Have you been tempted to start a business but don’t because you heard that the large majority of them fail? The biggest reality in business ownership is: about 1/2 (49%) of new businesses fail within the first 5 years. Actually, these are GREAT success results…far better than you get in Los Vegas. The four main reasons for failure are: lack of planning; insufficient capitalization at startup; mismanagement of cash flow; improper pricing. Proper planning & hard work is the only way to guard against failure.
D&B found that 90% of all failures can be traced to poor management resulting from lack of knowledge. In other words, the inability to critically think about business in areas like: accounting; planning; marketing; and human resources. My personal observations as a business mentor over the past 15 years are that business owners go under & lose their businesses not because they weren’t talented or smart enough. They simply try to re-invent the wheel rather than rely on proven, tested business methods that work.
Here is another startup myth buster, start ups don’t fail because there is no market need for their product. They fail because they are entering a market in which the supply and demand metrics are not in their favor. If you want to succeed as a founder, your sole goal should be to escape the competition.
Here are some more business startup myths:
Myth: As an entrepreneur, you won’t have to work so hard or put in long hours as you are currently doing working for someone else.
Reality: On average, entrepreneurs work far longer hours than employees do but they likely enjoy it more because they are building something they own.
Myth: My product/service is unique and there is no competition.
Reality: There is always competition. It may be in a different form or delivered in a different manner, but it exists and you need to recognize and deal with it. Most founders don’t start with an “idea.” Instead, they start with a real problem. By solving that, they can create a sustainable business. A good idea is a great start, but it takes hard work, research, planning & successful implementation strategies to turn the idea into a business! Don’t end up being a solution in search of a problem.
Myth: Business owners can deduct everything, so you won’t need to pay taxes.
Reality: Entrepreneurs do get to subtract business expenses from their gross income but they still have to pay taxes on their net income.
Myth: As a business owner, you will not have a boss.
Reality: Yes, you don’t have a single boss. You have many including your clients/customers who each have specific needs and demands. Your challenge is to keep them all happy. As John Wayne, in the movie McLintock, said to a young upcoming cowboy who wanted to be like him so he would not need to work for somebody, “Everyone works for somebody…I am a cattle rancher and I work for everyone who eat meat.” The real boss in your startup is your customer, because they decide whether or not to buy.
Read a free sample of the new book “Small Business Thoughts Real-Time Strategic Planning“.
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