What Consumers Don’t Think About

by Brian on April 25, 2011

It amazes me at the lack of understanding consumers have about small businesses and the way they operate.

Unfortunately due to the corruption in our government, the SEC defines businesses that net less than 25 million a year as a small business. Therefore, the public’s perception is… “Anyone making 25 million a year in revenue isn’t a struggling small business owner in my book.”

I totally agree. If you’re a business owner and you’re making millions a year in your pocket… Good for you, but I don’t think you should be defined as or given the same tax breaks as real small businesses.

What is a small business?

Not according to the SEC or U.S. Government, but according to me… a small business is a business that “nets” less than 200K in revenue per year. I still think someone who makes 200K per year is doing quite well financially, but it’s a heck sight different than $20,000,000 per year.

I know a lot of people will disagree with me on this, if you’re one of them… FUCK YOU, it’s my blog and your opinion doesn’t mean shit to me. I think the rich are destroying this country.

Just because a business gross receipts may read into the millions, that has very little to do with profit.

I have a friend who is an electronic engineer. He’s responsible for having his teams build specialty vehicles for the local, state & federal governments. His company may show several million in gross receipts, but the majority of receipts go back into building the vehicles. His company may sell a vehicle for 60K, but to stay competitive maintain a profit margin of maybe 5% (which isn’t much at all).

On the other hand, most retail stores have anywhere between a 100-300% markup on their items… So think about it like this, when you buy a $1.50 Bic lighter, it cost the store somewhere in the range of $.60. This may sound like a HUGE profit margin, but on the other side… it would take selling a LOT of lighters to pay rent.

I can’t count the number of small business owners I know… Of the small buisness owners I know, the vast majority would be stoked if they made even 100K per year; because in reality, they’re all sucking wind right now.

Small Business Reality

I feel there is a quite a bit of anti-sentiment towards small business owners right now. The reason I feel it’s happening is, typical consumers don’t put themselves in the small business owners’ shoes. They don’t think about the cost associated with running a business.

  • Small businesses typically float the cost of the majority of their merchandise/ materials up front.
  • Some businesses run on a net 30 up to net 90 with their vendors. This means they don’t pay their vendors for 30-90 days. The reason they do this is for cash flow.
  • The longer an item sits on a shelf the more it cost… and with sales being slow right now, inventory is costing more
  • When perishable items go bad, the business eats the cost (pun intended)… and still has to buy something to put on that space on shelf to sell.
  • With the economy being weak right now people are in more of a “buying what they need” mode instead of the “buying what they want” mode we all became accustomed to. So small business owners are cutting their margins (instituting sales) to move inventory, which they used to not have to do resulting in smaller profit margins.
  • Not all small business owners are rich… In fact, most of the small business owners I know are struggling to make ends meat. I personally know of over 40 small businesses that went out of business over the past 2 years.
  • The few small business owners I know who are making it, are only making it because they are in niche markets and are at the top of their game.

Yes this is a short list… But these some of the common things I don’t think people take into consideration when they bitch and complain about small business.

What are some other things typical consumers don’t think about?

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