An Introduction to Small Business Ownership
Many people dream all their lives about going into business for themselves instead of working for others. There’s an attraction to being more in control of one’s own destiny with the possibility of achieving a level of income that could far surpass what one could expect by working for others. And of course, a business owner can go on vacation whenever he/she wants to and doesn’t have to take orders from some “less than competent supervisor who’s only looking out for the company.”
These thoughts do indeed beckon us to take a closer look at the potential paradise of entrepreneurship. In fact, almost 2.0 million new businesses were created in the U.S. in 2017 resulting in a total small business population across the country of more than 23 million companies. And, over the next 5 years, that’s expected to grow by at least an additional 9 million more small businesses.
Just so you see the picture more fully, small business is a big deal in this country:
86% of all new jobs
75% of all new businesses
60% of the existing workforce
45% of all sales
40% of total GNP
The fact is there are so many new small businesses coming online that the United States is in the midst of a massive cultural shift from a managerial to an entre-preneurial society. Yes, there are some really large corporations out there in the marketplace but only 40% of the workforce is actually employed by them and that number is projected to decline to 30% by the year 2025.
Now from the start, you need to know how a SMALL BUSINESS is officially defined. That definition is in the hands of the federal government including the SBA so as you might expect, there’s considerable complexity involved. Generally, the determination of the official company size is made according to either its number of employees or the amount of its gross revenue. Moreover, that definition varies by the industry in which the company operates. If a particular company wants to borrow against an SBA guarantee, an official determination must be made as to the “size” of the company to know if it qualifies as a “small” business. Keeping in mind that a lot of variation is involved, we can say that in general, the number of employees of a “small” business is less than 100 and/or the annual sales revenue is less than 7.5 million dollars with a lot of exceptions to be expected when you look up the law. Here are a couple of URL addresses to go to as of summer 2016 for further info:
Before you get so excited about jumping in with this crowd that you lose your caution, the WISE prospective business owner needs to at least be aware of a few hurdles to be dealt with. It’s not about whether you ought to start a small business. You SHOULD start one… someday! It’s about the timing. You need to assess whether or not you’re ready to make the jump. Success is all about timing and preparation and knowledge, and I’m pretty sure you want to be successful. With the right training and equipping, almost anybody can be a successful small business owner. But it’s not a one-sided, rose-colored opportunity or everybody would already be successful small business millionaires:
- The first thing you need to know is that statistics show that of all the small companies started in the United States in the last 50 years, more than 70 percent of them failed and shut down during their first five years of operation. Oops! You absolutely must understand why this happened BEFORE you make the jump.
- When those small businesses were shut down, their owners were often left with responsibility for the debts of their failed companies and had to experience the heartache of personal bankruptcy.
- The proportion of failures to total startups is greater now than it was 50 years ago because the administrative requirements of business management are more complex. Most small business owners start out with almost NO business management knowledge even though without it, the probability of failure is at that very high 70+ percent level. On the other hand, if you DO possess the necessary business knowledge, there’s at least a 93% chance that you WILL succeed.
- The principal reason small businesses fail in such a high proportion is a combination of under capitalization plus the mismanagement of whatever amount of capital that was The main cause is that most new entrepreneurs tend to be sales and operations-oriented instead of fully-administratively-and-financially-prepared MANAGERS of an ongoing serious enterprise.
- Most small business owners don’t take a real vacation during the first five years of operation. Whenever they do take time off, they’re constantly in contact with their companies or at least thinking about them. They worry about leaving their “baby” with a hired “nanny.”
- On average most small businesses produce a level of income for their entrepreneur-owners that’s lower than they could make working for someone else which connects to the likelihood that more than 70% will fail.
Now most of the negatives can be largely overcome with proper planning, preparation, and instruction. The biggest need is understanding the area of business finances including budgeting, keeping books, managing bank accounts, understanding how cash flow works, etc. There are many good reasons to consider going into business for yourself, as we’ll see in the next chapter but step into it fully prepared so you will SUCCEED.
Once you’re prepared, YOU can succeed if you really want to and if you believe you can do it. First SEE yourself doing something successfully in your “mind’s eye” and then go and do it. If you can SEE it, you can DO it. THIS IS A BASIC PRINCIPLE OF BUSINESS. It’s not just words!
In addition to seeing it, make it a point to SAY it. Speak out your dreams as if they’re in the process of being realized. Speak out your success as if you’re already experiencing it. Make what you SAY agree with what you can SEE. What you SEE and SAY determine what you receive and what you become. You are who you SAY you are and stay away from people who’re SEEING and SAYING something different either about you or about what you’re trying to accomplish.
The truth is, success in business is more a matter of one’s attitude and thinking than how hard you work, even though you will need to be a hard worker. What you believe about yourself though is what you will become! But your eventual SUCCESS will be directly related to the amount of business and financial knowledge you possess when you make the start-up. The critical time is the startup. The odds are against you if you start off wrong!
You don’t have to learn everything in this book before you start your company, but you DO need to know the basics and you MUST have the right priorities about operating your own company: financial performance will ALWAYS be your first priority! And you MUST understand these things BEFORE you start your company.
If you apply yourself, you can be ready in less than 90 days! And here are some publications you should consider getting in your possession that will help you succeed: