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
  • All Blogs
  • Featured Top Posts
  • Growing Profits

Why Small Businesses Fail And What You Can Do To Succeed

  • December 15, 2020
  • 5.4K 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.

Why Small Businesses Fail And What You Can Do To Succeed

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 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 as 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, is 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 margin. 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 business, 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…
  • 10 Financial Management Tips for Small Businesses
  • 27 of the Most Profitable Small Businesses to Open in 2021
  • 7 Common Branding Mistakes Most Small Businesses Keep Making
  • 3 Top Reasons Why Startups Fail and How Not to Become a Victim
  • What Businesses and Industries Will Thrive In The Next Few Years?
Share
Tweet
Share
Related Topics
  • entrepreneur
  • profits
  • scaling business
  • small business
  • small business failure
  • why do small businesses fail
Jeff Wiener
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.

You May Also Like
man at construction site
View Post
  • Growing Profits

4 Common Contractor Mistakes: How to Avoid Them

  • January 27, 2021
  • Meg Rivera
cybersecurity
View Post
  • Featured Top Posts

How to Keep Your Company and Employee Data Safe

  • January 25, 2021
  • Meg Rivera
VPN proxy servers
View Post
  • Featured Top Posts

Myths Debunked: US Proxy Servers vs VPNs

  • January 19, 2021
  • Meg Rivera
entrepreneur
View Post
  • All Blogs

How to Become a More Successful Entrepreneur

  • January 15, 2021
  • Monica Serreon
online presence
View Post
  • All Blogs

Targeting Your Online Presence to Other Locations – Easier Than You Think

  • January 14, 2021
  • Monica Serreon
online business
View Post
  • All Blogs

7 Online Businesses Set to Thrive in 2021

  • January 14, 2021
  • Monica Serreon
The Top 1% of Wealth Canada
View Post
  • All Blogs
  • Create Wealth (Investing)

The Top 1% of Wealth Amounts for Canadians in 2021

  • January 8, 2021
  • Jeff Wiener
marketing strategy
View Post
  • All Blogs

4 Ways To Create A Marketing Strategy For Student Small Business

  • January 4, 2021
  • Monica Serreon

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
  • man at construction site 1
    4 Common Contractor Mistakes: How to Avoid Them
    • January 27, 2021
  • Fax-Ready Multifunction Printer 2
    10 Factors to Consider When Buying a Fax-Ready Multifunction Printer
    • January 26, 2021
  • cybersecurity 3
    How to Keep Your Company and Employee Data Safe
    • January 25, 2021
  • Girl talking over the phone while using the laptop 4
    Registering a Business: a Step-by-Step Guide
    • January 25, 2021
  • stock trading 5
    What is the Future of Stock Trading?
    • January 21, 2021
Featured Posts
  • how to become wealthy
    The Entrepreneur’s Secret to How to Become Wealthy and Build a Personal Fortune
  • Sell me this pen, Wolf of Wall Street
    Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do You Know the Right Way to Sell the Pen?
  • what net worth makes you rich?
    What Net Worth Makes You Rich? The Average Net Worth to Make it Into the Top 1% and How to Get There
Categories
  • All Blogs (207)
  • Canadian Financial Products (3)
  • Create Wealth (Investing) (55)
  • Entrepreneur Interviews (10)
  • Featured Post for Main Menu (4)
  • Featured Top Posts (23)
  • Financial and Investment Calculators and Economic Data (12)
  • Growing Profits (19)
  • Growing Revenues (79)
  • Growing Revenues (43)
  • Marketing (14)
  • Positive State of Mind (35)
  • Real Estate Investing (12)
  • Retirement (16)
  • Reviews (6)
  • Sales (6)
  • Sell Me This Pen (3)
  • Selling your Business (15)
  • SEMrush (1)
  • Top Products (3)
  • Uncategorized (38)
Follow us
Author
Jeff Wiener
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 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 Negotiation Peter Principle Profit profitability real estate retirement revenue Revenues sales sales management scaling business Semi-Retirement Blog | Entrepreneur Blog | Small Business Blog small business Stagnant stocks success Thomas Stanley wealth
    RECENT ARTICLES
    • man at construction site
      4 Common Contractor Mistakes: How to Avoid Them
      • January 27, 2021
      • No comments
    • Girl talking over the phone while using the laptop
      Registering a Business: a Step-by-Step Guide
      • January 25, 2021
    • stock trading
      What is the Future of Stock Trading?
      • January 21, 2021
    • workplace
      4 Ways to Protect Your Employees in The Workplace
      • January 14, 2021
    • accounting
      7 Tips for Boosting Efficiency in Your Accounting Department
      • January 13, 2021
    • cryptocurrency
      The Value of Trading and Investing in Cryptocurrency
      • January 8, 2021
    The Kickass Entrepreneur
    • About
    • Coaching
    • Book
    • Blog
    • Contact
    • Privacy Policy
    • Terms
    • Disclaimer
    • Facebook
    • LinkedIn

    Input your search keywords and press Enter.