One of the main reasons that small businesses fail is what I call “too big for your britches”.
Yes, I know that this does not sound like the standard business title. However, I believe that in this case the title fits.
The other day I was interviewing a small business owner whose name is George. I have known George for a few years now.
George told me that he had always wanted to be an entrepreneur even from when he was a kid. While others were playing sports after school, he was working cutting grass or dog walking.
A few years ago, George purchased a down and out gas station. Today the station is a thriving business that not only sells fuel but convenience items as well. You can even enjoy a great pizza there as well.
I asked him to share with me some of his wisdom. So, I said ” George, I am researching reasons why many small businesses fail, can you tell me from your experience why many entrepreneurs fail.”
It took him less than the blink of an eye to say, “they’re too big for their britches”.
I asked him to explain that statement. Here is what he said:
“I have known many people who have started small businesses. I am afraid to say that many of them have failed. There are many steps in starting a business and some are more important than others, but from my experience failure comes from not keeping expenses under control.
It is not the amount of money coming into the business. It is the amount that is going out of the business”.
“I am proud to say”, he continued, “that the key to success in my business has been the fact that I eliminated every expense possible and did the job myself where I had to. That even included cleaning the station toilets every night myself rather than paying someone else to do it.
I was not too big for my britches.”
George went on to share that he has witnessed many start up entrepreneurs who just won’t get their hands dirty and who just do not know that at the end of the day success depends on what you have left, after expenses.
His message is: Don’t be too big for your britches. In the early days, you may have to get your hands dirty to keep costs down and survive the early cash flow crunch. Of course, when the business is up and running, those chores can be handed on to someone else.
Now having said that, you need to be focusing your time on where you can make the biggest impact on the business. For example, if you can spend an hour and generate $500 in income, why would you spend that hour saving $30?
The only reason is because you do not have the cash flow to pay someone else. This can be a real problem in a new business. That is why it is very important to spend time doing a business plan and particularly a cash flow budget before starting your business, and then monitor and update it closely.
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