By Sabah Karimi
WWR Article Summary (tl;dr) Sabah Karimi of “Gobankingrates” illuminates seven myths about starting a business. Karimi also provides tips to sidestep some not-so-obvious pitfalls that can impede you on your journey to success.
Startup activity is on the rise. According to the 2015 Kauffman Index, more than half a million Americans start businesses each month. Still, not all of those businesses go the distance. Research compiled by Statistic Brain reveals that about 50 percent of new businesses, regardless of industry, crash and burn before the five-year mark.
If you’ve recently taken a leap of faith by becoming an entrepreneur, then you’re probably doing everything in your power to boost your chances of success. While doing your homework with regard to the industry and market is essential, even the most thorough research is no substitute for firsthand experience. If you want to make the most informed business decisions, and increase your odds of outlasting the startup competition, it’s important to avoid common first-time entrepreneur mistakes.
Additionally, savvy startup founders take care not to believe the lies associated with business ownership. Here are seven myths and lies about starting a business, along with tips to sidestep some not-so-obvious pitfalls that can impede you on your journey to success.
YOU HAVE TO GIVE UP YOUR DAY JOB
Starting your own business is an endeavor that requires your full commitment, but that doesn’t necessarily mean you have to give up your full-time work commitment right off the bat. In fact, many startups never become viable businesses, according to Winnie Sun, co-founder and managing director of the financial consulting firm Sun Group Wealth Partners.
“The majority fail within the first five years of creation,” said Sun. “Instead of giving up your day job, you’re perfectly able to start your business on the side or weekends and financially support your dreams with your continuous paycheck.”
Additionally, keeping your job can help you secure the financing you need to succeed. Said Sun, “It’s also easier to borrow business loans when you have a source of income.”
YOU’LL GET TO BE YOUR OWN BOSS
If you enter the startup world expecting to be your own boss, you might wind up disappointed. While you are technically the person in charge, you still have to answer to various individuals on a daily basis, including your customers and employees.
Larry Kim, founder and chief technology officer of Wordstream, had the mistaken impression that starting his own business would let him be his own boss.
“In reality, I found that customers are more demanding than my old bosses ever were _ and it’s possible that you’ll have hundreds of thousands of customers, versus just one boss,” said Kim. “Furthermore, if you take investment dollars, as I did, your board of directors are like ‘super bosses’ and add even more pressure if things aren’t going to plan.”
YOU HAVE TO WORK 24/7
Whether you went ahead and quit your day job to be a full-time entrepreneur, or are working double duty with your regular job and your entrepreneurial venture, it’s important not to forget about work-life balance. Owners who don’t maintain their physical and mental health will likely see their teams lose motivation and their businesses suffer.
“Being an entrepreneur is a lifestyle, not just a job,” said Glen Lubbert, a San Francisco-based entrepreneur. “To be successful, that lifestyle needs to operate as a high-performance system, including breaks during your day (every 90 minutes), as well as time away for fun. Having been face-to-face with burnout, I quickly learned the value of showing up at your best for your team and your customers. Paying attention your sleep, diet, exercise and mindset are as important as paying attention to your cash flow.”
The best business owners balance work and play time in order to ensure that the hours they do spend at their desks are productive.
NICE GUYS ALWAYS FINISH LAST
Being bold and pushing boundaries are key parts of the entrepreneurial adventure, but you shouldn’t let your future success ride on schemes, shady activities or dishonest business practices.
The founder of 5 Nines Automation, Steven Fage, said, “In the beginning I was losing orders to the competition, and I knew those guys weren’t playing by all the rules and providing misinformation to my customers about my products. I was more than frustrated.”
While cash-strapped startup owners might be tempted to engage in the same dishonest tactics, Fage recommends maintaining honesty and transparency. Over time, the customers who left you for the competition will likely realize the new companies can’t be trusted and return to you.
Said Fage, “Make decisions that honor your integrity and don’t force you to make cheap moves in order to make a quick buck, and ruin your relationship.”
YOUR FIRST BIG IDEA WILL MAKE YOU RICH
You probably have a killer idea that you can’t wait to bring to the market, but it’s important not to become too attached to an idea right off the bat. Alex Richwagen, CEO of CornholeOnWater Corp, notes that entrepreneurs often find themselves going back to the drawing board before officially launching their products. Additionally, he notes that listening to customers is critical if you hope to improve upon the initial design.
Richwagen developed the CornholeOnWater game, which involves throwing water squash balls through inner tubes. He noted that the game went through multiple iterations before it was finalized.
“What we initially thought would work isn’t what the final product ended up to be,” said Richwagen. “It is a process. We learned the importance of listening to our customers in order to create the perfect game they were hoping for.”
IF YOU BUILD IT, THEY WILL COME
According to the book, “Lies Startups Tell Themselves to Avoid Marketing: A No Bullsh(ASTERISK)t Guide for Ph.D.s, Lab Rats, Suits and Entrepreneurs,” business owners need to lay the marketing groundwork before they can expect customers to pursue their products and services.
Authors Sandra Holtzman and Jean Kondek interviewed multiple business leaders, including Marv Goldschmitt, Lotus Development Corporation’s first head of marketing. In the book, Goldschmitt emphasizes the importance of creating value first, identifying customers second and then pulling together a cost-effective marketing strategy to reach those customers.
“Awareness and creditability need to be established to reach profitability as quickly as possible,” said Goldschmitt.
YOU NEED INVESTORS TO BE SUCCESSFUL
While it’s generally true that you need money to make money, you might not need a lot of money to start generating income from your business.
“There’s no such thing as free money,” said Sun, noting that securing financing for your business can mean dealing with extra problems you might not have anticipated. “Having investors has its challenges and could cause additional stress on your business delivery timeline.”
Sun recommends self-funding the business in the beginning so you retain ownership of your company and, as you climb the ladder of success, attract investors that will be good matches for you.