What's the real deal about starting a small business?
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?
What other myths are out there about starting a small business? Please let me know.
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.
This article gives real advice perfect for entrepreneurs to take note. There is nothing wrong with dreaming big but putting together a solid game plan that thinks about the process to the dream as well as how to handle it when you get there is what will set the winners and losers apart.
Great post Melinda. I get a lot of questions about starting home-based virtual worker careers and find myself rolling out similar advice as you. It’s true that a virtual worker business likely comes with the lowest ‘out-of-pocket’ expenses compared to other entrepreneurial ventures. However, I caution those interested in this industry to spend sufficient time on market research and product development – in our case, that product would be intellectual services – Does your service meet a need? What and who is your competition? Are you offering a niche service? Why would a potential client choose you over another service provider? Etc.
It’s also important to consider whether you are self-motivated, proactive, determined, disciplined, focussed and are prepared for the ‘buck’ to stop with you whether it’s good news or bad. If you were an exceptional employee or manager, it does not necessarily mean you will find instant success as your own boss. However, you can transition into this industry gradually from a full time job, but expect your ‘free time’ to be nearly non-existent until the transition is complete.
I do actually have considerably more free time and flexibility to choose my schedule than I ever did working as an employee, but it can take time to achieve that life/work balance and ‘effort in’ certainly equals ‘results out.’
Lastly, as business owners, we are ultimately accountable to our clients, associates and our families…in some ways, that’s more pressure than the employee-based career.
Great post! It’s so funny that many think they need to get a grant or a loan to start a business, it’s usually not the case and often times it actually hinders people from being creative and leveraging other resources to move forward in their business.
Kimmoy—
You hit on the one question that probably irritates me the most. How could people honestly believe someone will give them grants to become a millionaire. It’s crazy. Your ability to save money has everything to do with your ability to start a business!
Thanks for your comment.
Melinda
Powerful list!
Good article Melinda. Here at Toronto Business Development Centre we ask propective business owners why they would want to start a business and your 5 Common Myths are often included on the list of reasons.
One more myth we encounter: It won’t take long to get established.
Richard Sakanashi
Richard—
Thank you for your comment. I am glad that you pointed out the other one. “It won’t take that long to get established.” This is the one that causes people not to save enough money before they start their business. It takes 12 to 18 months to get a business off the ground–just to break even. I really want people to understand what they are getting into as they start their small business.
Here’s to ending small business failure,
Melinda
Great article!
How about my business idea is wonderful?
Have you asked other people for an objective opinion? Getting an objective opinion is not asking your mother and friends “Don’t I have a wonderful idea? You like it, don’t you?”
Elizabeth—
Thank you for your comment. I agree that you do need to get some objective people around you who will tell you the truth. I call this group of people a Kitchen Cabinet of Advisors. They’re the kitchen cabinet because they will work for food, but you can count on these 3-4 people to give honest feedback.
Here’s to your business success.
Melinda
I love your article! I have been struggling for my niche for close to 5 years. Still haven’t figured out how to effectively reach people with an interest with paying “out of my nose”. I have been using my own money and with the economy the way it is makes it just that much harder! Sometimes, I get discouraged but I have a lot invested and I enjoy the art that I am doing, so I just keep hoping and praying that I will stumble upon that door and have sense enough to know how to open it! lol
Judie—
If you are doing the same things and not getting the results– you must try some new things. Is there a luxury condo building where you could display your art as long as it was clear that the art was for sale. Could you organize a showing for three artists and yourself– and invite a new audience to see your work? Could you do workshops on how to become a art collector to build wealth? Try targeted pay per click ads on Facebook. Could you offer your art to a local film crew shooting in your city as a prop. A good PR stunt could help. Could you offer to do a mural with children raise awareness of art and get a feature about you and your project. There’s all sorts of things you can do. I hope this helps.
Melinda
Great post Melinda. I get a lot of questions about starting home-based virtual worker careers and find myself rolling out similar advice as you. It’s true that a virtual worker business likely comes with the lowest ‘out-of-pocket’ expenses compared to other entrepreneurial ventures. However, I caution those interested in this industry to spend sufficient time on market research and product development – in our case, that product would be intellectual services – Does your service meet a need? What and who is your competition? Are you offering a niche service? Why would a potential client choose you over another service provider? Etc.
It’s also important to consider whether you are self-motivated, proactive, determined, disciplined, focussed and are prepared for the ‘buck’ to stop with you whether it’s good news or bad. If you were an exceptional employee or manager, it does not necessarily mean you will find instant success as your own boss. However, you can transition into this industry gradually from a full time job, but expect your ‘free time’ to be nearly non-existent until the transition is complete.
I do actually have considerably more free time and flexibility to choose my schedule than I ever did working as an employee, but it can take time to achieve that life/work balance and ‘effort in’ certainly equals ‘results out.’
Lastly, as business owners, we are ultimately accountable to our clients, associates and our families…in some ways, that’s more pressure than the employee-based career.
.-= Karen´s last blog ..Class of 2010 — Where Did All the Jobs Go? =-.
Steve–
I like your perspective about home-based virtual businesses. Even though you are selling yourself as the business you must treat it as you would any other business in terms of planning and market research. Your schedule is more flexible, but I’m quite sure you work many more hours.
We should talk about you being a guest on #Smallbizchat.
Melinda
I LOVE IT!! Tell it like it is!! So many fall for the “you can run your business and make millions of dollars while wearing your pjs!” lie. It’s not easy, it takes a lot of time and you have to have some biz knowledge, discipline and patience.
Lady—
I am very tired of people looking for quick fix fast-food solutions in business. People need to know what they are getting into in business so I try to make it plain.
Here’s to ending small business failure.
Melinda
Excellent read, I just passed this onto a colleague who was doing a little search on that. And he actually bought me lunch because I found it for him smile. So let me rephrase that: Thanks for lunch!
This is so different from the advice currently out there in such books as Four Hour Workweek. People need to know that before you get to the four hours a week, you probably need to have put in 60 hours a week first!
Temi–
Yeah–basically the books out there like Four Hour Work Week by Tim Ferris are largely gimmicks–People want to believe that starting a business is not that hard. I am all about working smart too, but in the first few years in business your business owns you. You will be burning the midnight oil for a while until things really kick-in.
Continued success.
Melinda Emerson