Accounting Principles, 11th Edition

Feature Story

Was This the Next Amazon.com? Not Quite

So you came up with a great idea for a product. You started a company, and you are selling stuff so fast that you can barely keep up. No problem, right? However, without proper planning and budgeting, your success could be short-lived. In some cases, failure is actually brought on by rapid, uncontrolled growth.

One such example was online discount bookseller, www.Positively-You.com. One of the website's co-founders, Lyle Bowline, had never run a business. However, his experience as an assistant director of an entrepreneurial center had provided him with knowledge about the do's and don'ts of small business. To minimize costs, he started the company small and simple. He invested $5,000 in computer equipment and ran the business out of his basement. In the early months, even though sales were only about $2,000 a month, the company actually made a profit because it kept its costs low (a feat few other dot-coms could boast of).

Things changed dramatically when the company received national publicity in the financial press. Suddenly, the company's sales increased to $50,000 a month—fully 25 times the previous level. The “simple” little business suddenly needed a business plan, a strategic plan, and a budget. It needed to rent office ...