Small Business Series – Mistake 1:
We are starting a series of blog posts regarding mistakes that are common to small businesses, brought to you by Dan Massey, a Partner in the firm’s Assurance Division. Although it may seem negative to highlight areas where business owners occasionally have erred in judgment, it provides a good learning opportunity.
When an entrepreneur starts a business, he or she typically starts with an idea. Oftentimes, the idea is based on knowledge of a trade or industry. This is common in construction and contracting. After someone works for another company for a long enough period and they want the freedom and power involved in being their own boss, they begin their own business in painting, masonry, electrical, etc.
However, starting a business, especially if the intent is to grow the business, requires more than just knowing a trade. A business owner needs to develop a business plan, develop the product or service being offered, know the characteristics of an ideal employee, understand the market for the product or service, understand the labor market, and prepare to generate revenue through the promotion of the business.
New business owners will often be able to withstand a lack of business knowledge or preparedness, at least at first. The SBA data shows that generally speaking, over the past 25 years, only 20 percent of businesses fail in the first year and 25 to 30 percent fail by the end of year two. By the end of five years, about half of all new businesses are out of existence.
There are multiple reasons for businesses not succeeding, including not staying relevant, but usually within the first two years, new business owners are motivated to overcome obstacles. After that honeymoon period, if they are not in business for the right reasons, they lose enthusiasm, and that loss of excitement is often because they enjoy the skill or trade involved but not the actual running of a business.
After a few years, when the going gets tough, many new entrepreneurs come to the realization that they had not adequately prepared for everything that owning a business entails. This often leads to the entrepreneur feeling defeated, not enjoying the business, and thinking of ways to get out.
If someone is truly passionate about starting a business, taking the extra time to prepare as much as possible for the various needs of the business will improve the chances for the company’s longevity.
Be sure to check back soon for Dan’s next installment: Not Having Proper Goals.
By Dan Massey, CPA, Manager
This installment is brought to you by Dan Massey. Dan is a Partner in the firm’s Assurance Division. He performs audit services for clients in many industries, focusing on construction, entertainment production, and not-for-profit entities.
Dan is both a member of the American Institute of Certified Public Accountants (AICPA) and the Pennsylvania Institute of Certified Public Accountants (PICPA). He is also chairman of the C.O.R.E. Task Force for the Keystone Chapter of Associated Builders and Contractors.
Connect with Dan on LinkedIn or contact our office to get in touch.
Due Diligence Considerations When Selling a Business
When selling your business, all parties involved in the sale will require certain due diligence procedures, which take time and patience to get through.
Succeeding At Business Succession
Business succession can be a complicated process and is full of tax rules and regulations