You can't judge your business by the past three years;

              34 HASKINS & SELLS April
You Can't Judge Your Business by the Past Three Years
If it is to live through the next three years, you must not make the mistakes which cause 75
per cent. of all businesses, that are started, to fail. What I have learned
about these mistakes through years of investigation
By ELIJAH W. SELLS
Of Haskins & Sells, Certified Public Accountants
IF I were asked at the present moment
for the most serviceable warning to a
business man, I would say: "Don't expect
to stand on the record of your house for
the past three years."
The extraordinary conditions of the past
three years cannot continue to exist. A l ­ready
some reaction has been felt, and this
is going to continue for some time.
As accountants, we know that firm after
firm has made vast amounts of money
during the past three or four years without
deserving success. Firms which produced
inferior goods, firms which have had bad
management, firms which, under anything
like ordinary conditions, would have been
dire failures, have made money despite
these things, and have made it so easily
that it is no wonder some of them are de­ceived
into thinking it must be a result
of their superior ability.
Nothing that I have to say in this ar­ticle
applies, with any force, to those
years. But it is going to apply from now
on. The real tug of war for business is
just beginning. Firms which have made
money simply because there was such a
demand for goods at high prices that they
could not help making money are going to
find out that it takes something more than
being in business to make a post-war suc­cess.
A good many of these firms will go
under.
If this sounds pessimistic, let us consider
the ordinary records of business. At least
seventy-five per cent. of all concerns start­ed,
fail. I have verified this statement
by calling on an authority in such matters.
It is as nearly correct as is possible. Men
who start out in business seem to know so
little about it that it is a wonder even so
large a proportion as twenty-five per cent.
succeeds.
Among our clients are all kinds of com­panies,
from very small concerns up to
railways, cities, and even Governments.
Big companies fail in almost the same pro­portion
as smaller ones; but their affairs
are so complicated that it is difficult to use
them to illustrate single points. Small
businesses often turn for their success or
failure upon a single point, because their
affairs are simple.
One of our clients went into business—
we will say the wholesale crockery business
—with thirty thousand dollars of borrowed
capital. This client was a good buyer and
an excellent salesman. He knew his mer­chandise
and the markets for it.