Business Bankruptcy in America
The United States government has published statistics showing that business bankruptcies have dropped significantly, and that personal bankruptcies have increased dramatically. These statistics have led lawmakers to believe that individuals are spending more frivolously, and that small business is strong, but nothing could be further from the truth.
Recently, a research team, including members from the Kauffman Group and Harvard Law School, published the results of a study concluding that the method used to collect US bankruptcy statistics was faulty, that in fact personal bankruptcy rates were lower than reported, and business bankruptcies were much higher because business owners use their own funds for their businesses, so when the business fails, it takes down the owner.
Why is business so shaky? It’s not rocket science, but much of the training we are exposed to is sales/front office concepts, and training in how to change how the owner or manager behaves.
We can find training that focuses on the owner, to change the owner’s thinking, strategy, philosophy, psychology, and dealings between and among people. We can also find training in how to deal with customers, sales, marketing, etc. But nowhere can we find nuts-and-bolts training on what should be going on behind the door in the operations area.
Where does the laundry go that you take to the dry cleaners? When you take something to be repaired, what happens to it? When you go to the airport, how in the world do they sort out all that luggage? How is beautiful furniture crafted in mass quantities?
To gain perspective on how large of a problem this is, just consider how many employees work behind the scenes in a company compared to how many work in the customer service area. Think about how many square feet of warehouse or manufacturing it takes to produce and deliver a product compared to the area the customer is allowed to see. It’s not difficult to see why ignoring the operation might be a huge problem.
Baby-boomers are getting ready to ‘retire’ in staggering numbers. The stock market of the early 90’s and today, along with the real estate market, have made small fortunes for many not-ready-to-retire retirees. The last ten years has seen these folks retiring from their jobs, and selling their California real estate in favor of Montana, Wyoming, and Colorado where twice the home costs half as much. And they have been investing the proceeds into starting a business for the first time.
Similarly, the past ten years has shown an increase in bankruptcies. The rate at which these new business owners are failing is due, in large part, to new business owners not having the mentor that small businesses traditionally had when family businesses were run by craftsmen.
The new business owner has come to rely on the advice of his accountant, and the accountant has attempted to answer the questions. But accountants typically have no practical experience in internal operations, or for that matter, in operating a business.
The accounting industry rightly focuses on history, on making sure that the entries that are reported to the government and other entities are correct and that no funny business is going on. But they should not be relied upon to teach business owners how to manage the future of their business, other than from the tax standpoint.
College textbooks are full of good information about the operation of a business, however, small business owners rarely have the time to attend college classes. And university programs tend to focus on training students in that in which they can become employed. Since small businesses typically don’t have the resources to hire graduates, schools turn out specialists, rather than the generalist required by small business.
Small business failure statistics will continue to grow as long as operations experts are expensive and unavailable to them. For small business to become competitive and strong, information about operations must become more available to them at a reasonable price, and in a format with which they can identify.
About the Author:
Visit us for a free report on how to hire and keep good employees and more lessons on how to run a business
