From time to time I have written about myths that I see when dealing with aspiring entrepreneurs. Entrepreneur.com has put together their own Top 10 list of Small business Myths that are worth a read for anyone thinking about starting a business.
Several of their myths dealing with financing issues:
Myth No. 1: "The government has grants for startups."
Generally this is not true. There are a few instances where local governments set up programs for disadvantaged people looking to use free enterprise to improve their lives, but they are not that common.
Myth No. 2: "The SBA loans money directly to small businesses."
Another financing myth busted. You still must go to a bank. Some banks work with the SBA program to get small business loans guaranteed by the SBA.
Myth No. 3: "Venture capitalists loan money to startups."
VCs fund less than 0.5% of entrepreneurial ventures, and of those, only rarely do they fund a start-up.
Myth No. 5: "I'll be able to write everything off."
Actually you can, but you will face interest and penalties from the IRS, so I don't recommend it either.
Myth No 6: "I can pay myself whatever I want."
Again, you can, but you'll be out of business in a few weeks. You can only pay yourself what is left after everything else gets paid. You are last in line if you want to make your business work.
Myth No. 8: "I should be profitable after six months, because I'm an expert at what I do."
The article states that most businesses take 2-3 years to make a profit. That is also kind of a myth. I have owned businesses that make profit within a few months, and I have had some that took years. It all depends on the business model and the market. That is why a plan is so important to help you understand what you are getting into. Which brings us to another of their myths:
Myth No. 10: "If I'm not getting funding, I don't need a business plan."
See my comments above...
They also have a couple of marketing myths:
Myth No. 7: "If I create a website, I'll get traffic (or the more popular 'If I build it, they will come.')"
Myth No. 9: "I don't need a marketing plan or marketing materials. This product/service sells itself."
I tell entrepreneurs that they should be prepared to spend 80% of their time selling and marketing early on. Nothing sells itself and no website creates its own traffic.
Finally, one of their myths deals with lifestyle:
Myth No. 4: "I'll have more time to do what I want."
You should assume you'll have some long hours early on. But, if time is important, make sure to build that into your business plans. Plan for slower growth or less ambitious goals if you want to structure time for other things. Also understand that some businesses just demand more of our time by their very nature. For example, if you want to start a restaurant, plan on very few days off, long hours, and no vacations for a LONG time. Know what you are getting into before you start any business and make sure it fits your non-financial and lifestyle goals.
Make sure to go the the Entrepreneur.com article, as it has some great links to more information on all of these topics.
