3 Things Every Small Business Owner Should Know

I am often asked what would you tell the small business person just starting out? What path would you guide them down?   According to Investor News, 85% of small businesses fail in the first year and of those that make it past the first 12 months 50% of them will close their doors by year 5 and 65% will shut down by year 10. Wow! With those kinds of statistics why on earth isn't everyone rushing out to open their own company?!  

We entrepreneurs are a different breed.  We have our own special kind of crazy.  We are fabulously optimistic, wildly delusional, often day dreamers and maybe less often workaholics.  We are the janitor and the CEO, and usually everything else in between. That first year, we are fearless and know-it-alls. 

So for those mighty souls out there:

Know what business you are in and your unique value.  

That means that if you are in the residential roofing business, you're probably not in the roofing business. You're in the business of providing peace of mind, security, and expert consulting services. There are lots of roofers out there that can shingle a house, but what value are you providing that the other people aren't? If you're going to be in the business where you deal with the people (and isn't everyone?) then you need to know exactly what extra value you are bringing to the table and why they are hiring you.

Watch the money. 

I don't just mean the cigar box method of accounting, where you put money in the cigar box when you get paid and take money out when it's time to pay bills.  Invest in and learn a user friendly small business accounting program such as QuickBooks or Peachtree that is designed to help you track accounts receivables and expenses.  Don't depend on anyone else to watch your money the way you watch your money. The information those programs will provide you will prove invaluable as your company grows.  

Don't hire help too quickly.  

As an overwhelmed small business owner you may feel that you need to hire help to get all the things done that need to be done in a day.  There are a lot of virtual assistants out there that can assist you in the day to day administrative tasks without the headache and expense of a full time administrative assistant.   Subcontractors are a double edged sword.  They don't only work for you and may in fact work for your competitor as well but they are responsible for their own taxes and insurance and they are paid on a per project basis so if there's no work,  you don't pay them.  

I don't know of any business that starts out with the intent to close in the first 5 or 10 years.  Mitigating that risk starts with seeing what other companies have done well and what they haven't.  You don't have to learn all the lessons yourself, success and failure both leave clues along the path.  Watch for them.