Recently, I spoke with my good friend and New York Times Best Seller Diane Kennedy about her brand new book ‘Smart Business, Stupid Business’. She offers excellent insight into the $40 billion dollar problem that puts most small business owners out of business.
Here’s part of the interview I did with Diane Kennedy.
What inspired you to write this book?
Many people have come to realize that having their own business means the only real control they can have over their financial future. The number of new home-based businesses has sky-rocketed. Yet, there is very little training and information available about what you need to know to run your business from a tax, accounting and legal perspective.
How did you come up with the title?
Everyday a business owner stands at a crossroads. They can have a smart business or a stupid business. A stupid business fails, on average, in less than 5 years. A smart business grows, and touches lives in positive ways. A smart business owner knows how to read important stats on his business, stand up to an IRS audit and stop employee theft cold!
What was one of the most surprising things you learned in creating Smart Business, Stupid Business?
I was shocked to learn that somewhere between $400 billion – $600 billion is stolen by employees every year. It’s the single biggest reason that businesses fail! Yet, there are some very simple things that business owners can do that cost little or no money and that will dramatically reduce the risk of employee embezzlement.
These are the type of strategies that smart business owners can put into place today and that they’d know about if they only had the time and resources to study up on all the financial, accounting, tax, and legal information they needed.
What is a word of advice that you have for small business owners operating as sole proprietors?
In one word: DON’T!!
There are 4 reasons to RUN away from the Sole Proprietorship for your business:
(1) you put everything you own personally at risk.
(2) You will pay an extra 15.3% tax on income from the business.
(3) You can’t build business credit.
(4) You have a 1 in 3 chance of an IRS audit.
I can’t think of a single reason why you SHOULD have a Sole Proprietorship.
Of the books that you have written, which is your favorite?
Without a doubt, “Smart Business, Stupid Business” has been my favorite.
Let’s face it; we’re in a deep recession. A lot of people have lost their homes, their investments, their pension and their jobs. And they know the only way to brighten their financial future is by taking charge. And, that means starting their own business.
But then what? Most businesses fail in the first 5 years.
But it doesn’t have to be like that. There are things you can do to protect your assets, create cash flow quick, find loans, build value, turn lazy assets into income, protect against employee theft, create systems that work so you don’t have to and learn how to foretell your business’s financial future.