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Business Bankruptcy in America

US personal bankruptcies appear to be at an all-time high while business bankruptcies appear to be low. It looks like individual's spending habits are out of control, while business is booming, but the stats are wrong.

Recently, a research team, including members from the Kauffman Group and Harvard Law School, published the results of a study concluding that the method used to collect US bankruptcy statistics was faulty, that in fact personal bankruptcy rates were lower than reported, and business bankruptcies were much higher because business owners use their own funds for their businesses, so when the business fails, it takes down the owner.

Why is business so shaky? It's not rocket science, but much of the training we are exposed to is sales/front office concepts, and training in how to change how the owner or manager behaves.

There are very few trainers, coaches, or consultants who are equipped to prepare business owners on how to manage the internal operations aspects of a business.

Where does the laundry go that you take to the dry cleaners? When you take something to be repaired, what happens to it? When you go to the airport, how in the world do they sort out all that luggage? How is beautiful furniture crafted in mass quantities?

To gain perspective on how large of a problem this is, just consider how many employees work behind the scenes in a company compared to how many work in the customer service area. Think about how many square feet of warehouse or manufacturing it takes to produce and deliver a product compared to the area the customer is allowed to see. It's not difficult to see why ignoring the operation might be a huge problem.

The baby-boomers who are not quite ready to retire are selling their expensive real estate, moving to less expensive areas, and determining to own their own businesses as a means to support their future retirement. Most of these adventurers have never before owned a business.

Without the mentor that came with the family business years ago, these businesses are destined for failure. Bankruptcy statistics for the last ten years are bearing this out.

Small business owners are looking to their accountants for the answers. But should they? Probably not. Accountants rarely have any more experience in running businesses than those who are asking for help.

They are great at capturing historical data, and reporting in a manner that is consistent with generally accepted accounting principals. They can file taxes. They can audit books to ensure that entries are made correctly and that there is no funny business going on. But they shouldn't be asked for advice on how to run a business.

The study of management is not new. But let's face it, even our education system fails small business. Degree programs focus on specialization, because they are training people to work in niches within big business. Small business can't afford degreed workers, so there is no market there for generalists. And entrepreneurs don't have the time to go to school anyway.

Small business failure statistics will continue to grow as long as operations experts are expensive and unavailable to them. For small business to become competitive and strong, information about operations must become more available to them at a reasonable price, and in a format with which they can identify.