BERMUDA -- Imagine not having to pay any taxes or keep any books or records on your business. It sounds wonderful, but strangely enough, the absence of taxes actually has a negative effect on local small-business owners.
"We are very loose record-keepers," said Ian Coles, publisher of Bermuda Business magazine. Without any documentation, island business owners find it nearly impossible to keep track of inventory, monitor sales or figure out exactly how much money customers owe them.
American business owners may also be surprised to learn that entrepreneurs living on this 21 square-mile, self-governing British colony face the same challenges they do: economic recession, a 20 percent decline in consumer spending and overall tough times.
Bermuda, about 700 miles southeast of New York, is best known for its pastel buildings, brilliant white roofs and romantic pink beaches. Its 60,000 residents live in a true small-business paradise with about 2,500 small businesses, each with fewer than 20 employees.
"In some ways, we would be better off having some sort of tax regime that would require small business to keep some sort of records," said Trevor Allwood, general manager of the Bermuda Small Business Development Corp.
Mr. Allwood, a former banker, was among the 70 business owners and advisers attending a recent "Succeeding in Small Business" conference here. Mr. Allwood said although it is difficult to make the right business decisions without accurate books or records, it wasn't a serious problem for local business owners until recently.
"In the 1970s and 1980s, it was very easy for anyone to open a small business in Bermuda," he said. "You opened the front door, and customers walked in and bought what you had."
In recent months, however, "sales have dropped about 20 percent, and most business owners don't know how to cope with it," said David Hills, an accountant and consultant who moved from Halifax, Nova Scotia, to Bermuda a few years ago. Mr. Hills works with local business owners, teaching them basic management and strategic planning techniques.
Business owners attending the conference said they often buy too much merchandise because, living on a distant island, they fear running out of stock.
"We have high inventories and huge receivables," said Mr. Coles, the magazine publisher and founder of Bermuda Marketing Ltd.
Cash flow, or "credit control" as it is called here, is another major problem, Mr. Coles said. Many Bermudan merchants encourage customers to take merchandise home and pay for it later. Most tourists, who come and go, don't realize how expensive it is to live in Bermuda. Rents are high, and gasoline costs about $5 a gallon. Mr. Allwood said many residents have two jobs or run a small business on the side to supplement their income. Still, Bermudans enjoy a very high standard of living, with a per capita annual income of $27,000 compared with $19,000 in the United States.