When we rebranded our consulting firm a number of years ago, we decided to call it BusinessTruths because we believe certain business adages are universally true. Things like “cash is king” or “concentrations kill companies” or “people willing to give advice are a dime a dozen but a good advisor is worth his/her weight in gold.”
There are also widely circulated business myths. These are commonly held to be true and might contain elements of truth, but lack substance. Falling in line with these untruths can cause you to make poor decisions that harm your business — and might even prevent you from ever owning a business. We’d like to look at three of these common myths.
Myth No. 1. Owning a business is riskier than having a job. This myth may be the most common reason why people are afraid to go into business but let’s use some logic here. If you have a job, your employer is essentially your only “customer” and your sole source of income. You’re at the mercy of whatever decisions your employer makes and one person’s decision can mean suddenly losing your entire livelihood. A lot of people who once thought their jobs secure are out of work these days.
Owning a business certainly has its share of risks but we think if you run a healthy company it’s safer than counting on a job. For one thing, you’ll be the person making the decisions and won’t be the victim of someone else deciding you’re expendable or running the company into the ground.
You’ll also have multiple sources of income because you’ll have multiple customers — and the ongoing possibility of obtaining additional customers. And you won’t be held back by any type of “ceiling” but will have a great deal of control over how well your business performs and the income it provides.
Myth No. 2: Ninety percent of all businesses fail in the first five years. This is another myth that frequently prevents people from venturing into business ownership. Let’s look at what the Small Business Administration has to say about this in the “Frequently Asked Questions” section of its website under “What is the survival rate for new firms?” (http://www.sba.gov/sites/default/files/sbfaq.pdf):
“Seven out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more.” (Source: U.S. Dept. of Commerce, Census Bureau, Business Dynamics Statistics; U.S. Dept. of Labor, Bureau of Labor Statistics, BED.)
As you can see, the statistics don’t come close to 90 percent myth. You can increase your chances of longevity by conducting market and industry research on your geographic location and industry before starting a business or buying an existing one. The SBA’s website has tons of good information, including state-specific statistics (for Colorado information, go to http://www.sba.gov/sites/default/files/files/co10.pdf).
Myth No. 3: If your business isn’t growing, it will die. This is a common misconception that has been bounced around for years. Too many people have grown their companies too much or too soon because they believed they had to grow to survive. You’ve probably witnessed the results of ill-advised growth when some of these businesses have closed their doors.
Our book (The Step Dynamic: A Powerful Strategy for Successfully Growing Your Business) delves into this problem in detail but here’s an example. “Jake” owned a small company that was doing well. But he had heard the grow-or-die baloney, believed it and acted on it. He adopted the “if we build it they will come approach.”
Jake got a second mortgage on his house and took a sizable loan from his father-in-law, leased a much larger building, bought new furnishings and equipment, and hired additional staff. But he couldn’t bring in new business quickly enough to sustain the increased expenses. Sadly, in his case, it was a matter of “grow and die.”
On the flip side, we’ve known many other business owners with good companies and good lives, who haven’t wanted to grow. They’ve focused instead on having more profitable, better run operations and have been very successful at it. You don’t have to grow to operate a successful company. Granted, you do have to continue to bring in new customers because you will experience some attrition over time. But you don’t have to pressure yourself into thinking your business will die if it doesn’t grow.
Like most myths, the three we’ve discussed may have elements of truth. But taking them at face value is dangerous because they can negatively affect the way you do business — or whether you even go into business. When you hear a similar statement presented as absolute fact, don’t act on it until you’ve done some research and decided for yourself what is truth and what is myth.
Laddie and Judy Blaskowski are partners in several businesses, including BusinessTruths Consulting. They are authors of The Step Dynamic: A Powerful Strategy for Successfully Growing Your Business. Judy@BusinessTruths.com.