Why Most Small Businesses Go Under

By Michael Gerber

Most businesses fail. Eight out of ten often in the first five years.

Most small business owners have little or no sense of demographics, finances, advertising, franchising or, managing. Mostly they have no purpose, no ideas and no image.

"In fact, most small businesses aren't really businesses at all, they're jobs," says author, Michael Gerber.

"Most have built a business around their own personal willingness to work, their own personal technical skills, for all the wrong reasons.

"Rather than building a business that works, they have built a job that works. At this point, a powerful question to ask would be: How do I invent a business that works apart from me, rather than because of me?"

"I'm essentially saying that most small business owners don't make it and, even if they do, it's not that grand of an experience. Rather than being entrepreneurs they are technicians suffering from entrepreneurial seizures."

"Most people who go into business for themselves are motivated not by a desire to own a business but by a desire not to have a boss. Their business is not really a business, it's a job."

"A business is a real business only when it's owner has one goal in mind: The sole purpose for creating a business is to sell it. Every day I come into my business, I'm buying it: What's the value of my business?

If you're not holding the business to the same standards that a stranger would you’re really in trouble."

What makes a business saleable, in turn, is how systematically it is organised, because that determines whether it can continue without the owner’s presence. Gerber's model for a successful business is the business-format franchise because it is based on replication: every new McDonald's should run just as smoothly as every other McDonald's.

Most businesses won't ever go into franchising, but, Gerber says, their owners should act as if they were going to franchise; that was they can anticipate and solve problems that otherwise strangle the business as it grows. In his eyes, the product or service that a business offers is much less important than the way it offers that product or service.

Gerber's ideas are not particularly warm and fuzzy, but neither, he thinks are entrepreneurs. "The truth is" Gerber observes, "there's no truly entrepreneurial individual, none that I've ever met who's really interested in other people. Entrepreneurial personalities wish they didn't have to deal with people because people are such a problem

"Small business owners are consumed by the work of the day, the tyranny of routine, the telephone calls, taking care of customers," says Gerber. "They are completely oblivious to their business's needs."

"Their business has a life of it's own, and rules of it's own. They never think of it in terms of a systemic operation. The thought of creating management Systems is beyond them."

"The small business owner gets sucked into this black hole and never comes up for air."

"Many small business owners Gerber says, have no idea how to control cash flow or analyse a financial statement. Many have no or little understanding of business. They don't know how many people walk through their door in one day. They don't communicate. They don't get or know how to get information. "So they just ignore it all and go into denial."

"Ninety-nine percent of small business owners I've met are in denial about most things", says Gerber. "Building a small to medium size business is possible however the owner needs to run it like a business. It's a challenge."

"A franchise is an elegant example of a business idea put into action and continually improved. A business-format franchise can be replicated. It is a product that doesn't depend on any one person. It is made to be reproducable in another time and place. It is consistent."

"A franchise is an integrated system, an operating business system which was invented by the franchisor to satisfy a very specific perceived need in the marketplace in uniquely differentiated ways."

"If you think about your business as though you were going to franchise it you would do business completely different."

Gerber teaches the key that eludes many millions of small business people around the globe... the secret of creating management, operations, and 'people' systems that truly free you from your business... what he calls the 'Turn key' approach.