The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
The Kickass Entrepreneur
Subscribe
The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
  • Featured Top Posts

Why Small Businesses Fail And What You Can Do To Succeed

  • December 5, 2021
  • 15K views
  • 4 minute read
  • Jeff Wiener
Why Small Businesses Fail
Share
Tweet
Share

A reader wrote to me asking why small businesses fail.  He wrote to me the following comment that I would like to address:

“With the Internet and various technologies that automate things like proper ad targeting, your main advice point is to WORK. No way around this, but if most are destined to fail, the few who manage will only spin wheels until they’re out of gas (so to speak), so building wealth is really the key to survival. Profit is meaningless if it doesn’t last, or isn’t at a minimum somehow leveraged for perpetuity.”

So let’s digest and address this reader’s comment/concern. I’ll start with an example from one of my clients.

Where Are Your Business’s Profits? What Every Entrepreneur Must Know About Profitability

My client initially called me last summer wondering if I could help him with marketing and, in turn, scaling his business.

In the early stage of our conversation, I asked him how profitable his business was in 2017 and the year to date in 2018. He advised that his company made $200,000 in 2017.

We then got to talking about how he was investing his profits. Although his business was profitable, according to the income statement prepared by his accounting firm, he didn’t know where his profits were.

He hadn’t taken any money out of the business, other than his salary. So although the income statement showed a profit, he didn’t see those dollars or know how to track where those dollars were.

I worked with my client on establishing a number of cash buckets to better manage his cash flow and then worked with him on the accounting side of his business so that he could better track the in-and outflows of cash into the business.

Back to the reader’s comment, “Profit is meaningless if it doesn’t last or isn’t at a minimum somehow leveraged for perpetuity.

Profit Is At The Core of Every Small Business

The holy grail of building a business is to establish a business that makes a profit. I have addressed this many times in multiple blog posts.

Profit should be at the heart of a business’s operation.  It is germane to the business’s existence. No profit, no business.

I will make an exception to the above if you’re scaling a rapid tech-based or dot-com that will sell for many multiples of revenue in a short period of time. Otherwise, you are in business to make a profit.

And therein lies the problem.

Every Entrepreneur Needs to Understand the Accounting Fundamentals 

Many entrepreneurs are so excited by the idea of opening a business, they spend so much time on growth, sales, marketing, and so on and neglect the fundamentals of accounting.

There’s a lot to know as a business owner.

I’ve often said that marketing is THE MOST important thing you need to understand, and although it is, you can’t neglect the other parts of business ownership. Accounting, and profit, are key.

So what to do?

You need to spend some time understanding the basics of accounting.

I’m not suggesting that you need to be a CPA, nor am I suggesting that you need to understand accounting as well as you understand marketing, but you need to understand things like gross margin, gross profit, net margin, net profit, and EBITDA.

You need a monthly accrued income statement and balance sheet.

You need to review these things … MONTHLY!

You need to review cash flow … DAILY.

Again, there’s a reason 80% of business owners fail within the first 18 months.

These entrepreneurs probably don’t understand the gross and net margins. Your gross margin needs to support your other fixed expenses and debt repayment.

Entrepreneur Profit Illness – Excelitis – The Excel Factor

These entrepreneurs are probably also afflicted by “Excelitis.”

That’s my term for grossly exaggerating the number of widgets they expect to sell, putting that number into the Excel document, and voila, you’ve got profit.

Even better, change the number of widgets you expect to sell from 1,000 to 2,000, and sales double. Hey, what if you make it 4,000?

Just because a business appears to work in Excel doesn’t mean that the business is a great idea or that it is necessarily viable. Just because you put the number 4,000 into an Excel document doesn’t mean you’re going to sell 4,000 widgets.

We have a few problems:

Many businesses shouldn’t have been started in the first place.  That’s why many small businesses fail in the first place. They’re just not viable.

But they start the business anyway, and then they …

  •     Overestimate the potential success of their business and underestimate the amount of marketing and sales work required to sell their widgets.
  •     And then they don’t have a handle on the accounting side of the business, profitability, gross margin, and cash flow.

Manage your cash flow. If you do, there’s no reason that profitability shouldn’t last or that you should forgo today’s profit into perpetuity.

I know, it seems so obvious, but lack of cash is the #1  reason businesses fail.

Good luck, and hopefully the above helps explain why small businesses fail, and what you can do to not become part of that statistic.

Here’s one of the first articles I wrote:  My Journey Post Business Sale as I Sail Into a New Harbour.

Are you a younger entrepreneur? Here’s another interesting article I wrote:

My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30.

My goal is to help entrepreneurs scale their businesses, improve profitability, and then, use those profits to create massive wealth. Subscribe to my blog to receive my latest thought on scaling your business and creating wealth.

Download my book and Amazon bestseller (number 1 in business, number 1 in non-fiction).  You can get your FREE copy here.

Jeff Wiener

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

Related Posts:

  • The Top 3 Reasons Why Startups and Businesses Fail and What You Can Do To…
  • What Should Small Businesses Know About Bookkeeping?
  • Small Businesses Should Know About These Marketing Tactics
  • Why Small Businesses Should Be Using Loyalty Programmes
  • Best Partnership Opportunities for Small Businesses
  • How To Get Started On Accounting For Small Businesses
Share
Tweet
Share
Related Topics
  • entrepreneur
  • Featured
  • profits
  • scaling business
  • small business
  • small business failure
  • why do small businesses fail
Jeff Wiener

Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time traveling and with his family, writing this blog, managing his real estate portfolio of apartment buildings,  overseeing his investment portfolio, investigating angel investments, coaching other entrepreneurs, and managing his private equity holdings. Jeff is currently on a couple of boards, one for profit, the other not for profit, and now helps entrepreneurs grow their business, profits, and ultimately, create wealth.

Previous Article
How to Grow Wealth
  • Create Wealth (Investing)

My 5 Step Plan to Grow Wealth in 2023

  • December 4, 2021
  • Jeff Wiener
View Post
Next Article
educational resources
  • Growing Revenues

How to Create Your Own Educational Resource?

  • December 6, 2021
  • Monica Serreon
View Post
You May Also Like
Protect and grow my wealth
View Post
  • Featured Top Posts

How I Protect and Grow My Wealth With These 8 Simple to Understand Concepts.

  • October 15, 2022
  • Jeff Wiener
Wealth Building Secrets
View Post
  • Featured Top Posts

14 Wealth Building Secrets You Need To Know

  • October 11, 2022
  • Jeff Wiener
Become a Decamillionaire
View Post
  • All Blogs
  • Create Wealth (Investing)
  • Featured Post for Main Menu
  • Featured Top Posts

How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club

  • August 1, 2022
  • Jeff Wiener
what net worth makes you rich?
View Post
  • Featured Top Posts

What Net Worth Makes You Rich? The Average Net Worth to Make it Into the Top 1% and How to Get There

  • June 4, 2022
  • Jeff Wiener
Investing in apartment buildings
View Post
  • Featured Top Posts

How Do You Make Money Investing in Apartment Buildings?

  • January 10, 2022
  • Jeff Wiener
Entrepreneur Semi-Retirement
View Post
  • Featured Top Posts
  • Retirement
  • Selling your Business

My Journey Post Business Sale as I Sail Into a New Harbour. The Next Stage, Entrepreneur Semi-Retirement, and Life Post Business Sale

  • December 14, 2021
  • Jeff Wiener
business challenges
View Post
  • Featured Top Posts

8 Business Challenges Every Small Business Struggles With and How to Overcome Them

  • December 11, 2021
  • Monica Serreon
Sell me this pen, Wolf of Wall Street
View Post
  • Featured Top Posts

Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do You Know the Right Way to Sell the Pen?

  • December 8, 2021
  • Jeff Wiener

Join 6,472 Entrepreneurs That Get My Business Building and Wealth Creation Posts by Email

I can teach you how to build a successful, profitable business, and turn that into millions in personal wealth.

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

We won’t send you spam. Unsubscribe at any time.

Recent Posts
  • Logistics Software 1
    Accelerating Your Business Growth: The Role of Logistics Software Development
    • March 20, 2023
  • crude oil 2
    Energy Futures: What to expect in 2023
    • March 17, 2023
  • man writing on board 3
    What is the Difference: Lead Scoring vs. Nurturing
    • March 17, 2023
  • group session 4
    Managing Wealth: 4 Reasons You Need to Opt for a Money Management Company
    • March 17, 2023
  • BUSINESS 5
    Planning to Start a New Business Abroad? These 11 Tips Might Help!
    • March 16, 2023
Featured Posts
  • Become a Decamillionaire
    How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club
  • how to become wealthy
    The Entrepreneur’s Secret to How to Become Wealthy and Build a Personal Fortune
  • Most Profitable Small Businesses
    27 of the Most Profitable Small Businesses to Open in 2023
Categories
  • All Blogs (1,034)
  • Business (220)
  • Canadian Financial Products (4)
  • Create Wealth (Investing) (131)
  • Entrepreneur Interviews (25)
  • Featured Post for Main Menu (4)
  • Featured Top Posts (23)
  • Finance (55)
  • Financial and Investment Calculators and Economic Data (114)
  • Fitness (5)
  • Growing Profits (72)
  • Growing Revenues (115)
  • Growing Revenues (70)
  • Marketing (139)
  • Millionaire and Business owner interviews (3)
  • Positive State of Mind (68)
  • Real Estate Investing (17)
  • Retirement (13)
  • Reviews (12)
  • Sales (15)
  • Sell Me This Pen (8)
  • Selling your Business (13)
  • Starting a Business (1)
  • Startup Ideas (14)
  • Technology (112)
  • Top Products (4)
  • Uncategorized (54)
Follow us
Author
Jeff Wiener
Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time…

    CHECK OUT MY BLOG, AND SUBSCRIBE

    about
    The Kickass Entrepreneur

    Expand Your Business, Improve Profits, Create Wealth

    Expand your business, improve your profits, and create wealth. Each one of the three can be elusive goals. Follow the right steps, and you, too, can create financial independence. It is possible … you just have to take the right steps.
    NAVIGATION
    • About
    • Blog
      • All Blogs
      • Create Wealth (Investing)
      • Entrepreneur Interviews
      • Featured Top Posts
      • Growing Profits
      • Growing Revenues
      • Marketing
      • Positive State of Mind
      • Real Estate Investing
      • Retirement
      • Sales
      • Selling your Business
    • Book
    • Courses
    • Podcast
    • Resources
    • Contact
    TAGS
    apartment BATNA Business business failure business growth business sale Capitalization Rate CAP Rate cash cash flow Creating Wealth Discipline entrepreneur entrepreneurship excel extra cash Featured goal setting Growing Business investing investment real estate M&A marketing Marketing KPIs Mergers and Acquisitions | M&A | Entrepreneur Blog Millionaire millionaire next door mistakes MUR Peter Principle Profit profitability real estate retirement revenue Revenues sales sales management Semi-Retirement Blog | Entrepreneur Blog | Small Business Blog small business Stagnant stocks success Thomas Stanley wealth
    RECENT ARTICLES
    • crude oil
      Energy Futures: What to expect in 2023
      • March 17, 2023
    • deck of folders with insurance word on it
      Tips for choosing the right auto insurance coverage
      • February 17, 2023
    • holding laptop
      Tackling pros and cons of virtual reality tours when buying and selling houses
      • February 9, 2023
    • Rising gold prices concept. Investment in precious metals in the stock market
      The Pros And Cons Of Investing In Precious Metals
      • February 9, 2023
    • man looking at his tablet
      These Are The 7 Mistakes Six-Figure Earners Make
      • January 7, 2023
    • starting your own business
      6 Must-Know Tips For Starting Your Own Business
      • January 1, 2023
    The Kickass Entrepreneur
    • Coaching
    • Book
    • Blog
    • Contact
    • Privacy Policy
    • Terms
    • Disclaimer
    • Facebook
    • LinkedIn

    Input your search keywords and press Enter.