Common Myths About Starting Your Own Small-Business
SOCIAL MEDIA IS REPLETE WITH SMALL-BUSINESS MYTHS, FOSTERED MOSTLY BY PEOPLE WITHOUT RELEVANT REAL-WORLD EXPERIENCE...
Preface: This post pulls together two earlier posts which, I think, fit more comfortably together as a unit, and which form a chapter in my soon-to-be-published book on small-business.
The challenges advanced here against several common myths about starting your own small-business, are based on more than 30 years as a small-business owner and operator, and in consulting for, and working with other small-business operators. You are free to accept these challenges or reject them, as you wish. However, in making that decision, you should keep in mind that a majority of what you read on social media about starting your own small-business is very often an expression of wishful thinking by people who lack even minimal experience, and who are speaking more to themselves, than to others. Unfortunately for those who listen, in the real world, wishing something does not make it so.
Early to bed, early to rise, makes a man healthy, wealthy, and wise...
It's often said that small-business is the backbone of the U.S. economy. And with the growth of interest in entrepreneurial activity over the past decade or so, small-business — which is incorrectly seen as a breeding ground for entrepreneurs — has taken its place in the phalanx of American Mythology.
From the publishing of "Poor Richard's Almanac" by historical icon Ben Franklin, to the ever-growing multitude of contemporary food and beverage, cleaning and maintenance, and sports and recreation franchisees, romantic flirtation with small-business has transformed into virtual obsession. And, as with most religious creeds, the new cult of small-business has created, and supports its own body of faith-based dogma.
Myth #1— Starting a small-business is a great way to deal with being unemployed...
Well ... not necessarily. And, of course, only if you are successful. But will you be?
If you're unemployed, then you aren't running a small-business now. You may have run a small-business in the past, but obviously, you weren't wildly successful at it ... or you'd likely still be doing it, which you're not.
According to the U.S. Small Business Administration, which has likely compiled more information on small-business than just about any other source, starting a small-business generally requires at least a modest initial capital investment, whether for facilities and equipment, or for operating expense during the early start-up phase, when revenues may be low or non-existent.
However, if you've been moving through a period of unemployment, and you're now being driven by a failure to find new employment, you are not likely to be in a position to properly capitalize the start-up of even a very small business. And it might well be wiser to take a job (or two) doing something you might not really want to do, while you pay your living expenses and accumulate a small-business start-up fund.
Myth #2 — You can start a small-business solely on "sweat equity"...
Sweat equity is what you build up by putting work into a small-business start-up without being paid a salary, or anything at all, by the business.
Sometimes it's thought that a small-business can "boot-strap" itself into existence, purely by the investment of sweat equity. Well, sometimes it can. But more often than not, it can't.
Sweat equity is always required in order to minimize cash outflows, until cash inflows reach a level that will support the day-to-day operational direct and indirect overheads in involved in running the business.
You can do sales work for your new small-business without pay, but you cannot pay for telephone and internet service by sweeping floors for the utility company. You can do your own bookkeeping without paying yourself for doing it, but the guy who is going to print your fliers and brochures is not likely to be willing to trade you out for your washing his windows. And there is little doubt that you will have to eat, clothe yourself, maintain transportation, and keep a roof over your head. Yet, most vendors of food, clothing, auto fuel, and housing refuse to take bottles of perspiration in exchange for their wares.
Again, your potential for success in starting and operating a small-business goes up dramatically, if you have accumulated sufficient available capital to finance that business during its early start-up phase.
Myth #3 — Owning and running a small business is a terrific lifestyle alternative to being employed by someone else...
There is a very old saw that goes: If you faithfully work really hard as an employee eight hours per day, five days a week, for ten dollars per hour, and do a top-rate job, eventually you will get the opportunity to run your own business, work doubly hard, twelve hours per day, six or seven days a week, and make five dollars per hour.
Okay, so the outlook on owning and running your own small-business is not that bleak. But there is some truth in that old saying. Starting and running a small-business from scratch almost inevitably requires a greater input of effort and time than simply working for someone else.
Additionally, when you run your own small-business, you carry all the responsibility — and risk, and associated worry — on your own shoulders. Often to such an extent that you may find little time to relax, may fall into neglecting your family, and may think constantly and obsessively about sales revenues, marketing, finding new customers and clients, keeping the office machinery running, getting the computer software up and running, making this week's payroll (if you have employees), and any number of other things that will work to keep you up at night.
Owning and operating your own small-business can work out to be great, beyond your wildest dreams. But then again, it also might not. If you don't have drivers other than simply wanting to be out from under the supervision (constriction) of a "boss" — drivers such as wanting to be solely responsible for your own success or failure, wanting to development and implement your own ideas and realize the fulfillment of your own talents, and wanting to work in a field solely of your own choice at something that you ultimately love to do — then you should think more than twice about striking out on your own. For maybe that well-paying, forty-hour-per-week job ain't so bad after all.
Maybe you should let somebody else worry about making payroll. Or worry about where new customers and clients are to be found and wooed. Or about the year end financial statements and paying the company's taxes. Or defending against the unfair employment practices suit, filed by a labor lawyer whose own three-piece business suit costs more than the car you're able to afford to drive.
Myth #4 — Running a small-business provides flexibility in your working hours, as well as the freedom to indulge in "social responsibility"...
This is a myth only a Millennial could love ... or believe. True, if you work for someone else, you generally have set hours during which you have to be present at work, and usually on site — although this is to a degree changing in the workplace with the increased popularity of working online or remotely at least part of the time.
But with a small-business, generally if you're not on deck, nobody is. And that often means you end up more firmly rooted to your work, and less able to "shut it down" than you would be if you were someone else's employee.
It's also true that as an employee you can at times come under pressure from your employer or from managers to whom you report to conform to some idea of "corporate social orthodoxy". Whatever that means or involves.
But don't kid yourself, as a small-business owner/operator, the pressure of having to not offend your customer or client base is just as strong, if not more so. At least when your business is in its early stages of start-up.
One of the defining characteristics of small-business is that it does business at a much more personal level, and so depends even more heavily on maintaining good public relations. And because the constituency of a small-business is so much smaller and likely more homogenous, as well as more sensitive to personal engagement than that of big-business, it's easier to find yourself in big trouble with significant portions of your customer base, for reasons totally unrelated to the product or service you market and deliver. How that translates into greater freedom to exercise social responsibility is beyond me.
Myth #5 — You can "fake it, until you make it"...
Notwithstanding that this was said in print by celebrity entrepreneur Richard Branson — or at least postulated by a ghost writer whom he employed to effect some of his social media presence — it's not a development strategy of choice for a small-business.
As a small-business person, you will have fewer colleagues backing you up, and far fewer covering up for you. So it is much to "learn on the job." And your mistakes will be much more obvious to your customer or client base, than they would be if you were employed in a large firm, where you can much of the time hide in the bushes.
No, in a small-business environment, mistakes are not only costly, they are so many times more difficult for your reputation to absorb, that the importance of having adequate training, skill, and experience is greater, not less than it is in the context of big-business.
"Small Business usually deals with known and established products & services ... [whereas] Entrepreneurial Ventures are for new innovative offerings..."— Investopedia
There are many myths about small-business created and perpetuated on social media by people who lack even a passing real-world acquaintance with owning or running a business at all.
One of these is the view that every small-business person is ipso facto an entrepreneur. Nothing could be farther from the truth.
Most small-business people seek to provide proven goods and services on a stable, long-term basis to an established niche market, defined either geographically or by market segment. That is one reason why franchising is such an attractive option to would-be small-business owners.
Myth #6 — Owning and running a small-business puts you in the company of the highly successful entrepreneurs of the world...
This is pure poppycock. Working for yourself does not make you an entrepreneur. This is not a popular view, but it is, I submit an accurate one.
It has nothing to do with the relative size of the business(es) involved, but rather with the attitudes and approaches of those who own and run small-businesses versus entrepreneurial adventurists who are seeking to create new markets, stimulate rapid growth, and profit highly from innovation.
Seeing yourself as a globe-trotting celebrity entrepreneur like Richard Branson may cause you to stand a little taller and straighter, or to puff out your chest a bit, but it may actually harm your chances of establishing or maintaining a small-business on a stable basis.
Myth #7 — Owning and running a small-business gives you the chance to pursue your "passion", while becoming wealthy...
There is no doubt that one criterion of a successful life is whether you can make a living doing the things that you would do even if you did not have to work to make a living. But the fact is most people, small-business or otherwise, don't get to earn a living by doing only what they want to do.
To say this, is not to seek to compromise your aspirations and dreams. Rather, it is to increase the probability that your expedition into the territory of small-business will be successful, because sound judgements can only be made from a perch called reality.
The reality is that virtually all endeavors in life, business-related or otherwise, require doing some things you don't like or want to do. Excelling in a sport, for example, requires hard training and practice. So too, running a small-business may involve at times firing employees — something that few decent people in this world care or want to do. Embarking on the road of small-business ownership and operation, without first coming to terms with this fact, is to court failure.
Myth #8 — Running a small-business doesn't require the same education, training, or skills that running a big business does...
Actually, it may require more. As a small-businessman, you will find yourself called upon to perform more cross-functional tasks that if you were involved in working for a big-business, or in an entrepreneurial context, where you have the luxury of hiring an array of people who are trained and experienced in doing all those things you're not trained or experienced in.
To my mind, small-business is best defined by a management structure that is much flatter than in a big-business. Small-businesses do not generally enjoy the luxury of having differentiated middle managers such as dedicated HR professionals, standalone accounting and financial centers, or purpose-designated marketing departments. So, the owner/operator of a small-business generally has to be a very quick study in successfully performing, or at least directing a wide variety of tasks. Which means that he or she needs to be just as well trained and educated as any high-level executive in a big-business... Not to mention more adaptable and quicker on his or her feet.
That is not to say every owner or operator of a small-business needs to have an MBA, or even a BBA or BSBA. It's only to say that, if you are considering entering the world of small-business, you should not underestimate what you will need in terms of education, training, and experience.
To be sure, many small businesses are started by people with minimal education, training, and experience. But if they want to stay in business, they have to grow quickly into being able to meet the demands for management skills. For small-business really is a get smart or die environment.
Myth #9 In small-business you do what you love, and the rest (meaning income) comes to you on its own...
Yea, right. You gotta be kidding!
Only someone who's never been in business for him- or herself is going to tell you that. If your single-minded focus is to engage in some recreation, sport, or pastime, while at the same time have a living drop into your lap, good luck with that. Nothing, but nothing in life ever comes easily. So, why would you expect that in the world of small-business, it would be any different than it is in the rest of life and the world?
You should also think more than twice about turning a hobby or a favorite recreation into a business. For doing so often leads to less, not more time being available for actually pursuing that hobby or recreation. For example, most of us who build yachts generally spend less time yachting than we would, or did when we weren't professional boatbuilders. That doesn't mean we're not happy with the mix. Most of us are. But the proper conclusion is that building yachts provides, at least to those who do it, as much satisfaction as sailing one does.
If you're thinking of starting a small business that is related to one of your recreational or sporting passions, consider whether that will be true for you, as well. And if you won't, or don't derive as much personal satisfaction from conquering business challenges as you might from, say, being a downhill slalom champion, don't turn your skiing obsession into a small-business.
Myth #10 — Owning a small business makes you the master of your own fate...
I suppose this one could be true. If you think you can simply decide not to pay your expenses. If you avoid having anyone work for you, so that you are not facing making a payroll every two weeks or month. If it doesn't bother you to have the city, county, state, and IRS chasing you for not filing your tax returns on time, or paying taxes due.
And if you enjoy hassling with landlords over how much your lease requires you to pay, and over all those services the landlord promised you before you moved in, like garbage collection more frequently than twice a year. If you are relaxed by thinking about where your next sales are going to come from, or whether your current bid for that big job is too high (and you'll lose out to the competition) or too low (and you'll lose money).
And if, moreover, you're stimulated by the notices from your accounting firm, internet provider, utilities company, and landscape maintenance firm that your rates are going up next fiscal quarter (after you've budgeted for the year at current rates). If you really think you don't have to make payments on your floor-planning or other business loan. If you can just shrug off the $50,000 in accounts receivables because the debtor just went into bankruptcy. If... if... if...
Be clear about it. Even if you own and operate a small-business, your fate will still be buffeted constantly by forces beyond your direct control — the state of the economy, the weather patterns this year, the price of crude oil, the phases of the moon and which house the Zodiac, and whether you are an Aquarius or a Leo.
A wise man once said that what you own, owns you...
I think maybe it was Willie Nelson, who made millions and apparently blew every penny of it. Or perhaps Johnny Cash, who was not exactly a model of rational thought, notwithstanding being a great C&W artist. But no matter, really.
The point is not to delude yourself that owning and operating a small-business will set you free. If you truly want to be free, you need to divest yourself of everything, material possessions, family, friends, the entire enchilada.
None of which should discourage you, if you are truly meant to be a small-business person...
Understand that I am not here trying to discourage you from entering the world of small-business ownership and operation. Indeed, I personally have spent the majority of my adult working life as an independent small-businessman and consultant. And although I haven't gotten rich in the process, I've managed to make a comfortable living. More important, I've always liked doing what I do. I've never awakened in the morning feeling the palpable dread of having to go to work that so many in the world of employment experience.
No, I am only exhorting you to be realistic about your expectations, and in your vision of what it will be like. For unfortunately, the nature of social media in our time is that just about anyone can pose as an "expert" on anything, even when he or she doesn't have a lick of relevant real-world experience with the subject or topic. If you unreflectively accept the pronouncements of such people, you are very likely eventually to come up hard against the brick wall of reality.
Owning and operating their own small-business holds big positives for some people. For others it turns out to be a lot worse, rather than better than being employed by someone else. Ultimately, only you can decide into which group you will fall. The neat trick is to avoid the myths that are propagated and perpetuated about it on social media. — Phil Friedman
Postscript: Please do not mistake what I've said here as discouragement to pursuing your dream of having and running a small-business. For it is not intended to be such. I have spent the vast majority of my adult working life as a small-businessman and consultant. Indeed, looking back, I would not have had it any other way. But that's me. And many other small-business people with whom I am acquainted and with whom I am friends. And my intent here is not to discourage, but only to encourage you to make or not make the leap based on a realistic view of what it is really like. — PLF
Author's Notes: If you found this article of value, you might also want to look at some of my other writing about small business operations, management, and marketing:
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About me, Phil Friedman: With 30 some years background in the marine industry, I've worn numerous hats — as a yacht designer, boat builder, marine operations and business manager, marine industry consultant, marine marketing and communications specialist, yachting magazine writer and editor, yacht surveyor, and marine industry educator. I am also trained and experienced in interest-based negotiation and mediation. In a previous life, I taught logic and philosophy at university.
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