DennisBeaverJune 14, 2019 • By Dennis Beaver 

(If You Love to Cook, Don’t Open A Restaurant!)

It is the American dream – successfully running your own business. But are you able to? Do you know the major errors which virtually assure failure?

Friends of this column know them only too well. They are Dr. Lyle Sussman, former Chairman and Professor of Management, College of Business, University of Louisville. Dr. David Schein, an attorney and Associate Professor at the Cameron School of Business of the University of St. Thomas in Houston.

Not Paying Taxes

“Some wildly successful businesses go down in flames, a result of owners who ignore their federal and state tax obligations,” Schein points out, adding, “Government has the power to pull the plug on your business in an instant, and will when discovering taxes which have not been paid, especially payroll taxes, When they are not paid, this results in personal liability of the business owner or CEO.”

Sussman cautions that employers who intentionally fail to pay their withholding taxes, “Run the risk of being found guilty of tax evasion, resulting in a prison sentence of up to five years. For any of your readers who are not paying their taxes as required, using the excuse, ‘I don’t have that much money,’ then close your business before you go deeper and deeper into debt!”

Running a Restaurant Demands Skills Seldom Found

If you love to cook and have been urged by friends and family to open a restaurant, Schein has this question:

“Do you know which type of business has the highest failure rate?”

“It is family-owned restaurants, and 60% fail within five years, often the result of thinking, ‘I love to cook so I’ll open a little restaurant, and since I’m retired, my 401K can be used as feed money to get it started.’

“My advice is simple: If you love to cook don’t open a restaurant! It involves every conceivable aspect of running a business and is simply brutal.”

Agreeing with Schein, Sussman notes that the exception would be a franchised restaurant, such as a McDonald’s or IHOP, explaining that, “One of the reasons a franchised–restaurant or other type of business–has a higher chance of success is that the organization has a system in place to vet potential franchisees who they want to succeed. They will say ‘Yes or No–We will not sell you a franchise because you lack the necessary business skills.’

“Finally, for anyone wanting to open their own restaurant in a location where several before have failed, before doing a thing, please get evaluated by a psychiatrist!”

Fail to Have Someone Look at You Objectively

I have had clients who fell in love with some type of a business concept but never put themselves through a vetting process. They plunked down their life savings, and lost it all due to a lack of the skills necessary to run a business.

Sussman observes, “We constantly hear, ‘Follow your passion,’ but it is difficult to look at yourself objectively when you have this dream, this vision. Unless you find people who will determine if you have the right skill set to run a business–then you risk starting this venture with your eyes shut.”

You Need a Lawyer – “Pay Me Now or Pay Me More Later!”

As Schein is both a university business professor and practicing lawyer, he has seen “Costly, preventable lawsuits, if an established an attorney/client relationship had existed before the doors were opened. For business owners who have a lawyer, trying to save money by dealing with a legal problem on their own is almost always false economy.

“There is a saying, ‘You can pay me now or pay me a lot more, later.’”

A Legal Startup Might Be the Answer

Recently I interviewed Brian Liu–who founded LegalZoom in 2001, and we spoke about a possible answer to the challenge of having a lawyer available to the new business owner, inexpensively.

In October, 2018, he launched BizCounsel, which “Guarantees small business owners quick access to legal advice for $65.00 a month. We are geared to the business community, aiming to establish a relationship with an attorney who is knowledgeable in small business legal matters.”

And, as I learned, this isn’t “Call an 800 number and hope to get the same lawyer you spoke with last time,” as some other pre-paid legal services offer.

“We connect business owners with experienced attorneys who are looking to develop their own law practice. Our subscription includes unlimited on-call attorney advice and counsel, but more importantly, we’re looking to change the way lawyers and small business owners interact,” Liu stressed.

BizCounsel’s website (www.BizCounsel.com) is well worth the time of any small business owner who does not yet have a lawyer.


Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.