Starting a new business is fraught with challenges, and none of us has the bandwidth to kill them all. As an advisor to business owners, and an occasional angel investor, my job is to separate the actual challenges from the common misconceptions that distract many promising entrepreneurs while building the leadership team required for your solution, marketing, and finance success.
I remember first seeing a good summary of these risk-reduction myths a while back in a classic book, “How to Start a Business & Ignite Your Life,” by Ernesto Sirolli, PhD. With his wealth of business experience and expertise as a top economic development consultant, he confirms my own view that the top five myths in starting a new business commonly include the following:
- You have to be able to do every job in your business. In reality, it is important to know the basics of all roles, but it’s counterproductive to try to be an expert or attempt to micro-manage every task. It is more important to find and nurture team members who have the right expertise, and have them respect and appreciate their work, as well as yours.
For example, if you start a new business with a software product you developed, you really need to know the basics of marketing and finance, but you will probably never be the expert in marketing and finance you require. Partner with experts who share the risk.
- Business success is all about having a winning idea. In my experience, finding a good idea is the easy part. It’s the execution that’s hard. I have seen too many great ideas fail due to poor execution, and less impressive ideas succeed due to an innovative business plan, implemented and managed by the right team of entrepreneurs.
Witness the number of seemingly simple or stupid ideas that have become million dollar businesses, thanks to some creative marketing or innovative financials. Of course, if you have a great idea AND a great execution, your company may well be the next unicorn.
- You have to pay big salaries to get top-notch help. In my experience, the people who will best drive your business are ones who share your long-term vision, and are willing to work for a share of the business or delayed compensation, rather than a high salary in the short term. Most business partners I know take little or no salary in the early years.
In fact, finding the right partners requires building the right relationships, more than negotiating a contract. A good business partnership is more like a marriage, where success depends more on relationship synergy than any financial expectation.
- “Staying small” is a positive strategy for your business. In fact, staying small does not protect you from the risks of growth, and makes it harder to survive, due to fewer economies of scale, no help from investors, and an easier target for competitors. Unless your company is a hobby or side project, I recommend a strategy that assumes growth.
- Sharing your business ownership increases the risk. Very few entrepreneurs have the skills and bandwidth to adequately cover all the business bases of product, marketing, and finance. Thus finding a complementary partner or two will dramatically increase your chances of success. Trust is required, so build relationships slowly.
Business founders who are paranoid of other people, or have an ego that demands total control, are doomed to a life of isolation and frustration. Their lack of trust and sharing will be noted by employees, vendors, and customers, and the business will suffer.
- More money would solve all your startup problems. Every investor I know will tell you that many startup businesses fail due to having too much money too early. They try to grow too fast, stop looking for innovative solutions, or try to buy their way into markets or partnerships. Money is necessary, but not sufficient to reduce the risks of a business.
In business, if you take no risks, don’t expect any rewards. Smart entrepreneurs do their homework to mitigate known risks, by talking to peers and advisors, and avoid approaches which are known to be problematic or counterproductive.
My advice to every new business owner is to never be reluctant or embarrassed to seek assistance, but do so with prudence and optimism. There are many of us who have gone there before you, and want to make your path easier than ours. With our help and your own commitment, this can be the best of times for both you and your business.