Debunking common myths about running a business
Words: Liane McGowan. This article appeared in the April/May issue of Your Business.
Here are five common misconceptions about running a business, along with some hard-hitting truths…
Entrepreneurship can be a funny game and after 18 years of ‘playing’, I’ve come to a few conclusions, many of which fly in the face of convention, but may help you on your journey.
Entrepreneurship is all about taking risks
The myth: We are often told that entrepreneurs need to embrace and take risks in order to be successful. If you don’t take risks you will always work for someone who does, we’re told. The Oxford Dictionary’s definition of an entrepreneur further cements this belief. It defines an entrepreneur as someone who is involved in matters pertaining to business, and who is a risk taker.
The reality: I have just been to a business convention when the keynote speaker yelled out loud: Eliminate your risk, maximise your growth! I have spoken to many wealthy business people and venture capitalists, they all tell you the same thing: Minimise your risk.
My insight: This is a classic example of an entrepreneurial myth. Most wealthy and successful people are not ‘dictionary definition’ entrepreneurs. Instead they are smart, calculating individuals who minimise their risk and seek out opportunities. Although the classical definition of an entrepreneur is coupled with the necessity to take risks, statistically very few entrepreneurial risk takers succeed.
You need to spend money to make money
The myth: In order to make money, you need to spend money on things like offices, IT equipment, branding, etc. Some even believe that investing in a trendy wardrobe and a nice car will project an image of success.
The reality: 90% of new businesses fail and 99% of them will experience cash flow challenges. It almost always takes much longer for a business, in its early stages, to build the momentum that was originally projected. In fact, cash flow is the primary reason why most businesses fail and spending money on items with perceived importance that are not practically needed in reality is asking for trouble.
My insight: Be very careful and selective when deciding how to spend the money you have on hand. A new business owner should avoid hire purchase or long lease agreements. And, having the latest iphone as an accessory to look good is far from necessary. Be smart by spending money on further developing yourself and your skills. This could involve choosing the right business/self-development course or piece of software. Yes, a little fashion sense is important but only if you are smart about it. Successfully differentiating.yourself and positioning your personal brand in a distinctive and memorable way is far more important.
A comprehensive business plan is the holy grail
The myth: You need to think and plan very carefully before launching a business, and part of this phase includes putting together a detailed business plan with complex projections and forecasts. After all, if you don’t know where you are going, how can you get there?
The reality: A journey of a thousand miles begins with a single step in the wrong direction. Have you ever seen a bad business plan? Of course not! A business plan is a simulated expression of an exaggerated aspiration. The road to success is not linear. The path is adaptive with waves and roundabouts and twists and turns.
It is highly likely that the business that you start out in will probably not be the business you ultimately succeed in. A business entity is like water, it changes with ebbs and flows. You cannot go against the flow, but you can guide the river.
My insight: In reality, a great business plan means very little. What makes a huge difference are real clients or customers that are actively engaged or transacting with your business. Real customer experiences will give you meaningful insights in terms of how to direct or redirect your business. The best salesman in almost every successful company I have ever worked with is the owner of the business. If he isn’t, then I guarantee you that they will have a partner or shareholder who is.
Advertise and get your brand out there
The myth: Spend money on advertising as quickly as you can. Get business cards and brochures and flyers and posters and a host of other advertising ‘stuff. Build a ‘brand’ and make sure everyone has heard and seen your company name.
The reality: Businesses are driven by people, not posters. The business owner who sticks his neck out is the one that cracks it. Today, people want to see a human approach that is attached to accountability and taking responsibility for their actions. Customers are getting sick of big corporates hiding behind offices, fancy branded material and legal teams. They want the human touch.
My insight: You are your brand. You are the one that needs to get out there and bring in the business, by establishing and building mutually beneficial relationships. Some of this learning will come from courses and mentors, and some will come from you doing it over and over and over and over again.
Half your advertising works, but which half?
The myth: It is impossible to measure advertising accurately. We should ‘spray and pray’ and trust the gods that business will flow in.
The reality: Marketing has never been more measurable than it is now and successful businesses are very careful about how they advertise. Good companies know where their leads and customers are coming from and use surveys and feedback to continually optimise and target the right marketing to the right people.
My insight: The days of small businesses spending money on conventional above-the-line advertising are almost over. Digital communication and marketing plans are measurable with extremely high success rates. Get online and only spend money if you are guaranteed a return.
The more things change, the more they stay the same. And despite this, one thing remains true – referrals are the best source of business. It’s amazing, but real authentic relationships will win the day at the end. How you get them, well then – that’s an art as much as a science.
Scott Cundill founded Majestic3.com, a standalone software innovation set to change the face of business through integrated communication solutions. He has also made his mark in local media and speaker circuits.
YOUR BUSINESS April/May 2015
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