Small Business Survival

A small business has a 20% chance of making it.  The most difficult phase is the start-up phase meaning the first five years.  If you're planning on going into business for yourself I highly recommend getting together with the SBA (Small Business Administration) as they are a wealth of information.  Most of the people are successful businessmen (or women) who have been-there-done-that.  Most of the time their services are free as the program is funded by the federal government.

Why do people go into business with the odds so heavily against them?  Because they don't have a clue as to what they're really getting into.  By the time they figure out what an enormous responsibility it is they have leveraged their homes and any assets they have to finance the business.  Trapped.

People don't consider the taxes, insurance, and licensing involved.  Just that alone will drive any person over the edge.  Ready for your first lawsuit when somebody slips on a banana peel on your floor?  Even if you're totally in the clear it will be your time and energy defending the claim which is an enormous time suck -- all the while still trying to run your business.

God forbid if you hire an employee as that presents even more stringent rules and regulations and more filing of paperwork.  Do you have your employee handbook ready?  Do you have your required Cal-Fed posters up?  Do you have your workers' compensation kit in a visible area?  Good luck trying to fire anybody - did you clearly document everything and follow protocol from hiring to termination?  Ohhhhh, you're smarter than actually hiring an employee and decide to "outsource" everything?  Don't like all the employee rules and hire somebody as a 1099 independent contractor?  Good luck with that, too. The criteria is now so limited that you better be careful.  That trick has been played to death and the IRS knows it.  

Wait.  I have not even gotten to the part of money yet.  Isn't that the reason you want to go into business?  Depending on the type of business you're going into will determine where you will need to invest.  It varies from business to business.  I can tell you that one of the most brutal businesses to get into is the restaurant business.  It's extremely competitive and your inventory (food) is perishable.

The part that counts the most that gets the least attention is tracking the money.  How much do you have in the bank?  How much do you owe?  How much do others owe YOU?  Are you aware of what your overhead costs are?  Is any of that flexible?  Do you keep track of your inventory?  Are you making a profit after all obligations are paid?  Don't think you can hire bookkeeper Jane to do this for you and walk away.  Some of the sloppiest books I've seen are from so-called CPA's with years of experience.  Be hands on with the money.  You would be shocked at how much 'disappears' or becomes unaccounted for.

One more thing:  the CUSTOMER.  You know, the person you sell your goods or services to?  Customers can be a PITA (pain-in-the-a**).  They will always be working to get a discount from you. They won't pay you if they owe you money.  They will complain and whine about everything so you finally cave and give them something for nothing just to shut them up and avoid a negative review on YELP.

After all this you still want to open up your own business?  Great.  Just know that it's a huge responsibility and chances are you won't make nearly as much money as you thought you would.  Some of you will want to prove me wrong.  That's the dangling carrot.