Do you want to start your own business? Have you been thinking about it for years?
In the next few posts I will try to provide a series of practical hints to move from thinking to action – but smart action.
First – let’s look at some common myths!
- Myth: It takes $100,000 to start a business in the US.
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Fact: I am not sure why, but this $100,000 I keep hearing over an over. Fact is, most US companies start for a LOT less. In fact, according to a CNN article the average cost is about $10,000. And I would agree! But, this means some have started for a lot less.
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. - Myth: Startup investment = growth potential.
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Fact: It seems everyone I know is looking for the right investment deal to get things started. They know they need tons of money – often over $1 million just to get going. Yet, a lot of companies have started for less than $1000 and done very well. Think about Zappos, which started for $1000 and sold to Amazon for over $500 million! Not bad. And I have been in companies that have had major investment and no investment. Oddly, the ones which have cost less to start have made more money! The reasons are many – but the key is that starting small does not mean you will always be small.
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. - Myth: It takes a certain kind of guts to start a company.
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Fact: Maybe – but it takes a lot more guts to have your whole livelihood controlled by other people doing what we call a “job”. Most people tell me they have a secure job and would not trade it for the lack of security of being in their own business. Security – really? Who are they fooling?
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. - Myth: I cannot start a company on the side. My current employer will not allow it.
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Fact: This is another one I hear often. Usually it is followed by a story of “this guy” who started a company on the side was sued and had to give it up or quit the day job. Usually the one telling me the story does not know who “this guy” is. The story has circled the company and the details are left to the imagination. Are there such stories? Sure. If you start a company on the side which competes with your day job – your employer should stop you. But before you go with assumptions, check out the details and see what you can do. Ask the right people the right questions. Your employer does not own you – so they cannot be in control of what you do on your off time. Think about it … would your employer care if you had a yard sale? Would they care if you mowed lawns? Probably not. So get the real facts of what they are OK with and what they would frown upon. Then – if you can – find synergy.
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. - Myth: I do not have an MBA or a business degree.
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Fact: Good. Then you might actually succeed! MBAs and Business degrees are not about startups – they are about being middle management in large companies.
Others? What have I missed? Any other myths or truths you would like to add?
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Sir:
I don’t know much about MBAs and business degrees, but was intrigued by your statement that they are not about startups but middle management in large companies. Would you please provide an example or two so I can better understand, or tell me where I might find information regarding the uses and aims of business degrees?
Thank you.
Sincerely,
Thomas Scales
Hoover, AL
I would add the myth “You can start a business without a product or service”. You can but your chances of being successful are slim. You need to understand what your value to potential customers is, how to provide or deliver that value, and how to make money. Just hanging out a sign or establishing an LLC does not a “business” make.
Thomas,
If you look at the courses you will see things like accounting, human resources, management, production management, etc. When you get inside and are taking those courses the focus is on managing something that is large and very structured. For example, during my MBA we looked at developing strategies for how a company might move into a new market. We considered the factory capacity and distribution to the new region of the country. We also had to deal with management policies. These concepts you just do not see in startups. Business degrees are about managing something that already exists – startups are about making something exist out of nothing – more about creation that management. For instance, if you tried to use a six sigma or other quality strategy on a startup, the shear volume of work it would take to do the process and the slowness of the process would kill the small company from every getting new product off the ground.
When companies are small – they are agile and can work fast. When you get more people and more complex, processes are – by necessity – slower, more complex, and sometimes even dysfunctional.
We often forget that basic business is very simple – even our kids get it. Find something someone needs, make it, add a profit margin so that you are making money, and then tell your customers you are there and then deliver. It is only when we add bureaucracy and complexity that we might need a degree to understand.
Dale
Amen!!! The stats show many companies go out of business every year – but a great deal of them formed (got an LLC etc) but never made a dime of income. Therefore they were “technically in business” but they never really started doing business.