By Mike Michalowicz
Author, The Toilet Paper Entrepreneur
If you want to go from wannabe to newbie to successful entrepreneur, you’ve got to bust through some of the most common misconceptions about starting your own business. If you
are already building a business, you may have discovered some of these myths the hard way.
Regardless of where you are on your entrepreneurial path, the last thing you want to do is buy in to a stupid misconception. So get a clue:
Myth #1 - Don’t Share Your Big Idea – One of the most common myths is that entrepreneurs must protect their genius ideas from pariah investors out to steal their best stuff. Investors don’t steal ideas. They don’t want to run a business; they want to invest in a business. Capisce?
And no, they do not have an army of can-do people just waiting to download your business plan so they can launch a copy of your business before you can so much as scratch your head. Investors want you to do all of the work. So share ideas. But don’t be stupid, there are a few bad people out there. As a rule of thumb, freely share ideas but never give away the secret sauce.
Myth #2 - Go In 50/50 With Your Best Friend – Partnering with your best friend is like marrying your mother. Sure you love mom, but it’s just bizarre – and gross – to consider marrying her. The instinct to partner up with someone you know and trust is understandable. Launching a business is a big hairy deal, and having your best bud along for the ride takes some of the edge off. But do you really have to split it down the middle?
Partnering in business is like getting married, just more intense and risky. More than 50% of marriages end in divorce – so if you want to hang on to your business and your best friend, nix this idea pronto. If you aren’t convinced, and still want to work together start off with 5% ownership each, and then each quarter assign equity based on performance, something that can be easily measured. You’ll thank me later.
Myth #3 - Writing A Business Plan Improves Your Chances For Success – That 200-page document you labored over (or paid through the nose for) is bad for the environment: a total waste of trees. Despite your best intentions, you will never review your business plan again. A business plan is pure fiction, right down to the five-year revenue projections. Why would you waste your time writing a fictional account of your business, when you could be launching it?
All you need to start and run your company is three sheets: A one-page Prosperity Plan outlining your vision, a one-page Quarterly Plan detailing immediate goals, and the Daily Metrics, a method for keeping you on track. That’s it, Sherlock. Save your mammoth manifesto for your memoirs and get crackin’!
Myth #4 - Count Your Profits At The End Of The Day – Many entrepreneurs and corporate honchos believe profit will happen naturally at the end of the day. They focus on getting everything paid first and then count up the leftovers, if there are any. It sounds logical, but it’s actually really stupid. Everyone gets paid except you? How is that a good idea?
The get-rich-right approach is to make your profit at the beginning of the day. Take your profit off the top and use the leftovers to run your business. Start with a small amount, say 5% of gross revenues, and then stash it away in an interest-bearing account, a Profit First Account (PFA). Setting up a PFA will build up your cash reserves, allowing you to actually earn a profit from your blood, sweat, and tears, and will force you to learn how to spend less to do great work. Now that’s smart.
Myth #5 - Balance Work And Family Through Self-Employment – No matter how hard you try, you will not be able to devote equal time and energy to both your business and your family. It just ain’t gonna happen. And if you’re one of those folks who think owning their own business is the key to spending more time with their family, I’ve got a bridge in Brooklyn you might be interested in buying.
The entrepreneur’s life is demanding. You will work long hours. As hard as you think it will be, you’ll end up wishing it were that easy. The only way to spend more time with your family is to integrate family and business. Get your family involved in some aspect of your company, whether it’s having the kids collate papers or brainstorming with your spouse. Bonus: free labor! Way to TP it!
So how many stupid misconceptions did you believe – even just a little bit – before you read this post? Don’t worry, it doesn’t make you stupid, it just means conventional wisdom is total BS.
Mike Michalowicz is a leading business expert, regular contributor to The Big Idea and author of the new book, The Toilet Paper Entrepreneur. For more great advice, click here to buy the book, available for the first time ever today!