Seven Deadly Small Business Myths

August 26, 2007

Small business myths are often started by people with little or no business experience. And these seven deadly small business myths can seriously damage your chances of business success.

Myth 1: Small Business Start Up Money Is Easy To Get If You Have a Great Idea

Reality: If you’ve never ran a business before, start-up cash is difficult to get, no matter how fabulous your idea is. Most business investors prefer to plough cash into start-ups which are being headed by experienced and successful business owners.

Myth 2: Small Business Owners Have More Freedom Than Employees.

Reality: In the early years, most new business owners have less freedom than employees. In the beginning you’re going to be doing a lot of the work yourself and you’re likely to find yourself putting in far more hours than you did when you had a job. Also, until you have people in place to run your small business whilst you’re not there, vacations may become a distant memory.

3) It’s a Great Idea to Turn a Hobby Into a Small Business.

People who make this suggestion are often ignorant as to what a business actually is. Your hobbies are normally something you enjoy. It’s often harder to give up something you enjoy. If you start up a business which was originally a hobby, more often than not, all you will end up with is a work at home job. Most business owners who turn a hobby into a business fail to grow the business because they’re doing it all themselves, and believe nobody can do it as well as they can.

4) If the Competition Are Bad, You Don’t Need To Watch Them.

You should always keep a close eye on your competitors, no matter how bad they are. If they were that bad, they wouldn’t be in business at all. And even if they are truly terrible, they won’t be in business for long and could be taken over by someone much better. Also, you can learn from their mistakes to make sure you don’t make the same ones and look at the things they’re doing well to see how you could improve.

5) The Best Advice is Free

This is an extremely dangerous fallacy. Sure you can get a lot of advice from other experienced business people on forums and blogs. You can also get really bad advice from them too.

Often people will make ridiculous posts just to sound knowledgeable and important, and sometimes, they’ll be trying to sell you something. Never take legal or financial advice from people with experience you can’t verify, and read as many good books on business, marketing, and leadership as you can.

6) You Don’t Need to Understand Accounts to Start a Business.

This is bad advice. If you’re starting a business, make sure you have at least a basic grasp of accounts before you begin. Learn how to read a balance sheet and make sure you understand cash flow as it is the lifeblood of your business. If you don’t understand accounting basics, you won’t even know that your business is in trouble until it is too late.

7) The Most Successful Businesses Grow Like Wildfire.

Successful businesses do grow quickly, but that growth should be well managed to ensure your start up can afford it. To grow rapidly, you will often need to outlay a lot of cash, and you may not see a return on it for a while, so keep a keen eye on cash flow whilst you are learning. Also, going after huge contracts is not always the best idea during your first few months in business. Often, a lot of work is required to be able to get huge contracts, and you may not see a pay off until many months down the line. Look for more smaller contracts initially — preferably ones that will pay straight away. You can always go after the big fish once your business has plenty of cash in the bank.

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Comments

5 Responses to “Seven Deadly Small Business Myths”

Ian on August 26th, 2007 8:28 pm

And being a company director is a licence to spend your day on the golf course while your business looks after itself.

Maybe one day. But not until you have completely replaced yourself in the business after several years of hard graft and systemising everything that is done.

And even then, you will still need to make sure the reporting in your business tracks cash, customer satsifaction, sales pipeline, work in progress, profitability, and all without it being able to be fiddled by unscrupulous employees.

Don;t get me wrong, only a minority of staff are untrustworthy. But the vast majority need to be kept motivated, and work within defined parameters on performance.

It also needs to be checked and balanced. You need to know for example that customer satisfaction is measured WITHOUT your employees being able to manipulate the statistics.

Use an outside agency to survey your clients. Or if you have the time, use an automated email circular which asks customers for their opinions directly.

Ask Cath Lawson for a recommendation as I’m aware she uses various systems and can point you in the right direction.

Or you can do it yourself. If there’s one thing more important than anything else to keep tabs on, it’s how happy your customers are.

Don’t lose touch with them and rely on what staff tell you about client satsifaction levels. Human nature dictates that staff will report more positively than is often the truth.

You don’t want to get a nasty surprise when a recorded delivery complaint arrives on your desk and it’s the first you’ve heard about dissatisfaction.

By then it’s often too late to save the unhappy client from spreading bad word-of-mouth about you.

So if you want to spend more time on the golf course, make sure you get your systems right (I hate golf by the way, but I love spending time at home or with family rather than being in the office all the time!).
cathlawson on August 27th, 2007 6:58 am

Great points Ian. I know lots of Company Director’s who spend a lot of time on the golf course and use the excuse that they’re networking.

And untrustworthy staff can cause real problems. When I first started out in business, I trusted everyone, and it was a massive mistake.
Asako on September 1st, 2007 5:03 am

Your 7 myths are totally on the right spots. 7) management of the pace and growth is a really important one. Not only the financial risk, also I have seen an organizational issue caused by too fast growth, that would impact in the future.

3) turn a hobby into work. Once it is a work, it is a work. But I think still it is good to do something you like and are interested in. As you said 1), fund raising is impossible, and if you do not like it, you can not last.

5) the best advice is not free, ouch, I am trying to set up a blog site to give advice with my partner… we definitely need to do a good job….
cathlawson on September 1st, 2007 7:34 am

Hi Asako. I think there is plenty of great free advice out there. I think the worst of it is on forums, and often - the bad posters will have signatures with things like “Make $20000 this month” so you can spot them.

By the way, I’ve visited your blog and I think it’s brilliant.
Asako on September 1st, 2007 8:26 am

Thank you, we are blog Newbies. We will try to keep up!