Hundred House Online is a new initiative we are starting, but we've already been in business as a chartered accountancy practice in the UK for over 40 years. So, the purpose of this first post is to introduce what we do and how we came to this point now of launching this new set of services. Just briefly, we are offering accountancy and bookkeeping services, company formation, online services such as website design and internet marketing and we're also offering a support system of business coaching and financial accountability baked in. There'll be more on how we do this later.
When I first joined the new Hundred House team as it was being put together, I asked what the motivation was behind offering a wide array of services to start ups. The answer was very definitive: more than 80% of all new start up businesses fail. This number varies when looked at from multiple sources but the big picture is overwhelmingly clear that the odds for a new business are very much against it. My first reaction will probably be the same as yours if you haven't heard this figure before just as I hadn't – why are all of these businesses failing and what are they doing differently from the ones that aren't? Naturally this was the question I asked and the answer ultimately lead me down a path of a lot of reading and some interesting self revelation.
The first answer I received was in the form of several anecdotes which would be amusing if not slightly tragic, all of which were mostly pointing to the same thing. Financially disorganised and often downright irresponsible new business owners who saw money coming in to the bank for the first time and were overjoyed to spend it as fast, if not faster, than it was coming in. Not too long afterwards their cash flow would change as perfectly foreseeable circumstances arose and started to cause real trouble and real pain as bills needed to be paid and the tax man came knocking. It's not surprising that these kinds of stories come from accountants who have had to deal with hundreds, if not thousands of small businesses before, but it can't be the entire story. What about all of the smart new business owners who bravely set out for the first time in the world of entrepreneurship because they were very good at doing something and wanted to try being their own boss? Now this is where things get interesting.
As my conversation started to head in just this direction I was nudged towards a book called “The E-Myth”, the E standing for Entrepreneurial, which I would definitely recommend to anyone considering starting a new business for the first time. Apparently this book has been around for a long time and quite effectively explains some of the obvious perils that face these start up businesses. So to cut to the chase and explain what I've learned: the “myth” is that small businesses are started by entrepreneurs at all. Allow me to explain!
According to this book there are ultimately three roles in any business which are the technician, the manager and the entrepreneur. To quickly sum up these definitions, the entrepreneur is the optimistic visionary constantly living in the future who thrives on creating opportunities however messy they are. The manager is his pragmatic counterpart living in the past and obeying the status quo who constantly puts things in order and clears up the mess left behind. The technician is the one who actually gets any real work done living firmly in the present and is at odds with the manager for trying to control and order his work and also with the entrepreneur for throwing seemingly crazy obstacles in his path (which funnily enough is also how the manager feels). However, neither the manager nor the technician would have anything to do in the first place if it wasn't for the entrepreneur. All three roles are absolutely essential for any new business and all three are often taken on by the same person – the person starting the new business.
And now things should start to become a little bit clearer as to why these businesses are failing. With this model in mind just how effective is the new person starting out in their new business at being any one of these three roles? The answer, it turns out, is not very. What often ends up happening is that the entrepreneurial aspect is mostly missing and the management is very much lacking – after all, these roles are opposed to the ideals of the technician and balancing the three is far more of a challenge than anticipated for most. Have you ever had a conventional job with more than one job role? I have and let me tell you that it was one of the most draining experiences I have had in my professional career so it's understandable for me at least to see why this struggle arises for the new “entrepreneur”. What all of this is getting at is that often a new business is started because a talented technician doesn't want to have a boss in the first place, and this carries over with neglecting all of things that the boss in their previous job used to have to do. It means neglecting being an entrepreneur or manager in their new business because then the technician would feel like they have a boss. This is exactly what they were trying to get away from in their initial eureka moment of “how about I just work for myself, my boss wouldn't even have a business if it weren't for me”. This is why the entrepreneurship and management elements are missing and it is disastrous for any business.
There is another excellent point that the author makes called the fatal assumption which I will quote here:
"The Fatal Assumption is: if you understand the technical work of a business, you understand a business that does technical work."Michael E. Gerber in The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It
In fact, it is the entrepreneur and the manager who understand the business. The entrepreneur decides which business to open over another and very often a technician will decide to work in the field they already know and love. The outcome of this is usually far worse than if they had chosen a field that they knew nothing about because then they would at least be forced to figure out how to create a functional business. I would recommend “The E-Myth” because it has a nice perspective on encouraging you to work ON your business and not simply IN your business and offers a lot of help on how to do just that.
Now lets turn back to that figure of 80% of all new start up businesses failing. Apparently, the ones that did succeed were the businesses most likely to have support either from some kind of incubator or otherwise. This is very telling that with the right resources most new businesses ought to be able to do a lot better than they are doing now. This is where Hundred House Online comes back in to the picture. We have found time and time again that our own clients perform a lot better with the right planning and setting of realistic targets. We've also been working on some electronic tools to help you along the way with this. Hundred House Online clients will be able to work with their account manager to define their business plan and financial forecast electronically and be in control at all times of the direction that their business is heading in. This is a big claim but how can we do this?
We are able to do this because of our incredible electronic bookkeeping software EcoOffice. When you use us as your bookkeeper we are able to map your actual accounts to your financial forecast and truly understand what's going on in your business. We want to understand your business with you and make sure that your success is our priority to keep you as a happy client. If you're interested in our services, and you're interested in taking on the challenges of business seriously, then we'd love to start a conversation with you. You can reach us by applying here and telling us about yourself.
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