Episode 31: The Shocking Truth About Small Business Failure (And How to Avoid It)

Did you know that only 50% of small businesses make it to year five? That statistic fires me up! In this solo episode, I’m diving into the real reason so many entrepreneurs struggle—ignoring their numbers. I’ll take you behind the scenes of my own business journey, including a humbling moment when my payroll checks bounced (yes, it happened!). But more importantly, I’ll show you why understanding your numbers isn’t just about finances—it’s about confidence, growth, and finally paying yourself what you deserve.

If you're a creative entrepreneur who avoids looking at financials, this episode is for you. I break down the key metrics every business owner should track, how to use numbers to make smart decisions, and why your numbers are just data—not a reflection of your worth. By the end of this episode, you’ll be inspired to take control of your business finances and start making more profitable choices.

Meet Your Host: 

Jennifer Kok has been a business owner for over 25 years and now is a business coach.

She turned her first business into a franchise and successfully sold it 20 years later.  She was passionate about building a business and a family at the same time.

Today she works with creative business owners who are tired of not getting paid enough for their hard work.  She walks them through the 3-step process she developed to allow them to Create More…Earn More…Stress Less.

Get your free guide to grow your business

https://nextwavebusinesscoaching.com/3-steps-to-be-instantly-referable/

Connect with Jen:  https://nextwavebusinesscoaching.com/

🔗 Book a Free Discovery Call to dive into your numbers and learn about my Earn More, Stress Less program! https://link.fgfunnels.com/widget/bookings/consultwithjenkok

Transcript

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Jennifer Kok: You know what makes me really angry? Only one out of 2 businesses. Go on to make it to year 5. And let me tell you this is what I'm gonna do about it.

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Jennifer Kok: Hi, everyone. I'm Jennifer Koch, a 25 year entrepreneur. And I created Main Street success stories to share others, journeys to help you learn, grow, stay motivated, and know that you're not alone in this game called entrepreneurship.

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Jennifer Kok: Today I want to welcome you to something a little different. Instead of having a guest today, it's going to be me. It's going to be me and a solo

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Jennifer Kok: podcast for you and the reason being is I get asked a lot. How do you help

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Jennifer Kok: your clients? What do you do with small businesses? So I thought I would share a little piece of what we do. So the reason I created my program was because I'm really passionate about helping entrepreneurs get to that 5 year. Mark. The statistics are not in our favor, and even after 5 years, only 63% go on to year 10. That's tough. I've seen firsthand what people do to start businesses. I've seen people cash out 401 ks.

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Jennifer Kok: To lose that money. I had a friend who had a business for about 4 years ended up quitting failing, and she had to go take a job in corporate America just to pay her loans back on her business. So I know what it takes, and I just feel like, Oh, there's got to be a better way, right?

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Jennifer Kok: So that's where it comes from. So what I learned in my 20 plus years of owning and operating a business, and I

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Jennifer Kok: kind of drilled it down to 3 key steps, and the 3 key steps are part of my earn, more stress, less program. And today I want to take you through Step number one, and why we start with step number one.

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Jennifer Kok: So the 1st thing I do whenever I work with businesses is, we dive into your numbers, you have to know your numbers, and when I say numbers, I mean your P. And L. Your financials, your gross profit margins, your customer, count your average ticket all these things, so all of you out there who are creatives, don't. I don't want to lose. You don't get, don't go. Oh, gosh! It's going to be one of those budget.

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Jennifer Kok: Podcast or she's just going to talk about financials. No, but I just want you to understand why it's so important.

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Jennifer Kok: So let me take you back to a little bit of how I got started into entrepreneurship. I left a corporate job because I didn't want to keep relocating which was required of me back then, and I started a cookie gifting business. Now this was a business where we made these

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Jennifer Kok: fresh baked cookies, cracked eggs, measure the flour all the bits, and they were decorated. They were on sticks. They were, you know, a lot of times we would decorate them with corporate logos, or babies or birthdays, and we would deliver them. They were very much a gifting business, not so much a cookie business, and I absolutely loved it.

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Jennifer Kok: Well, I was about 3 years into my journey.

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Jennifer Kok: and at the time my husband and I had 2 children, and we were in our car heading to Wisconsin. Our business is located in Michigan. We live in Michigan, and we wanted to go to a place called the Wisconsin Dells, and take our kids and hang out in the

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Jennifer Kok: the. You know the theme parks and do all the fun things.

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Jennifer Kok: and we're driving along super excited for our weekend. When I got a call from my manager

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Jennifer Kok: and I could tell right away. You know, you get those calls, and you can just tell. And she was kind of like,

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Jennifer Kok: Our paychecks are bouncing.

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Jennifer Kok: I was mortified. I was embarrassed because from the outside looking in. Everything looked really good. Sales were good.

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Jennifer Kok: but cash flow was horrible.

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Jennifer Kok: and then, to make the situation even a little worse, we had to stop and take out a cash, advance on our credit card to deposit into our business, checking account.

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Jennifer Kok: to make payroll.

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Jennifer Kok: What a humbling, awful experience! And of course it triggered so many emotions like, what have I done? Why did I leave that corporate job? Oh, my gosh, I'm not any good at this.

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Jennifer Kok: but what I've learned over the course of meeting with lots and lots of different business owners is that I'm not alone.

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Jennifer Kok: Many of us get focused on the revenue. That's the fun number. That's the vanity number I always call that. That's a sexy number, right? But really the revenue is only one piece of the pie. What happens when you trickle down to the bottom? What's left? That's the key number, the profit. How are you going to pay yourself more?

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Jennifer Kok: So what this awful experience taught me was. I have to not just focus on the revenue anymore. I need to look at everything

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Jennifer Kok: you know when you think about

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Jennifer Kok: when you start your businesses. It's kind of like designing homes, or even baking, you know. There's lots of elements to the recipe. It's not just one thing.

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Jennifer Kok: but as business owners we start our businesses. We're super passionate about why or what we chose to start. We don't want to think about the numbers. They often can be very intimidating. I had this one financial advisor say small businesses either are an avoider

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Jennifer Kok: where they avoid looking at their numbers.

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Jennifer Kok: or they are like just so scared of them.

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Jennifer Kok: and they obsess over them. So they're an avoider or an obsessor.

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Jennifer Kok: you know. An obsessor would be somebody who is so worried about spending every little penny. Well, that can hurt your business, too, because they're not investing in your business. And you're not growing so if you think about that. Are you one of those? Are you an avoider or an obsessor?

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Jennifer Kok: Well, the truth is, the numbers tell the story of your business.

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Jennifer Kok: and you know what they're just facts. However, as business owners, we tend to put a lot of our self-worth, our personal value. It kind of reflects

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Jennifer Kok: we feel about us. But you know what? That's not true. You're still building a good business.

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Jennifer Kok: Numbers are just the tools they provide the insight. So it's really important to separate who you are personally from what the data is showing you.

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Jennifer Kok: Your worth is not tied to your revenue or your profit mat, or your profit margin.

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Jennifer Kok: But you know there's a lot of power in knowing your numbers, and I know a lot of you are creatives, and you just want to go produce your product or take your photos or help people with their interior design. We don't really want to pay attention to our numbers, but I'm here to tell you if we don't start there.

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Jennifer Kok: Any good marketing plan you put together

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Jennifer Kok: any well thought out. Customer experience you put together is going to be meaningless unless at the end of the day it fills your bucket.

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Jennifer Kok: So the power of knowing your numbers, you know I had one client say to me

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Jennifer Kok: when I 1st started working with you. I was so embarrassed to even admit that I had been running my business for 6 years, and that I felt intimidated by the numbers, the P. And L. And all the financial details. It was a constant source of stress and self-doubt.

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Jennifer Kok: After we worked together, she said, I gained confidence and clarity. I actually started to enjoy it. And that's crazy. I know there's a lot of you out there thinking. Heck! No, there's no way I'm going to enjoy my numbers, but the best part is, in less than a year she doubled her revenue because she was looking at her numbers, and it was helping her make decisions.

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Jennifer Kok: You know, knowing that your numbers isn't about being a math. Whiz. It's about uncovering the insights hidden in your data. It's about uncovering the story of your business.

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Jennifer Kok: So how do we take the scary out of the finances? Well, we break it down into simple, actionable steps.

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Jennifer Kok: So the 1st thing is we look at what are we tracking.

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Jennifer Kok: you know, for many of us, if we're trying to lose weight, we track calories for some of us who are trying to retire. We track how much we're in, but you know how much we're investing every month. But then, when it comes to our business. We kind of let our business dictate what we look at or our day dictate what we do. So what are you tracking? You know you'll hear this referred to as a metric

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Jennifer Kok: key performance indicators. A benchmark.

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Jennifer Kok: you know. So yes, we track revenue. What does that tell us? That tells us how our sales are doing, how we're if we're getting new clients, we need to track expenses, and there's lots of expenses to look at.

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Jennifer Kok: But more than that, we need to track our profit. Margins, you know. One of my favorite one to track is the gross profit margin. Because what does that tell me that tells me if I'm priced properly, that also tells me, am I being efficient at producing my product or service? So it's really important to think about. What do you want to track some other things depending on your type of business could be average ticket sale. How much do my customers spend on average, every time they come into the store or go online and buy from me.

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Jennifer Kok: We could also track sales per square foot. If you're a brick and mortar, because that might tell us how big of a space do I need? Am I renting too big of a space? So these are the things that your numbers can tell you that help guide you to the next best steps. Right?

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Jennifer Kok: So when we start to look at these numbers, what happens is we start to make better decisions.

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Jennifer Kok: It's you can't avoid it. You're going to make better decisions.

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Jennifer Kok: So the other day I was working with a client who is feeling very pulled into her business, sucked into her business inside the 4 walls. I call it right. She cannot figure out a way to get out of her 4 walls. She's got standard operating procedures. She's got people in place. She's trained them, however, every time she comes in she's fixing mistakes, redoing things. And I said to her.

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Jennifer Kok: You need a manager, somebody a little bit more mature, a little more professional, that can manage these elements for you, because otherwise you're never going to get out of your 4 walls. You're always going to be stuck doing this.

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Jennifer Kok: her 1st response. Well, I don't know if I can afford a manager.

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Jennifer Kok: and that's usually what we think. Whenever we're looking at making an investment or hiring somebody or creating a marketing plan, I don't think I can afford that. Okay. Well.

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Jennifer Kok: why do you think you can't afford it?

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Jennifer Kok: No, I just can't.

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Jennifer Kok: All right. Well, let's let the numbers tell the story.

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Jennifer Kok: So we looked at the numbers. We looked at the payroll. We came up with a benchmark, and usually a benchmark. I always like to say it's a percentage of your revenue. So, for instance, when I owned my bakery, my payroll benchmark was, I could not spend more than 30% of my total revenue dollar.

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Jennifer Kok: so if I sold $100. I had 30 bucks to spend on payroll. Very simple math there, folks, but, anyway, so that's where we started. Well, good news was she was under 30%, which was a good benchmark for her business and her industry. So she actually had some wiggle room to pay somebody a little bit more per hour, or create a bonus program

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Jennifer Kok: and help her get somebody in there that can start taking some of these tasks and managing the staff.

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Jennifer Kok: We couldn't do that without analyzing our numbers, without understanding our numbers, without having benchmarks. You know other ways. You can make decisions with your numbers, are pricing.

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Jennifer Kok: How many of you, if you're being honest, are scared to death to raise your prices? I think we've all been there.

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Jennifer Kok: but if we are, if our gross profit. Margin is too lean. That often tells me that you're not priced properly, and so you have confidence in raising your prices, knowing that this is going to help my gross profit margin, and this is going to help my net income, and at the end of the day I'll be able to pay myself more. So we need these numbers to help us make those decisions.

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Jennifer Kok: So

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Jennifer Kok: how can we make it fun and not intimidating? Well, 1st of all, bring in somebody who's gonna not talk down to you, because I think that's a lot of it. A lot of times, we're, you know, afraid to

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Jennifer Kok: go talk with our Cpa. Or somebody that's very well educated because we don't. We feel silly that we don't know this. So find somebody who's gonna nurture you, teach you show you, and then use some visual tools, you know, for us

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Jennifer Kok: creatives. I'm a visual person. I like to see things in charts or dashboards, and then I like to create little milestones with my numbers, and guess what put together a plan to celebrate. I think sometimes

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Jennifer Kok: what, and I don't think I know this from talking and working with a lot of different clients is that when we actually look at our numbers where we are today versus where we were last year. Guess what our numbers are better. We have something to celebrate, but when you're in it every day, and not looking at it frequently, it's hard to feel that

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Jennifer Kok: I was just talking to another client today who was feeling kind of blah because she didn't hit her annual goal that she had set for 2024. But then, when we said, Well, what did 2023 look like?

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Jennifer Kok: And she pulled it up. It had been a while, and I said, Oh, my gosh! Look at! You're like up 22% from 2023.

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Jennifer Kok: So your numbers aren't that bleak after all?

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Jennifer Kok: So celebrate the little the little wins in your business.

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Jennifer Kok: So when people come to me.

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Jennifer Kok: they're feeling overwhelmed a lot of times they want more for their business. They just feel like they're doing everything.

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Jennifer Kok: Step. One of my 3 step process is we have to dive into what's going on. We have to lift the car hood, and look at your P. And L.

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Jennifer Kok: Look at your processes, look at all the things and look at what you're measuring, and that's why, knowing your numbers is so critical.

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Jennifer Kok: There's also a lot of confidence that can come when you know your numbers.

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Jennifer Kok: So let me share with this

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Jennifer Kok: when you are not sure if your pricing is where it should be, and let's say you're in interior design, and you go to, you know. Have a proposal for a client, and you give them this proposal, this bid. If you're not feeling really confident that you're going to make money at the end of the day, it shows up in your body language. There can be this like,

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Jennifer Kok: yeah, here, you know, I charged this.

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Jennifer Kok: but when you have run the numbers, you know your profit margins. You know at the end of the day that it's solid, you're competitive, it feels good. You show up differently. You show up. And you say, here. This is what I can do for you, and that comes across whether you realize it or not. It comes across in your body language, your tone, and when you know your numbers you feel more confident it just brings you can't help it. And I just want you to know that

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Jennifer Kok: when you start to feel like you want to avoid them because you're embarrassed, or you're going to obsess over them. You're afraid to spend any money, because that both of those will hurt your business. Your numbers are just data. They're not a reflection on you. They're not a reflection on your self-worth or your lack of being able to be a smart business owner. They're just data.

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Jennifer Kok: So if you would like to do a deep dive into your financials, I'm going to invite you to learn more about my earn, more

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Jennifer Kok: stress, less program

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Jennifer Kok: in the show notes below is a link to set up a discovery call. I'm going to invite you to this free discovery. Call and help you start to unravel, unpack, and look at your numbers and make your numbers fun.

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Jennifer Kok: So thank you so much for listening. I hope this was helpful. I hope you can. Now go. Take a look at your P. And L. Take a look at your point of sale. Take a look at what you're measuring, and start to look at your numbers in a different light, because, trust me, when you do, you're going to make smarter decisions, smarter decisions help you grow, and and ultimately you'll be able to pay yourself more. And I believe that small business owners who make good money. Go on to do great things.

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Jennifer Kok: So thanks for listening until next time. Keep building and remember to support your local businesses. They need you more than ever.