This is national small business week. In honor of that I thought I would use my blog to dispel 5 common myths about starting a small business. I chose these five as they are the most common questions I get when I speak around the country and do workshops on how to transition from a job to small business ownership. Entrepreneurship is the only way to build true wealth in America, but you need to make sure that you understand what you are getting into for the long haul.
Myth #1: Starting my own small business will give me more control over my schedule.
Reality: Starting a small business is not a 9 to 5 job. In the beginning your business owns you—you do not own it or your time. For many startups, 14-16 hour days are not unusual. As an entrepreneur, you do 10-13 jobs at once including being the chief sales person, business planner, secretary, payroll manager, human resource manager, brand manager, chief financial officer, technology manager, project manager and bill collector. Carving out time for yourself will be a luxury. If you duck out early to run a personal errand, you’ll need the make the time up once the kids go to bed. For the first three years, do not plan on spending lots of time on the golf course, or taking off every Friday. Your business will need every minute you have to spare.
Myth #2: I don’t want any loans to start my small business – I can get grants.
Reality: There’s no such thing as getting a grant to start your small business. Expect that the money to start your business will come from your right or left pocket. Successful startup entrepreneurs save 20-40% of every paycheck for at least 12 months prior to starting the business.
In fact, there are three pools of money you should have before your start a business
- An emergency savings account
- Enough budget to go for 12-24 months without a paycheck
- The first year of operating capital to run your business
Banks do not typically loan money to start-up businesses either. You need to be in business for two to three years to qualify for even a line of credit. The only chance you have of earning money you don’t need to pay back is if you win a business plan contest or new inventor competition, but that’s a long shot. Now there are some franchises that provide funding, but 20-30% of the loan must come from your own resources.
Myth #3: My business idea is so great my products will sell themselves.
Reality: Do not fool yourself. Building sales requires time, money, and a disciplined sales process that starts with strategic relationship building. How strong is your network? That’s where your first customers and sales will come from for your business. What are your weekly marketing activities? Marketing is the engine that fuels a small business – no marketing = no sales. Even if you have a big client, you do not want to put all your eggs into one basket. Make sure your client base is diversified.
Myth #4: I have been successful in corporate America; running a small business will not be too hard.
Reality: If entrepreneurship were easy, everybody would be doing it. The biggest difference between working in corporate America and self-employment is infrastructure. You must build everything. You will have to do every job until you can afford help. Your corporate job can survive without you for a day or a week. In your own business, if you don’t work, you don’t eat. Sick days, hour lunches, health benefits and 401K perks don’t really exist in the start up phase of a small business. You must be prepared to learn everything you can. If you already know everything, keep your good job–if you can.
Myth#5: Anybody can use my product or service.
Reality: One of the top reasons why small businesses fail is lack of having a niche target market. Do not make the mistake of trying to sell to anyone that you think has money. Take the time to develop a customer profile. You should be able to see the face of your customer and know everything about her. How old is she? Does she have children? In what country does she live? Does she make purchases using the internet? How much education does she have? What is her income? How often does she buy your product or service?
Melinda Emerson “Smallbizlady” is a seasoned entrepreneur, professional speaker, and small business coach. Her areas of expertise include small business start-up, business development and social media marketing. Melinda hosts #Smallbizchat, a weekly talk show on Twitter for emerging entrepreneurs. Melinda’s first book Become Your Own Boss in 12 months; A Month-by-Month Guide to Start a Business that Works was released in March 2010 by Adams Media.