Top ten myths of entrepreneurship and other things to consider
To those of you reading - How did you learn how to swim? A structured lesson plan at the local pool, with a multi year instruction program before you were left to solo - OR - did you jump (or get pushed) into the deep end? How about starting a business? Take years of classes or jump into the deep end?
I jumped into the deep end myself, 20 years ago. Everyone I knew told me not to do it. I never was very good at listening… and now I have three businesses. One of these days I will listen. Scott Shane, as a guest blogger on Guy Kawasaki’s blog wrote a piece title “Top Ten Myths of Entrepreneurship“. I have some opinions of his top ten to share with the three regular readers of this blog.
1. It takes a lot of money to start a new business: Scott says no, $25,000 average. I agree! My business ventures’ startup capital was (in order) $35,000, $15,000, $0, $11,000, $2000, $45,000 and $100,000. Ironically the most expensive one is the least successful so far. Or maybe too much startup money is to blame.
2. Venture Capitalists are a good place to go for startup money: Scott says no. I could never get one to return my calls, so I don’t know either.
3. Most business angels are rich: Scott says no. My only business angel was my mother. She is not rich.
4. Start-ups can’t be financed with debt: Scott says yes they can. My own experience would be (in order) angel investor, cash, home equity loan. Banks didn’t finance the business per se, but they did let me put the house on the hook.
5. Banks don’t lend money to start-ups: Scott says yes. I say yes too; in the beginning it was home equity, now they love me and can’t give me enough money. At 9%, the criminals.
6. Most entrepreneurs start businesses in attractive industries: Scott says no. I haven’t done so, apparently my experience is different than most. For the life of me I could never see the attraction of owning a restaurant or bar. Racetrack maybe… but my most successful business experiences are with the ones that can scale.
7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses: Scott says no, get into computers. I say no, think about scale. Computer businesses typically DO scale well, but they are not the only ones. Any franchised system is a scaling system (own the franchisor, don’t be a franchisee). My more successful projects have been the ones that scaled up easier. Some things like restaurants and hotels (Scott’s examples) won’t scale easily because they require buildings and big capital.
8. Most entrepreneurs are successful financially: Scott says no. I say that I have never met a successful business person that complains about having too much money. They are all broke, just ask them! It is a learned response, since any time you tell people that you are doing well, they stick their hand out for some money. If you read “The Millionaire Next Door” you will find out that the rich are mostly self-employed and drive Chevrolets. They are wealthy, they just don’t look it. I look like a homeless bum most of the time. According to my banker, most of his successful clients do too.
9. Many start-ups achieve the sales growth projections that equity investors are looking for: Scott says no. I say, ask an academic. According to Scott’s numbers one of my companies will make the top 2% of sales. Not good enough for a venture capitalist, but not bad for a self-funded effort. Go me! Of course the others won’t, so I must suck.
10. Starting a business is easy: Scott says no. I say yes. Starting IS easy, succeeding less easy. Sometimes you have to be smart enough to kill it, so that you can start another. If you noticed I listed the finances for seven start-ups, but now I have only three. Four are dead by my hand. You only have so many hours in a day, so put your time into the best projects.
