Starting your own business can be one of the best decisions you ever make in your life. There are many advantages to starting your own business such as independence and control over your potential salary. While all of these benefits are great, there is a lot of misinformation about what it takes to become an entrepreneur. (Find out if you have what it takes in Are You An Entrepreneur?)
In Pictures: 8 Tips For Starting Your Own Business
Have you ever been told that it takes a lot of money to start a business? Have you ever been told that you need a MBA to start a company? Myths like these keep potential business owners from taking the plunge into entrepreneurship and becoming their own bosses. You may think that you know all of the basics for starting a business but what you believe may in fact be wrong.
Myth No.1: You need a lot of money to start a business.
Contrary to popular belief, starting a business does not require that you have a small fortune. 17% of all new businesses begin with less than $5,000 dollars in cash according to Wachovia. 72% of companies with a net worth over $1,000,000 dollars started with less than $50,000 dollars in capital. You may remember wealthy billionaire Ross Perot from his presidential campaign. Perot started his company Electronic Data Systems with just $1,000 in 1962. You could start a landscaping business, a website development company or your own consulting company with limited funds. (For more, see Business Startup Costs: It's In The Details.)
Myth No.2: You need a great idea.
While coming up with a bold new idea would be great, you don't have to reinvent the wheel to become an entrepreneur. Many great entrepreneurs take an existing product or idea and just improve upon it. HeadBlade CEO Todd Greene is a great example of this. Greene developed the HeadBlade razor while looking for a razor to shave his head. He tried to sell his head shaving razor to Gillette. Gillette initially rejected the idea and so Greene launched his wildly successful company. As another example, Brian Taylor became a millionaire by creating seasonings for popcorn with his company, Kernel Seasons. (For more examples, see 7 Unintentional Entrepreneurs.)
Myth No.3: You need to have an MBA to run a successful business.
Conventional wisdom says that you need an MBA to run a successful business. Numerous Fortune 500 CEOs have proved this line of thinking wrong. Ambition and desire outweigh having the right educational credentials. Take Michael Dell for example. Dell dropped out of the University of Texas to start his own independent personal computer company. Today Dell Computer is one of the largest computer companies in the world. Another example is John Mackey, who was a 25-year old college drop out when he started Whole Foods Market. Brian Scudamore started 1-800-GOT-JUNK? right out of high school with only $700.
Myth No.4: You need a detailed business plan
Business pundits and professors often champion the cause of having a thoroughly developed business plan. While having a plan is important, a simple plan may meet all of your needs. You might be better served by using the months of planning time to launch your new business. While you are developing this detailed 100-page plan, the market for your product is rapidly changing. Having a plan is a definite plus but you may be best served by having a simple outline of your goals and updating it as the business evolves. (Learn more in 4 Steps To Creating A Stellar Business Plan.)
Myth No.5: You won't make a profit for three to five years.
Business schools often teach that it takes a minimum of three years for a business to break even. Many small businesses are able to turn a profit much sooner. The lower your starts up costs are the quicker that your business can make a profit. Companies with low overhead costs can find themselves on the road to profitability overnight. If you start a financial services company, child care company or tutoring service, you could be profitable in a few months.
Myth No.6: You need a catchy business name.
There are lots of business with great business names and catchy domain names that have never made a profit. What do eToys.com, boo.com, and pets.com all have in common? All three companies went bankrupt despite having popular domain names. The names were great but the business model was flawed. The work that you put into your business will far outweigh the hours put into finding the right domain name. (To some extent the business model makes the business, find out more in Getting To Know Business Models.)
Myth No.7: You need a great office location.
Some of the best businesses in the world got their start in the most obscure locations. Steve Jobs and Steve Wozniak started Apple Computer in a garage. Computer programmer Pierre Omidyar launched eBay from his living room. Bill Hewlett and Dave Packard began Hewlett Packard (HP) in a 12 foot by 8 foot garage. All of these entrepreneurs kept costs low by starting from a simple location. The only thing that a fancy address assures you is high leasing costs. (Find out more about saving on office space in Creating A Home Business Work Space.)
The Bottom Line
Starting a business is not as complicated as many people make it out to be. The keys to building a successful business are ambition, determination and motivation.
If you're still feeling uninformed, check out last week's business highlights in Water Cooler Finance: Auto Hope, Bubbling Oil and Obamanomics.