Yesterday, I found myself engaged in a fascinating discussion with a client. He was curious about what constitutes an ideal business or profession, including the key characteristics that define such a venture. My response was straightforward, emphasizing that an ideal business hinges on two primary characteristics.

First and foremost, an ideal business should be profitable; it should generate income. This is a fundamental expectation, as the primary reason for starting a business is to make money. When we establish a company, we do so with the intention of turning a profit. Otherwise, we might as well create a non-profit organization, which operates under a completely different set of goals and regulations. From a regulatory standpoint, even the IRS only recognizes an enterprise as a for-profit entity if it consistently makes money. If a business consistently reports losses over two to three years, the IRS may reclassify it or question its operational legitimacy. Common sense and practical wisdom also tell us that a business's purpose is to generate revenue. This is an obvious truth, albeit one that many entrepreneurs unfortunately overlook.

As an accountant with over 22 years of experience, I have encountered tens of thousands of small businesses. The statistics are grim: 95% of small businesses fail within the first five years. In my practice, I've seen many businesses close doors or struggle to generate sufficient income for their owners. Some businesses operate at a loss, others barely break even or make a minimal profit, barely covering their expenses. Then there are businesses that only generate enough income to match what the owner would have earned as an employee elsewhere. This category of businesses merely serves as a replacement for the owner's salary, offering no real financial advantage over traditional employment.

On the other hand, there are businesses that achieve decent profits, and a rare few hit the jackpot, making substantial profits. However, these success stories are exceptions rather than the rule in my years of practice.

The second characteristic of an ideal business is that it should be enjoyable. Running a business that you love, where you can have a good time and feel passionate about the work, is crucial. This aspect is often overlooked, but it is just as important as profitability. A business should not only be a source of income but also a source of joy and fulfillment.

An ideal business is one that not only generates profit but also brings happiness and satisfaction to its owner. It's a blend of financial success and personal fulfillment that truly defines the best kind of business to have.

Success in business often hinges on timing, the industry in question, its current status, and the cycle it's undergoing. Certain fields or businesses thrive under specific conditions, but I have yet to encounter a business that sustains extraordinary profits year after year. Typically, a business might achieve this for three to five years before facing new challenges or shifts in the market. These observations come from my experiences with a wide spectrum of businesses.

For me, fulfilling the first characteristic of an ideal business—generating substantial profit—means surpassing merely replacing the owner's salary. If a business only achieves this baseline, it's essentially no different from traditional employment, where the customers, rather than a supervisor, become your boss. This scenario often introduces additional stress and challenges without any financial improvement. Thus, a genuine business must not only cover all employee salaries generously but also provide handsome compensation to the owner, alongside generating significant profits beyond these costs. This is my criterion for a successful business from a net income generation perspective.

Growth is also crucial; a business should aim for perpetual revenue and net income increases. Consider a business grossing $1 million and netting $200,000 after expenses. This $200,000 is deemed income and represents a successful outcome. However, the decision to reinvest this income into the business—whether by opening new locations, revamping products or services, introducing new offerings, investing in technology, research and development, or other ventures—is equally important. These investments might not immediately reflect as income on financial statements due to tax deductions, but they are indicative of a business that is growing and increasing in value.

Reinvestment is key. Therefore, when evaluating a business, one should not fixate solely on the net income figure. It's essential to consider whether the business is in a state of growth, continuously reinvesting in various aspects such as systems, policies, procedures, equipment, technology, and workforce to enhance its overall operations.

I've come to believe that reinvesting profits back into one's own business can be a more advantageous investment than placing those funds in the stock market or real estate. This belief stems from the control and direct impact you can have on your business's growth and profitability. To make such an investment worthwhile, you must have faith in your business, carefully analyze the numbers, and ensure a promising return on investment (ROI). Comparatively, investing in your own business offers more control and decision-making power over how to use the funds to foster growth, focus on product or service improvements, and address business shortcomings than investing in external entities like stocks or real estate.

In essence, believing in your business and understanding its potential ROI makes reinvesting in it a sound strategy compared to external investments. This approach grants you complete control over how to allocate resources, direct business growth, and refine your offerings, which I consider a more empowered and potentially profitable investment.

I've been guilty of the very thing I'm advocating for now. Historically, I hesitated to reinvest significantly in my own business. The necessity for growth, for investing in processes, systems, technologies, workforce, locations, and equipment, didn't resonate with me. I feared that more investment would demand more of my time, risk concentrating my resources too narrowly, and upset my work-life balance. Perhaps I was partly justified in my concerns. However, effective management and a competent team can facilitate expansion without disproportionately increasing my workload. This realization underscores the importance of focusing on and growing the business without it monopolizing my time.

For the first part, it's critical that a business not only generates income but does so consistently. A portion of this income should be reinvested to further the business's growth. Sometimes, the best investment return comes from channeling profits back into the business. Yet, diversification is also key. Allocating a portion of the profits to stocks, real estate, and other ventures can complement the primary business strategy.

Earning money is, undeniably, a fundamental aspect of any business. Let's consider the second characteristic: enjoyment in the process. The concept of having fun at work can seem ambiguous. Can repetitive tasks truly bring joy? My perspective deviates slightly here. Firstly, the work must be challenging. Monotony fails to inspire or motivate. Engaging, challenging tasks that foster continuous learning and growth are essential. This challenge and the opportunity for personal and professional development are what make work enjoyable for me.

Secondly, problem-solving is crucial. Creating new products, services, and solutions, addressing client and organizational issues, and implementing effective policies all contribute to this satisfaction. As an accountant and CPA, resolving complex tax or business problems for clients offers immense gratification. Facing new challenges not only compels me to learn but also to find solutions, providing a dual sense of achievement.

Lastly, continuous improvement and growth are vital. The drive to elevate the business, enhance systems, policies, workforce, and culture represents an ongoing commitment to progress. This multifaceted approach—embracing challenges, solving problems, and pursuing growth—renders the business journey not just bearable but enjoyable. It satisfies curiosity, engages the intellect, and delivers satisfaction from overcoming obstacles and contributing to the business's evolution.

Embodying these three principles transforms business into a rewarding endeavor, marked by intellectual stimulation, problem-solving satisfaction, and the joy of growth and contribution.

When your work encapsulates these elements, you can genuinely say you're having fun or enjoying your time. Having fun at work doesn't necessarily mean cracking jokes or wishing you were nowhere else but at the office every day. True enjoyment comes from facing challenges, solving them, and growing through the process. Take, for instance, our tax season, which spans from January 15 to April 15. The days can be demanding, filled with back-to-back client meetings, and at times overwhelming, yet it doesn't detract from the enjoyment. Despite the ups and downs, the sense of accomplishment from navigating these challenges keeps the work engaging and fulfilling.

Pairing this sense of fun with the primary goal of making money is the ultimate success. Achieving both means you've truly hit the jackpot. If you find yourself in such a fortunate position, my final piece of advice is to be profoundly grateful. Recognizing this as a rare privilege is crucial. It's an opportunity for which we should give thanks, understanding that many dream of such a chance but never see it realized. If your business allows you to thrive financially while bringing you joy, acknowledge your good fortune and never take it for granted. Complaints about the workload or challenges only detract from the appreciation of this unique situation. Instead, view every hurdle as an opportunity for growth, both for yourself and your business.

In summary, the essence of an ideal business venture is straightforward: to make money and enjoy the process. I hope we all can find or create a professional path that offers both financial success and personal happiness. It's a simple yet profound goal, and one that, with gratitude and dedication, can lead to a fulfilling life and career.