It’s a shame that there are not good stats out there on the success/failure of small business because the data that is out there, which is skewed towards corporations large and small, isn’t rosy.
Why The Bureau of Labor Statistics Data (USA) Is Wrong
The methodology used to determine success is flawed. The BED evaluates business success and failure based on employment numbers and that poses two main problems which distort the findings:
1. Sole proprietorships are excluded – Sole proprietorships, which by definition, don’t have employees, aren’t included in the BED data set. Over 70 percent of US businesses are sole proprietorships, so excluding them leaves a big hole in the BED data. Why do I care if I’m in Australia, about this data – because its representative of first world data collection!
2. Reducing employment levels may not indicate failure – Reducing employment doesn’t mean a business is dying. A business owner may decide to let go of employees and hire contractors to save on overhead costs. That business could be raking in profits but would be considered dead in the BED report.
Similarly, a small business owner may have closed her shop because she decided to retire. This exit would be tallied as a ‘closing’ under the BED data. Ultimately, the BED only provides data on employment changes and cannot identify whether a business was successful or not.
I wanted to get these insights into the myths surrounding business, out there and out of the way before I start.
The future is rosy for business owners who want to work to achieve their goals.
Having said this, let me now say this – use an Accounting System to manage your numbers – your Gut only takes you so far.
Create a Plan
Create a Budget
Produce a Forecast
Develop a marketing system for leads and forward sales
Understand your market and the factors that impact it
Working in your business
1. Stick to your rules – don’t give credit, ask for upfront payment
2. Communicate with your clients – they love it and you will cover your ass when it comes to a ‘he said she said’ situation. It often does even over small things so write emails or use ‘voice to text’ software to put it in writing. Stay on the same page!
3. Do what you say you’re going to do.
4. Competence – keep your training up to date
5. Compliance – get a Terms and Conditions
A budget can be a lifesaver when it comes to decisions about spending. You must have a budget – a list of outgoings which you must cover every month by Sales, Credit or Borrowing.
Yes, it’s not all about getting what you need every month, every day of the year, for what you and your business needs. There will be times when you need credit. The trick is to manage it so that it works for you.
Sales = Cash flow but its also the collection of that money owed that is important.
Taxes. Cash must be managed for taxes. This is why we use Accounting Systems.
Business Decision Making
Change Course if you have to.
The smaller you are the quicker you can change direction and or diversify. The term “pivot” has become buzzword – we aren’t Jetliners we are 2-seater propeller planes – we can spin on a dime – and should if we think we need to. Decisions you make have to be adventurous. It’s very hard to design a business that is just a job because you’re in charge of it going forward. You are more than a cog in a series of cogs you are the machine!
Your Accounting System kept up to date and compliant will keep taxes in check, will prevent you from unexpected problems down the track which might affect the investment decisions you’re making now. Get it right. It’s important. And have fun, if you work at it, you will succeed, not fail!.
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Dianne Jewell, Accountant, Business Consultant.