5 Key Mistakes That Could Lead to a Small Business Failure

Thursday, October 31st, 2019

A small business failure can be surprising in terms of what led to the demise and how it may have been avoided. There are some common errors that many small business owners and entrepreneurs make that lead to problems that cannot be overcome. Subsequently, it is these errors that often lead to the end of the company or business.

Avoid these 5 key mistakes that lead to a small business failure:

 

Money Issues  

Probably the biggest reason for small business failure is money; aim to keep your overhead as low as possible and track all your expenses. Be frugal, even when you don’t need to be and be on the lookout for ways to monetize and further improve your bottom-line. Always have a goal of streamlining your operations in efforts of curbing costs and improving revenues to succeed.

Too Big, Too Fast  

Another reason small companies don’t succeed is that they try to take on too much, too fast. Start small, such as a pop-up shop or an event like a festival or fair to learn the market. Some businesses assume there is a market for something only to discover that there simply is not; know the market before investing.

No Back-up Plan  

Have you heard the expression, ‘prepare for the worst but hope for the best’? That should be your mantra when it comes to your small business. Always have a back-up plan and anticipate, even expect, things to occasionally go wrong or askew. That is simply part of doing business. Make sure that you are fully covered in areas like insurance, staffing, and that you have a slush fund ready for a rainy day.

Lack of Business or Industry Experience  

Are you sure that you fully understand the market that you are taking part in? Surprisingly, many businesses fail due to a lack of understanding of their market. For example, some restauranteurs may not understand the time, commitment, and money that it takes to open a restaurant in a specific area.  Many successful companies encourage entrepreneurs to go with what they know.

Underestimate the Undertaking  

Speaking of underestimation, make sure that you are well-aware of the effort and time that go into making a business successful. Remember that you will have a wide range of obligations, from marketing and human resources to serving clients and keeping facilities clean.  Make sure that you never minimize the work that it will take to make your endeavor a success.

These common issues are not always a result of the business owner making rash or compulsive decisions, but rather may be related to the industry, current market, or other unforeseeable circumstances that impact revenues and force closure.

For help keeping your business matters precise and timely, reach out to BMH Accounting, Don’t let mismanagement be the reason your business fails to thrive and succeed; get the accounting assistance that you need.

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Income Statement and Balance Sheet: Integral to a Successful Business

Friday, August 30th, 2019

If you want your company to succeed, you must maintain detailed financial records related to the operating of your business. Gaining a grasp on the more complicated aspects of accounting can help you garner a better understanding of your company’s finances, though hiring a professional accountant may be the most practical approach. Whether you learn as you go or hire a pro, two of the fundamental elements of business bookkeeping are your income statements and balance sheets.

Income Statements

When you want to track and analyze revenues and expenses over a period of time, an income statement offers the best glimpse. Usually, these reports are made monthly or quarterly and then integrated for yearly reports. An income statement gives a good look at a company’s performance and if you are a publicly-traded company, it is directly reported to the Securities and Exchange Commission (SEC). Income statements cover the basics: revenues, expenses, gains, and losses. From this tracking, periodic reports will show both short and long term growth, health, and future predictors for success. This information helps mold financial decisions for the next fiscal season, quarter, or year.

Balance Sheets

As important as the income statement reports is your balance sheet. Balance sheets aim to track the three fundamental areas of your business financials: assets, liabilities, and shareholder equity. Balance sheets don’t cover a range of time but rather a specific moment, which offers insight into shareholder equity at the drop of a dime. Balance sheets offer a quick view of the company assets, what is owed to other parties, and how much your shareholders have invested in you.

A balance sheet works with a formula that is used to track what your company has at any given point in time. That formulaic equation used by a balance sheet is Assets = Liabilities + Shareholder/Owner Equity.

Merging the Two

The two together- income statements and balance sheets- provide the perfect tool for gaining a look at the financial health of your business. Don’t wait for tax time or quarterly reports to run some numbers; generate reports anytime to gain perspective and see where you are going. If your company is big enough to employ analysts, they would use both reports, the income statement and balance sheet, to give you an overview of your company’s finances and offer predictions based on these reports.

Maintaining the income statement balance sheet is integral to the smooth operation- and subsequent success- of your business. Don’t have time to track your assets and liabilities? Call the professionals at BMH Accounting; they can provide you with a snapshot of your company’s financials and help you analyze data to improve daily function and overall operation.

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