Fairytale #1: You Need Money to Make Money
How many times have you heard this?! If you’re thinking of starting a new venture, this false assumption could easily put you off. It simply isn’t true that you have to have bags of cash to start a business (although it definitely helps).
There’s no getting around the fact that business startups require some kind of initial investment and also need to take on some manner of risk/reward in this investment –something cannot appear from nothing. However, no new venture can survive if the owner keeps plowing more and more money into their enterprise while imagining that the greater investment equals larger payout.
Throwing money at every challenge that presents itself is a sure-fire way to fail. Beg, plead, negotiate, and hustle to find other solutions that don’t require you to keep paying out until you’re sunk. Easier said than done, but it’s true that as a new business owner you’ll need to quickly get into a smart and gritty mindset where you’ll probably end-up owing some people a favor or two.
Be imaginative and clever, rather than paying to solve your business challenges. Offer your services as payment and make deals that won’t hurt you financially. Get creative about ways to raise money. In 2008, the owners of business start-up Airbnb, funded their venture by selling custom printed “Obama O’s” and “Cap’n McCain’s” cereal boxes. It worked and they raised $30,000 doing it! Now, I’m not suggesting that this is the answer for your business, but it does show how you literally have to “think outside the box” if you want your business to succeed.
If you’re not tightly managing your cash, then you’ll come undone. Have higher visibility around your expenses and manage your cash like the scroogiest, Scrooge McDuck who ever lived! Cut your expenses to increase your bottom line and cut all costs that are not critical to servicing your clients or growing your business.
Fairytale #2: The Government Helps Small Businesses and They’ll Help You
It’s not going to happen and you certainly shouldn’t plan for a hand-out or assistance from the government, despite what any late-night infomercials may tell you.
Some states may have programs that are created to help veterans and disabled people, but these programs are designed to be incredibly difficult to qualify for and have stringent requirements. In addition, they rarely offer the support and funds necessary to get a business off the ground. The simple fact is that the federal government does not offer programs to fund small businesses. It would be nice, but it’s a myth.
And if by some miracle you find funding from some independent organization or new government scheme, then it’s probably too good to be true. There really is no such thing as a free lunch. As the famous journalist and humorist, Franklin P Jones said:
“When you get something for nothing, you just haven’t been billed for it yet”
–Franklin P. Jones
Fairytale #3: Low Prices Improve Sales
If you set your prices low, you’re severely handicapping your business before it’s even got chance to get off the ground. Ask any successful businessperson and they will tell you that low prices have NEVER guaranteed sales or success. Don’t be scared of setting your prices higher than your competitors if you feel that you have a better product or solution to sell.
As much as consumers love low prices, they don’t always choose the lowest price. It’s not low prices you need to offer – it’s overall value. Beat the competition in quality, branding, or customer service and you’ll soon realize that price isn’t everything.
Early businesses success relies more on positioning than pricing. You need to know the market, your audience, what motivates them and why they would choose your product or service. When you unlock these secrets through conversations with your customers, researching, data gathering, and generally putting in the work to find out where your business fits in the market, then you can start defining your product, setting prices and figuring out how you can be successful.
It takes time and effort to build a brand, a product, a reputation and a business, and simply selling your product at a low-price and expecting success is not a smart strategy. Getting your product to market as the best product in the market is far more valuable to your business than simply trying to out-cheap your competitors.
Fairytale #4: You Don’t Need a Business Plan – Just Wing it
Every great business is born from a great idea. However, it takes more than just a great idea for your business to succeed – nothing falls magically into place. You need a solid, workable business plan that outlines your vision, budget, sources of funding, company goals, industry opportunities, demographics, projections, and every other aspects of your business that needs to be planned-out and written down.
A business plan should include the following:
- An executive summary with outline of business goals and growth plans
- Industry research, including target audience
- Organization and management structure
- Clear definition of what sets you products or services apart
- Marketing and sales plan
- Financial projections, including sources of income or funding
Being spontaneous and doing things on-the-fly rarely leads to success. You have to have a goal and a plan to get there. It doesn’t have to be perfect business plan, because there will inevitably be things that you simply can’t plan for. However, to react completely spontaneously to each setback or change is just bad business. Being successful in both business and life requires that you weigh your options and make informed decisions. A business plan is a great reference when making these decisions.
Here are some of the benefits of creating a business plan:
- The competitive research you do will generate new ideas and force you to think in creative ways to out-market the competition
- Visualizing the big picture allows you to see potential pitfalls from the start
- You can treat it as an exercise in figuring out your customers
- It can unify a company vision for you and your team members
- It can provide references for company reports and applications
Fairytale #5: Social Media is My Most Important Marketing Channel
Just to preface this point, social media marketing is a legitimately important outlet for all start up businesses to grow their audience. Many small businesses have built successful companies by concentrating much of their marketing efforts on social media promotion.
However, it takes a very specific product or service to find success through social media; retail, fashion, food, décor, real estate, veterinary, and other consumer-focused industries need to hit social media hard in this modern online marketing environment. But what if you’re starting a brick supply business, opening a local hardware store, or developing business software? Will these businesses succeed in the very visual, storytelling world of social media?
The answer is clearly, no. Some businesses do exceptionally well on social media by sharing photos of their latest apparel designs, telling heartfelt stories of how they rescued animals, etc. This simply doesn’t work for all businesses and those businesses that do have huge followings are almost certainly not marketing themselves just through social media. In fact, it’s more common for businesses to build their products and reputations through other media channels before achieving success on social media.
A social media plan HAS to be part of a bigger online strategy that includes emails, website optimization SEO optimization, PPC campaigns, and even more traditional print advertising.
No marketing plan should just include social media marketing. The key is synergy and company successes is more likely to be achieved by uniting your marketing channels so that each one of these channels is fulfilling a single purpose based on a broader company objective.
Fairytale #6: Passion is all You Really Need to Succeed
The American dream is a great thing. It speaks to people of possibilities – to start with nothing and achieve great success. It’s a beautiful idea and there are countless stories of people fulfilling this dream. However, there are even more people who have started a business and fallen by the wayside because they put all their faith in blind belief.
The idea that “all you need is passion” or “it happened to them, so it can happen to me” is unrealistic. According to Inc. Magazine, the hard fact is that 96% of business startups fail within 10 years. That’s a frightening number and undoubtedly includes businesses with solid plans and whose owners did everything right, yet still failed! However, don’t let that discourage you – while passion certainly helps, it takes more than belief and passion to succeed.
Think with your head and not your heart. You will heighten your chances of success by making solid, practical decisions that will positively impact your business:
- Plan, plan, plan
- Know exactly what your business is worth – both financially and conceptually
- Establish a legal entity for your business to prevent risk
- Keep ultra-tight control of your expenses and costs
- Research and seek-out every new competitive advantage you can find
- Study your market with meticulous detail and intimately know your customers before spending a penny on marketing
- Be a good business person and you (may) be rewarded – be good to your word and follow through on commitments even when difficult
- Choose your team wisely – be cutthroat when it comes to hiring but fair to your employees when they join your team
When starting a business, success is never guaranteed, but buying into common fairytales and generalizations is a bad road to go down. Every business is different and if you’re starting one up, you need to look at practical plans and solutions rather than hopes and wishes for success. When you know your own business, you’ll know good advise when you hear it.
Image credit: CC by daniMU