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Why Are Small Business Owners So Confident?

by Steve Strauss

Small business owners are a hearty, confident group. One might even say overconfident. But don’t they have to be? Of course, if they are willing to leave the known (a job, a steady paycheck, benefits, security) for the unknown (starting a business, building a brand, getting customers and making payroll).

This self-assuredness allows entrepreneurs to wear all the necessary hats they must, especially at the beginning of the venture: CEO, VP of sales, shipping and receiving clerk and so on. The problem, however, with all that certainty is that it can lead small business owners to tackle duties they may not be ready to or don’t have the skills for.

Confidence for Every Aspect of the Business?

The latest Staples small business survey, which looked at various issues, including small business owners and their finances, found that 40 percent of those business owners surveyed said that they wished they knew more about managing a business before they jumped in, but they jumped in anyway. So yes, we small business owners tend to be pretty darned optimistic and self-assured.

But what should we make of this even more startling statistic? While 94 percent of the small business owners surveyed said that they are confident about their ability to manage their finances, less than half of that number (45 percent) could not even define such basic accounting principles as “accounts receivable.” Should they really be so confident in their financial prowess (probably not) and if not, what should they do about it?

How to Get Financial Help

There are all sorts of ways small business owners can bring their financial skills up to snuff:

Take a Class: Your local community college likely offers basic small business accounting courses, and attending one would help any entrepreneur who doesn’t understand finances well. After all, 28 percent of those surveyed said they lose sleep over cash flow, and 32 percent said that they are “drowning in receipts.” You can find classes online, at chambers of commerce and via SCORE.

Learn from Your Software: Most small businesses use some sort of accounting program like Quicken. But having financial software and running a spreadsheet doesn’t do much good if you don’t understand what the numbers are telling you. The good news is that most of these sorts of programs also usually offer a lot of help — online tutorials, whitepapers, Webinars and so on. Spending time with these resources can be of great assistance.

Hire Help: Thinking you can do it all yourself can get in your way. The fact is, you can’t do it all yourself. If you look at any small business that has grown, you will see that at some critical juncture, the owner brought in help.

Help Can Be Helpful

Just today I was speaking with a lawyer who had been in business for himself for over 50 years. He relayed a story of when, back in the day, he was nervous about hiring his first employee because he thought he couldn't afford it. But what he learned was that he made more money after the hire. Having help freed the lawyer up to do more important things, like billing more and getting more clients.

So it’s really OK that many small business owners don’t know basic accounting or that they hide money (65 percent of respondents admitted to this practice), or that they postpone hiring because of cash flow problems (28 percent). The important thing is that you recognize future problems you encounter due to overconfidence. One of the great things about being an entrepreneur is that the very nature of the gig requires you to become a lifelong learner, whether that means getting up to speed on social media, mobile marketing, or in this case, basic accounting. Readjusting your confidence level may help you keep your business growing.

 

Steve Strauss is a leading small business expert. He is a lawyer, author and the senior USA TODAY small business columnist. Steve runs TheSelfEmployed.com, a valued resource for small businesses and entrepreneurs.  

 

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