Why Small Businesses Fail

Courtesy of Barbie Hull Photography

Before we continue with steps 9-12 in the writing of our business plans (which involve financial statements) I thought it would be good to reflect on why it’s important to know your business’s financial details.  Writing the financial portion of the business plan is usually the most challenging.

The wedding industry is made up of the most creative and artistic individuals.  Individuals in the industry can be wildly successful without any business background.  Unfortunately, many people are told “hire an accountant and let him or her do the dirty work.”  While you MUST indeed hire an accountant, you MUST also understand the numbers of your business.  And, I’m here to tell you: DO NOT BE SCARED.

I have an accounting degree and worked for an accounting firm right out of college.  This makes me no different from you in running a successful business.  None of what I learned is a mystery.  None of what I learned is rocket science.  I might have a little more practice, but that’s all.  You practice at yoga, you practice at photography, you practice at design, you practice at baking.  With practice, you can understand all of the numbers of your business.  And, you can become even better. I’m not an expert.  (Here’s a secret: no one is an expert.)  But I practice a lot and I am constantly learning.

Fortune Small Business recently had a great article on “Why Businesses Fail“.  I recommend you read the entire article here.  (It’s simple, to the point, and so true.)  In it Jay Goltz gives a real life example of a business that has had had strong revenues and loyal customer following, but has LOST MONEY for the last 8 years.  Jay believes that 70% of small businesses go broke by their 10th anniversary because they don’t know their numbers.  He highlights the following:

• Entrepreneurs tend to concentrate on what they love, whether it’s the artist who paints but doesn’t spend any time marketing or the chef who lives in the kitchen and ignores her financials.
• Every business owner needs to be his or her own CFO.
• Delegating that task to a bookkeeper or an outside accounting firm means putting your life into their hands.
• [The accountants] generally don’t know the ins and outs of your business well enough to make critical decisions.

So, before we embark on the financial elements on our business plan take the day to reflect on the things you want to practice.  It is dangerous to strive for perfection.  Strive instead for excellence.  Excellence is achieved by practice.  Practice is the journey, not the destination.  Practice is something we DO.

I’ll see you back here tomorrow… ready to practice with your calculator!