From supervision to soupervision: accounting for the rise of the small business nation

Mom and Pop were doing just fine selling what people nearby needed. Growth meant serving some things they wanted. Now growth (or should we say survival) often is about selling something remarkable in a remarkable way to people everywhere.

This is insanely hard to do. Yet, we’re witnessing the rise of the small business nation. How are a fair number of small businesses doing so well in such a competitive, crowded environment? It takes looking at why most of the time they tend to fail to gain a better understanding.

Jay Goltz knows exactly why small businesses tend to fail, but not from personal experience. In fact, quite the contrary; his five separate design-related businesses in Chicago are booming. His regular small-business blog for The New York Times is well read because the man knows one thing totally unrelated to all of them: soup.

That’s right. Soup.

In his Top 10 Reasons Small Businesses Fail, he boils it all down to soup:

“Eventually, everything shows up in the soup. If people don’t like the soup, employees stop working for you, and customers stop doing business with you. And that is why businesses fail.”

This means stop doing whatever doesn’t directly and significantly enhance your offer. Especially including payroll. And especially including accounting.

Let’s take Goltz’s #4 reason small businesses fail – “poor accounting” – and dissect it a bit. Jeff Robinson of Jeffrey C. Robinson, CPA, PLLC in Richmond, Va., near Snagajob headquarters has offered to lend his expertise.

Poor accounting. You cannot be in control of a business if you don’t know what is going on. With bad numbers, or no numbers, a company is flying blind, and it happens all of the time. Why? For one thing, it is a common – and disastrous – misconception that an outside accounting firm hired primarily to do the taxes will keep watch over the business. In reality, that is the job of the chief financial officer, one of the many hats an entrepreneur has to wear until a real one is hired.

Speaking of wearing many hats, in his bestseller The E-Myth Revisited, Michael E. Gerber said entrepreneurs starting small businesses must make decisions every day about whether they are going to work on their business or in their business.

(Hint: Working on your business is much, much better than working in it.)

Robinson says you’re working in your business if:

  • You refuse to delegate tasks or trust others to handle the routine duties.
  • You spend all your time dealing with the details of your sales and product delivery.
  • You focus your efforts on day-to-day administrative functions.

But you’re working on your business if:

  • You develop business processes to fulfill your sales and product delivery and all other needs of your business.
  • You allow yourself to trust others to execute the routines of the day following your business processes.
  • You step away from the details to provide vision and management to meet the long-term goals of your business.

Every minute you spend in QuickBooks (and waste trying to rightly interpret the raw data) is a minute you don’t spend on making sure people like your soup.

Robinson says QuickBooks and similar software may give a small business owner a false sense of cost savings, accomplishment and security if it’s not set up, used and maintained competently.

Listen, it’s all of us – not just small business owners – making decisions all the time about what we will do ourselves and what we will pay others to do for us. Haul out the lawnmower or pay the kid down the street to cut the grass? Eat in or out? Buy drugstore hair color or go to a salon? The right answer for you depends of the value of your time relative to the question.

Robinson says to look at what not doing something like accounting yourself can do for your business:

  • Focuses your efforts on the growth of your business and service of your customers.
  • Develops a relationship with a financial professional who stays current on the activities of your business all year long and not just at year end when it may be too late to properly plan.
  • Ensures that you have up-to-date and accurate books and records.
  • Gets you ready when your banker or other vendor needs financial information to make the loan you have requested.
  • Lets you enjoy your evenings and weekends with your family and friends instead of finding yourself working to catch up what did not get done during the week.

Again, if people don’t like your soup – and they won’t if it’s not remarkable, with all the competitive offerings out there – probably it means you’re not spending all of your time on it. Allowing someone else with the right training and background to perform the support functions necessary to keep your business running gives you the freedom to do what’s most important.

Proper supervision of these functions has always been and will continue to be important, of course, but it’s a move toward soupervision – a dedication to making sure people like the soup – that has given rise to the small business nation.

kmoriarty