As a serial entrepreneur who has over 20 years of small business experience underneath my belt and SCORE counselor, I have heard many, many small business myths promoted over the years.
Owning a small business is a lot easier than working for someone else.
This has been the No. 1 most prevalent myth regarding small businesses I have heard since beginning my professional career in my family’s business as a teenager. The fact is that small business owners (and their families) work 24/7, 365 days a year. If they fail to turn a profit, then they essentially work for free. If the business operates at a loss, there is no unemployment check or severance pay. You lose everything and are out on the street.
Putting up with a long commute or a boss who is a pain in the neck might be troublesome, but when you consider that there is no safety net if you can’t make a go of it being the owner/operator of a small business, the unpleasantness associated with working for someone else doesn’t seem so bad after all.
All I need is a loan from the bank or a family member to start a small business.
Capital is necessary for startup, no doubt. But that is just the first obstacle that needs to be overcome. A family member or the bank loans you the money. What next? Without a sound business plan, you are destined for failure.
I can have a successful small business providing a product/service I know very little about just because I find it to be of interest personally.
How on earth can anyone realistically expect to be able to successfully operate a small business providing a product/service they don’t know inside and out? Who will your target market be? How will you be able to sell your product/service to your target market? How will you determine unit pricing? How will you be able to effectively design and implement a business plan if you don’t know the specific pitfalls of that business? You must start from the ground up if you are going to successfully own and operate any small business.
It will be easy to sell my product/service because if I thought it was a good idea, then so will everyone else.
This myth is why multi-level marketing schemes never seem to completely die. A successful business doesn’t happen accidentally because the owner thought it was genius. Due diligence is necessary before jumping in with both feet. The truth of the matter is that even when one happens across a valuable product/service, one still runs the risk of failing due to a host of reasons, including, but not limited to, too much competition and market saturation, incorrect unit pricing, employee theft, poor advertising, bad location, etc.
I won’t really have to work. I can just hire other people and pay them to do it for me.
Employee theft and loss and liability created by employee incompetence is a surefire recipe for disaster for any small business. Unless you are willing to dedicate yourself body and soul, I strongly suggest you do not quit your day job. Family businesses are also very stressful and can lead to the demise of the family unit on many levels. Unless your entire family is ready, willing, and able to pitch in and be 100 percent supportive of your efforts, it is only a matter of time before your small business fails, while your family will be forever negatively impacted.
I will be able to open a thriving small business in a location where several other similar businesses have previously failed because, unlike the previous startups, I know what I am doing.
Regardless of how revolutionary your ideas are, the odds are already stacked against you. What would possess anyone to literally throw his or her money away to re-invent the wheel in a place where several others have already failed? It is rare when a small business can buck the old rule: “Location, location, location.” Chances are the only person who will make out is the owner of the land or building; the only way they make money is to keep leasing their property.
If my business runs into financial difficulty, I will just be able to borrow money from the bank.
Regardless of what you may have been led to believe, banks do not lend money with ease. Not to mention, you must be able to give a solid answer to the lending institution’s legitimate inquiry: “Why should we risk loaning your business money when you are already in trouble?” Think about it logically. The only thing you will be able to do is get a loan against your home or other valuable collateral, if you qualify. Are you really willing to risk losing everything when your business begins to go belly-up?
I can just write all or most of my expenses off (small business, as well as personal), so I will never have to pay for anything.
Clearly, the person who promotes this myth has no understanding of income, expenses, cash flow, or basic small business accounting. Regardless of how easy it was to “cheat” when you were working for someone else by submitting personal expenses to the company for reimbursement, it doesn’t work the same way when you are the boss. You can’t write off an expense that you’ve not generated enough income to cover.
Now that I am over 50 and have not been able to save for my retirement, opening a small business will be a great way to make up that money and give me something to do with my free time.
This is by far one of the most ill-thought plans known to the general population. Beginning a business when the best years of your professional life are behind you is highly counter-productive. You will invite more stress for far less income than you could begin to imagine. When you’re younger and have less to risk, you are able to recover more easily as your small business hits numerous bumps or, worse, fails. The best advice for people who find themselves at a professional crossroads later in life is to go back to school either to become more relevant in their current field or go into a new field altogether.
Small business owners are rich people who got lucky.
Small business owners are, without question, the backbone of our economy. Many small business owners struggle daily, wearing many hats. They must be proficient in all aspects of business, regardless of what specific product or service they offer, or they will fail. Many began with very little financial investment. But what they do have is a tremendous work ethic that is second to none. The “luck” they experienced was hard-earned, with many, many failures they worked hard enough to rectify before they had to shut the doors.