Great ideas do not automatically translate into great businesses
The business world is full of myths. If you’re thinking of starting your own company, being able to sort fact from fiction will help ensure you know what to expect from day one. Here are 10 of the most common business myths; we explore what parts, if any, are true.
The customer is always right
A customer’s viewpoint must always be considered, but small businesses must learn to stand their ground and push for a fair deal – even when dealing with complaints. Although customers can always leave for a competitor, in some cases they may just be ‘trying it on.’ Being polite at all times is essential but never be afraid to stand your ground when necessary. Constantly giving others a better deal, to your own detriment, will make it difficult to maintain your profit margins.
Cheaper products are always best
Undercutting your competitors is not the fastest route to market share. Customers consider factors other than just price, including environmental credentials and after-sales support. Besides, established businesses could always use their experience and contacts to undercut you further, and then you have no unique selling point. If low prices are your only competitive advantage, reconsider starting your business.
Great ideas equal great businesses
Ideas that can’t be commercialised result in businesses that can’t make money. Great ideas can inspire millions and change the world, but unless they make people buy a product or service, you’ll need to go back to the drawing board. Even with substantial capital behind a great idea, unless you have a tenable business plan that protects profit margins and targets organic growth, your business will struggle to keep its head above the water.
Friends make great business partners
There’s no guarantee friends will make great business partners. Assertively giving your point of view is essential in business partnerships, and sometimes partners must call the other up on shortcomings or poor decisions. Can your friendship handle this strain? And money can do very strange things to people if they feel they are coming off second best. If you do decide to go into business with a friend, make sure all arrangements are legally watertight.
Customers will come to you
Even businesses that operate in markets where customers actively search for products will find this myth to be false. There’s so much ‘noise’ in most markets – competing companies, competing information – that there’s no obvious path for a consumer to take. You need to get out there and tell your customers why your company is best and why your products are best. This, of course, is where marketing comes in. And if you don’t market to relevant audiences, you’ll find that making sales is difficult, which makes making money impossible.
Running my own business will give me more free time
It’s a nice image: sunning yourself on a golden beach while happy employees make you millions back home. Unfortunately it’s a long way from reality. While successful business owners can find more free time as the business grows, in the early stages business owners often find themselves putting in 60 hour weeks trying to get everything off the ground. This can continue for many years until the owner feels comfortable enough – and successful enough – to delegate.
Profits are the owner’s salary
Owning part of a successful business will most likely earn you more than as an employee. But it’s not a license to take all the profits without a second thought. To remain profitable – and to achieve long-term success – businesses must grow. A proportion of profits must be re-invested into the company to enable this growth to take place. As with all things, there’s a balance to be struck; there’s no harm in being rewarded for your hard work, but you mustn’t lose sight of the big picture.
Long-term experience is enough
Many people who start a business do so after years of experience in the relevant sector. Some succeed, but many don’t. Knowledge of, and experience in, the relevant sector is not enough when it comes to running a business. Running a florist
is very different than working in a florist. You need experience in a senior-position before you consider running a business, and an understanding of finance, marketing, sales and business growth specific to that sector (to name just a few) before you go it alone.
I’ll be able to write off all my expenses
Complex rules govern what can and can’t be written off as a business expense. The ability to ‘write off’ expenses is grossly exaggerated, and you’ll find that only a portion of expenditure is tax-deductible. It’s important you stick to the rules, or you may catch the taxman’s eye, which could lead to severe issues down the line. Check with HMRC
in advance if you are unsure what qualifies as a tax-deductible expense.
I can call all the shots
Although you will have a controlling stake in the business, you’re not going to be able to make all the decisions, particularly as the business grows. Delegating effectively is an essential skill; you won’t have the knowledge and experience to make an informed decision in every area, and must be able to delegate to those who do. In the early stages, most of the decision-making will fall to you (and a partner) but bear in mind that it comes at a price: it’s your head on the block at all times.