Sunday, July 28, 2013

Most Small Business Owners are Dumb as Hell

I love how politicians only champion "small businesses."  "Big business" is bad, but "small businesses" are good.

Never mind that big businesses account for the majority of employment.

And never mind small businesses,when successful, become big.

Nope, small business = good.

Big business = bad.

Just one problem.

The vast, and I mean like 93% vast, majority of small business owners are dumber than hell.

They are incompetent.  They have no business acumen.  And they consequently fail the vast majority of the time.

The reasons are many.

Most small business owners are naive and start things they think will be "fun."  There was no limit to the number of sports bars, trinket shops, horse hobby farms, music studios, and restaurants I had to deal with working as a credit analyst.  NONE of them were profitable.  NONE of them were feasible.  It was just some moron who foolishly cashed in their 401k to "pursue a dream" and start a company they thought would be fun.  Of course "fun" things are usually oversupplied to the market and the profit margins just aren't there.

Another reason for the spectacular failure of small businesses is their owners truly and honestly believe accounting is optional.  THat's the "hard stuff" and they literally have no idea how much they're making or losing.  All one has to do is watch Restaurant IMpossible where the host invariably asks the bloated sows about their "P&L" and they don't even know what that is.  Again, these are lazy, dumb people who started the business for "fun."  Not profit.  And since accounting isn't "fun" they don't do it.

Finally, a disproportionate number of "small businesses" are really just contractors who claim theyr'e running a business.  You know, the guy with the truck who bought a magnet to put on it "Joe's Master Paving" but couldn't tell you what "LLC" stands for or where the secretary of state is to register such a thing.  They are basically playing make-believe-businessman.  They get cards, they get signs, they get everything that is glamorous and ritzy, but not the basic things like setting up a company or getting insurance.

Normally I would like to submit a solution.  Like "hey, if you're a dumbass, don't start a restaurant."  Or "hey, if you're a politician, the LAST group of people you should be championing for saving the US economy is small business owners."  But I don't care anymore.  Not because I'm enjoying the decline, but because the entire small business world, even the entire US economy, is more focused on feeling good and avoiding real work than working hard and making a profit.  And no amount of logic, reasoning, lecturing or facts from me are going to wake these people up out of their trance.

The only thing will be when the Chinese and Japanese turn off the credit line and there's no more money to be lent out to sports bars, hair salon, or horse hobby farms.
Enjoy the decline!

9 comments:

Bob Wallace said...

I opened my own business (LLC) and I was putting in 60-70 a week the first six months. It wasn't "fun" but I was my own boss, and that counts for a lot.

kurt9 said...

Setting up the LLC, accounting system, and getting business liability insurance are the first steps to take when starting or purchasing an existing small business. I find it unbelievable that many people do not do these things first. Liability insurance is particularly important. There is no such thing as too much insurance in this country.

Oh, and yeah, you will be putting in 60-70 hours a week the first year or so you are in business.

Heh said...

Many dumb-as-hell people are at least smart enough to want to be employees so they don't have to worry about running the business.

Paul, Dammit! said...

I always think of a friend who was the only one of us who didn't go to a big name U, didn't spend a semester abroad and didn't accrue enough debt to choke a goat in the process. He became an ironworker, then went out on his own and keeps his business small but busy- 2 trucks, 3 employees, and makes more money than a doctor or lawyer.

All things considered, doesn't the market require competition in the talent pool for small business? Folks want to spend their retirement money and get a bank to approve a loan, foolish or not, isn't that just their attempt to enjoy the decline? You advocate not saving for retirement via traditional means, anyhow. A fool and his money, and all that; for both the bank and the individual.

Anonymous said...

I'm with Bob. I was a corporate guy for many years. Always considered my job as a business unit manager to be entrepreneurial and grow existing revs and find new rev streams. It was all for naught. I was treated poorly while corporate politicians were rewarded. I bailed and after researching hard for 2 years found a niche/solution that solved a biz problem no one else had identified in a growth area. We've gone from 1 person to 6 (both full & part time) and watched revs grow from $200k to $500k (and on track for a mil this year). You are spot on-- we had to learn/buy expertise/experience around unfun things like correct pricing/billing/legal/etc that could have killed us. But we're doing OK and we own our own time and destiny. I'd be a hotdog vendor before I'd ever go back to corporate big biz again.

George guy said...

The problem is that when someone on the left hears 'small business' they most likely think about it, not from the employer's nor the employee's perspectives, but from the customer's perspective. They just think it's *nice* to be able to go to a mom-and-pop cafe, or an artsy Luddite craft shop, and get the warm fuzzies from the ineffable ambient charm and feel smug knowing they support local business.

And therefore, that's the image most people get from the media, and they're set up to be steamrolled in the battle of feelings versus reality.

There's no reason this has to continue to be the case-- any half-competent high school could work this into some kind of required course material if they wanted to. You wouldn't even have to learn the hard stuff to graduate, just process the fact that if you want to start a business, you'd have to learn the hard stuff.

tempesttcup said...

For a bunch of really good examples of this, go to some sort of quaint little resort town like Eureka fobarSprings, where every "shoppe" displays proudly "Est. 2013".

J said...

"The problem is that when someone on the left hears 'small business' they most likely think about it, not from the employer's nor the employee's perspectives, but from the customer's perspective."

Exactly. We have a failing strip mall around here, and one time they asked the public what stores they'd like to see in there to "revitalize" it. Every single one of them was an idiotic, economically non-viable idea from a "customer" perspective (scrapbooking store, that kind of crap). Needless to say nothing like that is operating there now.

Anonymous said...

> "There was no limit to the number of sports bars, trinket shops, horse hobby farms, music studios, and restaurants I had to deal with working as a credit analyst. NONE of them were profitable. NONE of them were feasible."

I don't suppose you did any "credit analysis" on all those Sand State Liar Loans which Goldman Sachs and their ilk were packaging in bundles [or in derivatives thereon] and offering to whichever loser was stoopid enough to fall for their lies and actually purchase them.

Except that they finally ran out of losers willing to take the bait, and so Cousin Timmy had to secretly wire them a bunch of fiat electrons from the NY Fed in order to keep them afloat in December of 2008 [after they had rigged the election in September of 2008].

The difference between "small" business and "big" business is that small businesses can't go whining to their Uncle Ben to float them a few trillion more fiat electrons so that they can continue purposelessly shuffling the aluminum bars around in their Michigan warehouses.

At the end of the day, when everyone has gone tits up, at least the Trinket Vendors and the Hobby Horse Farmers can still look at themselves in the mirror with a clear conscience.