It is not easy running a small business, but if you run an accounting firm you have a better chance of succeeding.
According to an infographic designed by Elena Tahora of www.csbgroup.com, the most profitable business sector to invest in is accounting and tax services. Small businesses in this area average a 18.4% net profit margin, which is a whole 3% bigger than the second most profitable industry, real estate. This may come as quite a shock to you, especially if you’ve always thought real estate to be the leading industry for profit. However, if you are serious about investing in a new business this year, you now know where to start.
The Top Challenges of Running a Small Business
According to the same infographic, which you can see below, the three top challenges of running a small business are economic uncertainty, a decline in consumer spending, and the cost of health insurance benefits. All of these three things are financial in nature, which may go some way to explaining why accountants and tax professionals are so well sought after – and why business owners are willing to pay good money to hire them.
A good accountant and tax professional can save a business money on the cost of their tax return, they can help them to determine expenses, and they can also help businesses look for ways to cut costs. Most business owners don’t have the time, or the financial knowledge to be able to do this on their own, hence why they look for professional assistance.
Cash Flow is the Main Cause of Failure
The main reason why most small businesses fail is because of a lack of healthy cash flow. Small businesses rarely have a lot of money in reserve that they can use to pay staff, order products, and pay the bills. When a client is late in paying, or cannot work to the short payment deadlines that small businesses often require, this can lead to a large cash deficit. Many small businesses look to loan and credit card providers to help them get through these periods, but many ultimately go under when loan interest is due and a client still hasn’t paid. According to the infographic below, 82% of businesses fail because of cash flow. This is an extremely high number.
Optimism is Still High
Despite the financial difficulties facing small business owners, 75% say that they are optimistic about the future. Many say that they are confident in the business that they are running, and believe it has the potential to be a success. If businesses can survive through the first couple of years, they have a higher chance of succeeding in the long term. The solution seems to be negotiating payment terms before contracts are signed in order for a business to stay afloat without the need for hefty loan products.
The infographic below provides a lot of stats in relation to small businesses, and is well worth a read if you are considering investing in one in the near future.