Small Business Failures - The Real Info

In this economy, we hear a lot about bank failures

, lost jobs, and business troubles. Things often sound grim for the business world. The media doesn't discuss the small business realm much. I am often asked; "How do small businesses play into the mix?"

The latest statistics from the Small Business Administration show that "two-thirds of new employer establishments survive at lease two years, and 44 percent survive at least four years." This is a big difference from the previous long-held belief that 50 percent of businesses fail in the first year and 95 percent fail within five years.

An economist with the SBA Office of Advocacy, Brian Head, noted that the latest statistics are a much more accurate assessment of new business success rates, and that "as a general rule of thumb, new employer businesses have a 50/50 chance of surviving for five years or more."

There are a large number of things that cause a business to fail. Each situation is different. However, in my opinion, here are just a few of the most common reasons.

First, businesses don't start with enough working capital. Often when a business owner gets funding for a business, he underestimates costs, needs, and doesn't expect many unknown fees, overages, and simple things that no one can estimate until they're actually into a business. I always tell entrepreneurs to overestimate how much of a "cushion" they need financially, personally and in their business. Take what you expect you need, then add three to six months more!

Second, I often see that business owners fail to handle the financial aspects of their business well. When it comes to the general bookkeeping and accounting practices of the business, record keeping is vital to the survival and success of any business. According to analysis of the SBI cases, problems with record keeping constituted the second-largest problem area. Whether the business used a single- or double-entry system did not appear to be as important as how the system was executed. Timely and accurate record keeping is essential.

A. FINANCIAL STATEMENT and CHECKBOOK PREPARATION- The small business owner who understands bookkeeping, records the transactions and prepares the financial statements has an intimate knowledge of the business. Knowledge of these accounting and financial aspects makes the owner credible with lending institutions. It also keeps the owner out of financial trouble and helps him or her stay focused on ways to make a profit.

B. USING A CPA OR OUTSIDE BOOKKEEPER - The owner who does not understand the essentials of bookkeeping needs to hire a trusted professional. Even then, the owner needs to understand financial statements. Failure to understand essential financial statements is an indication that the owner has surrendered managerial responsibility. It is generally wise to have the professional bookkeeping service prepare taxes when the service is already keeping the books. The owner who does not do the record keeping is rarely in close enough touch with the records to adequately prepare tax forms. The business owner who delegates so much financial responsibility to others should think seriously about using a CPA.

by: Jim Frey

POST COMMENT

Strategic Planning for Entrepreneurs - Finding Focus in Your Business and Life Learning Seo For Your Online Business Free Online Home Business Opportunity—What is the Best Home Business Idea Finding the Right Type of Brochure for your Business Needs Importance of Copywriting to Grow your Business Small Business Web Marketing Consultant Raleigh Nc Corporate And Business Expenses Administration Along With American Express TGI Friday savings coupons - How to pay less for discounts on your business dinner Unsecured Business Loans-smoothen Your Business By Removing Fiscal Problems Quick Cash Loans – Fast Loan Scheme Piercing Retainers And The Growing Business A Business Card: An Ideal Branding Tool For Offline Marketing Online Wendy's coupons - How to get discounts discounts on your business dinner