The oft quoted statistic of the Small Business Administration is that 50 percent of startup businesses fail within the first 5 years.
According to the Growth Guy, Verne Harnish, barely 4 percent of all companies in the United States reach $1 million dollars in revenue.
So, how do you not just survive, but thrive? Leverage, my friend. Leverage.
As a young auditor going from business to business across the country, I was able to see how things really worked from the inside out. An awesome opportunity for which I will always be grateful.
One thing that I learned that literally shocked me was how few business decisions were made rationally. There was rationalization for sure, but the many decisions were made from personal feelings (i.e. fear, greed, laziness) rather than sound business analytics.
But if that shocked me I was in for a full blown terror when I moved to working with small businesses.
Sound analysis was not often part of the process when it came to small business decisions. Without the structure of a large organization, the business owner had no “context”, no support, to make their decisions, so they generally “went with their gut” and justified their decisions after the fact with arguments that sounded good.
The biggest challenge business owners face is admitting that they don’t know the answer, and admitting that they need help.
Author Malcolm Gladwell made famous the 10,000-hour rule, quoting several studies finding that to truly master a cognitive skill takes 10,000 hours of practice. Considering all of the skills necessary to run a business, it would take years for a business owner to develop the skills necessary to run a successful business. And that’s assuming that they were “practicing” correctly.
Think about it. At a minimum, a small business owner has to have a working knowledge of accounting, marketing, sales, people management, in addition to the specifics of the industry in which they operate. Let’s assume best case scenario where a business owner purchases an existing business, and that they have working knowledge of the industry.
To gather proficiency in the areas of accounting, marketing, etc., it could take 40,000 hours. That’s 20 years of full time work folks! No wonder so many small businesses fail.
Back when I started my first business, an accounting firm, I thought for sure that business owners would want to pay me to help them with their businesses. Compared to the loss of their business from past due taxes or not managing profitability, my fees were a pittance. Alas, most business owners didn’t make decisions rationally. We convinced enough to grow a businesses, but in hindsight, I should have been much more forceful in scaring the hell out of business owners. If rational thought couldn’t prevail, then you can always rely on abject terror.
And things have not changed in 20 years. There are a lot of tools that help you with running businesses whether it’s accounting (Quick Books) or marketing (Hubspot), but that only accelerates the pace of change. After all, these tools are available to anyone, right?
The bottom line is that a business owner that doesn’t seek the help of professionals, be they a CPA or marketing consultant, will succeed IN SPITE of themselves. Make your life easier, you need the help.
Psychiatrist Photo via Shutterstock