Today we are going to talk about small businesses. What they are, why they fail, and how can they find success.

So what is a small business?

A small business as defined by the Small Business Administration is a privately owned enterprise with 500 or less employees. That is a pretty broad definition, so let’s break it down to get a picture of what MOST small businesses are.

Small businesses comprise:


Before we move to the next topic, it is important to talk about how the pandemic changed the small business landscape.

The Small Business & Entrepreneurship Council estimates 29.7% of small businesses closed in 2020, up from an average of 7-9% yearly.

However, 4.4 million new businesses were started in 2020 – the highest on record to that point.

In 2021, that grew to 5.4 million.

And in the first 3 quarters of 2022 there have been 3.8 million small businesses started.

With all of that great news, what are we here to talk about?

One thing we hear often is how many small businesses fail. So let’s take a look at what the Small Business Administration reports on this front, which we will visit from the consistent data we had prior to the tumult of 2020, 2021, and 2022

Pre-pandemic, 32.4% of businesses failed in first two years, 51.1% failed by year 5, 63.4% by year 10, and only a quarter of all small businesses made it to year 15.

But there is some good news, according to SCORE, about 82% of the small businesses that do fail, do so because of cash flow problems. That means that a strong financial foundation can increase the likelihood of a business falling in that 25% long term success story!

So what is cash flow and why does it have such a strong impact on business success? In the simplest terms, cash flow is the net amount of cash and cash equivalents that transfer in and out of a business. The types of cash flows in a business are:

Some of the easiest ways to successfully manage cash flows are:

Many small businesses also seek financing to expand and strengthen financial health and create a reserve. And when you ask, ask for twice what you need! 75% of all small business applicants receive some of what they asked (less than 50% receive all of the financing asked for).

And do you know what a business needs to secure financing? Complete and accurate financial records that are created and maintained well and regularly by….

A great bookkeeper! Look for professionals offering proactive guidance and with a track record of success with clients. This will be a long term relationship, so personality fit is also very important.

And while all bookkeepers will help manage transactions, many do not focus on the additional aspects of business management that can affect cash flows.

As many of our clients are solopreneurs, small owner/operators, and partnerships looking to grow, MK Beyer & Associates helps our clients additionally by focusing on:

These are some of the common things we hear in consultations and from our clients.

“I just freeze every time I look at my finances.”

This may be due to lack of understanding, lack of time to really focus on the work, or total lack of any sort of system or process. Many people who do not have a competency for bookkeeping and accounting procrastinate the work, which also adds to this anxiety.

“I am so ashamed of how bad it has gotten.”

This is where anxiety leads. When the finances are left for too long, they become a mess and make it hard to run a business. We also see many people who feel stupid because the business owners they know all seem to have a handle on understanding business financials, but they just cannot “get it.”

And, if both of these are left too long, we get to fear.

“I haven’t filed taxes in three years and I am scared to start now.”

Or, “I know I filed my taxes wrong and I am scared to amend them.”

Or, “I feel like going back and fixing things will put me on the radar for an audit.”

But the biggest we hear, “I am afraid I will have to close my business because I don’t know if I am actually making any money.”

We help guide our clients out of these deep and painful places through organization, accuracy, and compassion. Removing these stresses frees them to focus on doing what they love and finding success. The best way to remove fear is to feel through it and take action – and we are here to help.

We are happy to talk to all small business owners to determine their needs and how we can help or who we can best refer them to for help.