Owner-Operator vs. Semi-Absentee vs. Passive Ownership: What’s the Difference?
As husband and wife, we starting our first business nearly 17 years ago. Prior to our marriage, we both started businesses but with little success. Starting your own business is a lot of work. A business can take over your life, especially if it the first time you start a business. The upside is that it can be the most rewarding decision you make.
Our first business together was a franchised business. We were starting with a proven business model and a corporate team (and franchise community) to help make us successful. It was an owner-operator model and not suited for a semi-absentee model. So, what is the difference?
In franchising, you will hear the terms owner-operator, semi-absentee, passive ownership. Each type of ownership requires considerable time and effort on your part. A semi-absentee model or passive ownership may be a right fit for someone who still needs to maintain a job or has other obligations while building their business.
Let’s break down the differences between each model.
This option allows the business owner to be completely hands-on. You will be responsible for the day-to-day operations of your business. This does not mean that will be doing ALL the work. You may oversee 2 people or 20 people depending on the model.
This requires you to be fully committed to the business. You can’t hold down another job and if you have other obligations, they should be more hands off for you.
In our journey, we started as owner-operator and grew the business to the point where we were able to be semi-absentee owners.
As a semi-absentee owner, you needn’t worry so much about hiring and training the right employees for your business because you would hire a manager. They will handle many of the day-to-day operations. A semi-absentee owner must be comfortable enough to give up some control. It can give them the opportunity to concentrate on the part of the business they do well, and someone else takes over the areas they are weak. For example, if you don’t like networking but love back-office operations, you can hire a marketing manager that will attend the networking functions.
Keep in mind that you can’t just open the doors, put your feet on the desk and wait for the revenue to roll in. There is work that needs to be done and at the end of the day, it is YOUR business. You are ultimately responsible for its success. As a leader, you will need to be able to make key decisions and provide clear direction for your team.
Fully Passive Ownership
Fully passive ownership is the stage of your business where you are no longer involved in the day-to-day operations. The business has developed systems and processes that allow your employees to run the business. You now have time to concentrate on the strategic side of your business or possibly explore other business opportunities.
In franchising, becoming a fully passive owner is a process that you grow into not something you do from day one. It is rare for a franchise system to allow fully passive ownership for a new franchisee. The benefit of a franchise is that it can get you a fully passive model sooner than a non-franchise business.
Which is best for me?
Each ownership models offer distinct benefits. The right fit when choosing a franchise is important. Many franchise opportunities are best suited to an owner-operated model but many opportunities work very well as semi-absentee. In most case, you can start as an owner-operator and grow into a semi-absentee owner, just like we did with our first business.
If you like hands-on management and enjoy day-to-day operations, then an owner-operator is the model that best suits you. You will be knee-deep in the business and you will see the rewards of your hard work.
Being a semi-absent owner allows you more flexibility and you can start a business while working another job. On the flip side, it does have its own set of challenges. You must be comfortable with your business being managed by others. There is extra pressure on you to hire and retain top talent to make the business successful.
The choice is yours and each model offers benefits depending on your personality, time constraints and your desire to run the daily operation. No matter which model you choose, franchising offers you the best chance of success.