I believe that many factors contribute to small business failure. Indeed I believe that business failure is part of eventually becoming successful in business. The key for me is to make sure you don’t lose everything when the business fails. So bootstrapping is absolute essential, don’t spend money you do not have, don’t borrow from banks, make sure you don’t get into trouble with taxes, hire a good small business accountant, learn cash-flow forecasting and with that try and understand your business dynamics.But to give you a more straight forward answer, running out of money is the ultimate problem why business fails, reasons for this are:

1. lack of cash-flow planning;
2. no sales or not enough sales;
3. too high overheads and not cost control;
4. loss of business focus;
5. red-tape;
6. lack of marketing;
7. bad customer care.

Bootstrapping, sales oriented and customer focused small business has, in my opinion, the best chance of survival. ST.        

I think it is clear that all businesses today - big or small - need a website, which has to be hosted. You will find some options here, you can go for the free hosted website or you can can go to a web-hosting company and pay for the service.

Nothing in live is free - so the “free” hosted website will be advertising financed. Maybe you do not care that your website is full of ads for other and sometimes competitive services, than you could consider this option.

If however you want the visitor to read and concentrate on your products and services you need a website without distractions, i.e. advertising. A website is like a billboard, you have 20 - 30 seconds to get someone interested in your services, if they get distracted by ads for 20 seconds, you’re left with 10 max. - I guess you can do the math yourself. There are many web-hosting companies out there who give you good value for money, or you could use WinWeb’s - All you need to run your business! offer.

In my opinion free web-hosting on the above basis is no option for a serious small business owner. ST.

Just got this question, I know there are others questions I have not yet answered, and I have already written my “The Week Ender” post for the week, what the hell, but I’m in the mood to have a go at “The System” again. I think I’ve mentioned before that blogging is therapy for me, and I’m sure some of you might even think I should be in therapy, so there you are.

I’m going to expand this question “slightly” into - I hope Walsh does not mind:

What are some of the social, political and economic issues small business face?

I should remind you that when I talk about small business, I mean 1 to 5 people businesses, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professionals, contractors, freelancers, self-employed, sole-traders and virtual assistants.

Social issues are clearly centered around the work-place, work life and private life. To many work is the central activity in their lives and the stresses and pressures of todays workplace are enormous, overtime, project pressure, sales targets, travel to and from the place of work, to name but a few. This all causes tension in a partnership, family and leads often to a dysfunctional family/private life. For example, we need dating agencies and web-sites to find partners, because we are too busy to find a partner in what used to be a “normal way”, and in this sense we have to be thankful for the service dating agencies and web-sites provide. These issues are prevalent in the group of small business owners too.

Striking the right work/life balance has become a personal choice item, with the advent of home businesses. Businesses run by entrepreneurs, often unhappy with the traditional choices in the work place, who have decided to set their their own work/life balance and run a business, not to grow and dominate the world, but to earn an often higher than average income, while retaining a certain amount of freedom and flexibility in their private lives. Parenting people often see a home business, as a way to have a family and stay active in their chosen field of work.

The growth in these kinds of businesses is explosive, while our society is technologically perfectly capable of sustaining this trend, our social work infrastructure in many cases is not.

This brings us to the political issues these micro and small businesses face. The fact that our society is wholly unprepared for this revolution in the work place and small business environment, has to do with the fact, that governments often receive no advice from actual participants in this new home based micro business economy. Current advisors are from big business, with virtually no experience or knowledge about micro business issues.

Of late universities and other institutions have started to produce a vast amount of valuable data, about micro businesses, which is often meaningless to the political elite in the western world. It is, in my opinion, wrong to expect our politicians to guide us into this new area of explosive micro business growth. Experience tells us that any decisions made will be often too late or even counter productive, market forces are much faster and more targeted to help these growing sectors develop.

In my discussions with politicians, civil servants and often big business, the term “Small Business Infrastructure” is rarely understood. The best we can hope for is the insight that less red-tape is going to help, for some politicians this is a frightening thought.

Economically, I feel we are at the beginning of a truly “golden age” of entrepreneurship. Our technical infrastructure, the internet, powerful micro-computer systems and mobile technology have helped to transform our way of doing business. The last piece in the puzzle was the advent of the software as a service industry, which took longer to develop than I had foreseen. With an almost transparent internet and IT infrastructure, the focus is getting back to the business objectives, even in very small businesses. If this is extended by a “Small Business Infrastructure“, which includes 24/7 technical and customer support, additional service offerings like bookkeeping, telephone answering, and similar services, the survival rate of small business startups, vastly improves.

If small business owners use outsourcing and bootstrapping techniques as a matter of cause, the fixed cost (over-head) structure in each of these micro businesses can lead to super efficient and hyper valuable home or micro businesses. I believe you can start a business with $20/£10 a month and grow your business, risk free (without loans) on the side, while still in employment, until the turnover is big enough to justify quitting ones day job.

You may feel about a business on the side as you will, the fact remains this is going on as we speak, trends we see in the online usage patterns of our OnlineOffice, certainly support this theory.

At the same time business failure is far less an issue, as the risk associated with these ventures is very small, with the right mental attitude of the entrepreneur towards failure, the learning effect of a failure can be enormous. Especially in Europe the old-fashined anti-risk strategies only serve to leave us further behind the other global economies in terms of technological leadership. The U.S. is testament to what an economy with a “normal prospective on business failure” can do.

Emerging economies like China, India and some others are learning from the U.S. and will outstrip our economies within the next decades, unless our politicians, will finally stop putting barriers up for micro businesses.

Last and by no means least, the positive ecological impact of a largely home based economy can not be underestimated. Endless hours of travel to and from the work place, meetings, office heating, and so on could be a thing of the past. Rural economies will be revitalized, multi-generation household will no longer be a thing of the past, this all will have a tremendous positive impact on our social infrastructure, child-care, crime and drug abuse, to name but a few.

While I have often quoted this in the past “it is not the answers that are the problem, knowing the question is”, I’m often left feeling with politicians it is both, not only do they not know the question, they don’t know the answers either. While I accept it is easy for me to sit here and say this, it does not alter the fact that it is only too often true.

It is almost the weekend now, and I’m off to see 10cc, or what is left of them. ST.

I received a great weekend question the other day, “How can I find a great home business idea for me?“. What I would do in these situations is get a pad of paper and a pencil - yes paper not my computer, that comes later - and sit by myself in a corner somewhere.

I start writing down what it is I’m interested in or passionate about, so for myself I write down things like diving, photography, traveling, boating, physics, computers, internet and stuff like that, not to forget small business. In my next step I try and find reasons, why I like this particular subject or activity, again write them down.

Next, I try to find out what my personal traits are, with the help of my family and friends, am I:

• a good teacher,
• a traveling person, like driving all day
• do I thrive on new ideas,
• and so on?

Now I combine the two, diving and teaching, I’m a bad teacher, so diving instructor is out - you get the idea. I may come up with some close ideas - but doing gardening everyday, no matter what someone payed me would be a definite NO-NO!

Somewhere down the line I get to small business and I can say:

• I have had 30 years of small business experience;
• I have had formal business education;
• I’m passionate about small business;
• I know I make and will make mistakes everyday, failure for me is just another way of learning;
• I love listening to customers and their ideas about my business; I’m always surprised and learn something new;
• mad about the inability of politicians to understand very small business;
• sad about the accountants lack of a forward looking outlook in their profession;
• know we are in trouble with our environment, and I would like to make a difference;
• always loved high-tech, computers, software, my years as CEO of a leading ISP;
• building a company from zero to tens of millions in turnover in just four years.

This is my personal list for my small business interest and after all that, what you get is WinWeb - my way of dealing with my passion and frustration about small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants - and it’s a great business!

The point I’m making here is, the answer to this question - Finding the right home or small business idea for you? - is within yourself. So spend some time with yourself over this weekend, find out what you like and what you are like, get some feedback from friends on how they see you, write it down. Then go though the permutations and I’m sure you will find a few ideas that will make your heart jump, when thinking about the possibilities - e-voila, your business ideas!

You need to have passion, interest, a love for change, and control your fear of failure. You noticed, I didn’t mention an MBA, lots of money or bookkeeping, marketing, IT, and law experience, these are “nice to have” items, but not essential, unless you are working in those fields of cause.

Like someone once said, when you are older,

“You don’t regret the things you did, you regret the things you didn’t do.”

At the beginning and the end of our life we are all the same, what makes the difference is the bit in the middle, making it exciting and interesting is something you have to do - nobody is going to do it for you. On second thoughts, my wife would possibly disagree, she keeps telling my that at least life with me isn’t boring. I think I will have to think about that this weekend.

Have a great weekend and an even better “middle bit”, Stefan.

For me this question has a simple answer, and it goes like this:

• 90% sales and marketing
• 10% product development

Let me quantify that a little. Before you start in business, and the clock is ticking, sort of speak you should have a two things:

• at least one order for your product, to see if someone will actually buy it, preferably more orders if possible and
• the product to sell, which you will have produced in your spare time, while still having an income.

But from the time you launch your small business or start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants, you need to spend most of your time on selling and marketing, because that is what brings the money into your business.

Many thousands of businesses go bust every year with a “perfect product”, but no sales. So get a product out there and sell, sell and sell. If you then have time develop your product further or develop more product. By now you will have had some feedback from your clients and they will guide you as to what they would like to buy from your next.

That is the bootstrapper way of doing it, in my mind the only way to do it with the least amount of risk and on a shoe string. Remember the aim is to make money, not to spend it. ST.

This is not a precise art so you need to make some judgment calls along the way, every small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants needs a bank .

I would take this stepped approach to finding a small business bank in your area, and many of the steps are similar to finding other suppliers:

• Find out the facts - i.e. account charges, loan charges, banking hours, online banking and other benefits, like free advice, software, etc.
• Talk to the person who would be in charge of your account, meet with them.
• Talk to other small businesses about the bank and the bank manager, go to networking events in your local area.
• Make a Pro’s & Con’s list - then make your decision.

You will notice that banks don’t like to be called suppliers, or service providers, but that is exactly what they are, nothing more and nothing less. So use those terms and see how they react, if they get all upset and defensive about this, then walk away - they only see you as a number. This is probably the last time for a while that you hold all the cards, so it’s better to find out what your bank is like before you really need them.

For me business is between people, I move bank with my bank manager when he leaves, I’m on bank number three with him right now and that always served me well in the past, it is also a compliment to my bank manager, and he knows it.

Better the devil you know……! ST.

This question is hard to answer, because there are no simple answers here and the outcome of this situation could easily be fatal to the business and if you are personally guaranteeing this money - and you probably are - this could potentially be very serious for your personal life too.

The things that you need to do, in my opinion are:

• Find out why? If the reason given are not satisfactory, you will need to get legal advice.
• Try and extent the deadline? If that is possible reduce the overdraft as soon as you can, or negotiate a stepped reduction of the O/D limit, ie. by month or week.
• Try and change bank, ASAP.

People often believe it is somehow always their fault, if the bank changes their attitude towards them, that is not always the case. Banks will always try and make you believe it is, but in reality they my have new internal guidelines for handing out money - banks can get into “cash-flow” problems too. So - don’t automatically assume it is always your fault.

Banks may have the right to recall a loan or overdraft, but I’m not sure if they have the right to damage your business by doing so - especially if the reason for the recall is not your doing. So if it comes to the crunch, get legal advice. This is one of the reasons why I hate these, IMO, often legal but still unreasonable arrangements between banks and clients.

Many years ago someone made the the loan, O/D - umbrella analogy and it goes like this:

When the sun is shining your bank gives you an umbrella;
when it is raining, they need the umbrella themselves.

It is best if you do everything possible to not need banks in the first place, by bootstrapping, outsourcing, planning your business and keeping your fixed costs as low as possible.

Remember sometimes, attack is the best defense even with banks, they may need their money, but they do not need bad publicity either. ST.

I received this question form a lady working from home, she emailed and explained her business had started of well, she got some clients and kept her costs down. But her turnover is not high enough and she wants to grow her home business. Interestingly she does not want to grow the business more than 20 to 30%, she wants to stay at home with her business. This is not unusual for many small businesses and start-ups, a home business is an ideal way to run your own business.

Getting back to her question, there are really four answers:

• Increase the number of customers - this in turn will increase the your turnover, yielding the extra business you want, while at the same time make your business more recession proof;
• Increase the order frequency from your existing customers - this could be more difficult, you need to find out if you can replace someone else as supplier, or diversify your offering;
• Increase the average order value - same as before, offer higher quality or premium service.
• Increase your own efficiency - outsource more if you can, cut costs this will not grow your turnover, but increase your bottom line, so you can take more money out of the business for yourself.

Once you start thinking about these options you will find out what you can do, often it is a combination of things to do. But you need numbers, so plan your business, get an overview and find out where you stand.

Remember what you can measure you can manage. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below - I’d be most grateful.

Choosing an accountant/CPA is probably one of the most important decisions to get right, because you are unlikely to have an accountant’s grasp of

• taxation
• company law
• dealing with the tax authorities
• wide range of knowledge about small business.

You need to make sure you find an accountant/CPA who concentrates on small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants before you make any appointments.

Another aspect is size, make sure you are not “one among millions” sort of speak, smaller accountants practices are often more in tune with your small business needs, because they are a small business too.

Here are some questions I would be asking when starting out with a new business venture:

• Should I start my business as a sole-trader, partnership or limited liability company?
• Can you help me to find and raise finance? (Read about bootstrapping first!)
• Will you help me with setting up my cash-flow forecast?
• When do I need to register for VAT (UK), GST (Australia) or when do I need to charge sales tax (US)?
• Am I ready to start trading, or should I wait?
• Do I need to choose my financial year and trading year end date?
• Are you going to do my bookkeeping and accounting work?
• Will you work online with me, so we both can be up-to-date with my business progress?
• Will you deal with my employment issues, pensions, annuities and insurances for me?
• Will you help me to understand more and more of these issues myself, and will you be available for advice if and when I need it?

There are many more issues to consider and they depend on your business, that is where your accountant will help you too. If you find the accountant is dealing with other businesses like yours you are in good hands, they can give you better and more realistic planning guidelines about your business venture.

The most important question is the one you need to ask yourself, “do I trust this person and can I work with him/her long term?” If you feel intimidated, or misunderstood, get up and walk. An accountant should be your advisor, he/she should never be your boss, what I mean is you need to make the final decisions, not your accountant. No matter what advice you get anywhere, you are always responsible.

Most of all your accountant should be a trusted advisor, trust me you will need his/her advice on a regular basis! ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below - I’d be most grateful.

Good question! When you read many small business publications and online resources, most people talk about growing your business. Sometimes it sound like it is important to grow your business, along the lines of if your business does not grow, it is going backward.

To tell you the truth most people talk about growing their business to attract funding - VC money, loans - believing that this money will help them to grow and this way solve their business problems. Surprise, surprise - that never works and never will, it amuses me no end when I hear some people ranting about VCs, when they not even have a business.

If you achieve your business objectives, whatever they are, why would you want to grow your business? There is no problem in remaining small and as you are, don’t let anyone tell you otherwise. Work on your work-life balance and enjoy your success.

As Michael Bloomberg - a U.S. entrepreneur and Mayor of New York - once said:

Is your company small you have to do everything yourself? Wait until you’re so big that you can’t. That’s worse.

Could not have said it better myself - there is your answer. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below - I’d be most grateful.