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Starting a new business is a positive action, and in my experience most entrepreneurs are positive people. But sometimes that positivity can mask harsh realities that many entrepreneurs would rather ignore, and can lead them to buy into ideas that are detrimental to success.

Here are ten dangerous ideas that many startup entrepreneurs buy into that they shouldn't.

Raising money from VCs is crucial to success. While having a flush bank account can give a startup entrepreneur the opportunity to execute on a vision, money alone doesn't guarantee success -- the majority of companies that receive VC funding still fail, just like all businesses.

Bootstrapping is wonderful. Some believe that startups should raise as much money as they can, but there's another camp that advocates for bootstrapping. Unfortunately, extreme bootstrapping is problematic because not having enough money is just as detrimental as having too much of it. In fact, undercapitalization is one of the leading causes of new venture failure.

We can figure the business model out later. While there are more than a few high-profile examples of successful entrepreneurs that didn't know how their startups were going to make money, the reality is that launching a new company without a business model (or some thoughts about business model) is, in most cases, more likely to produce failure than success.

There's no competition. Even though focusing too much on the competition can be a distraction, entrepreneurs who believe that there is no competition are almost always completely out of touch with reality, and that's a far worse thing.

The competition sucks. Many entrepreneurs who recognize that they have competition believe that the competition is so inferior as to be of marginal importance to their new business. In some instances, this might be the case, but most of the time, this type of denial can be harmful.

Experience is overrated. Just because a number of high-profile startups have been founded by entrepreneurs with little to no experience doesn't mean that experience doesn't matter. Experience is far more likely to provide for key industry insights that will boost the chances of success, and in some relationship-driven industries, having a track record is a prerequisite for getting deals done.

We don't need a business plan. While a 40-page business plan might be an unnecessary formality, not planning is planning to fail, so it's always good for entrepreneurs to put into writing a 'business plan' for personal use.

That's going to happen -- it's in our business plan. Business plans, including those with financial projections, can be valuable planning tools, but far too often entrepreneurs conflate plans and projections with reality. They come to believe that certain things are real because it's in the business plan. Business plans and projections should be thought of as a guidebook, not a map.

Somebody will want to buy us. A big exit is something many entrepreneurs dream about, but it's not something they should count on. Unfortunately, when you're building for an acquisition, chances are you're not building for self-sustainability.

Failure is not an option. Negativity isn't a desirable trait for an entrepreneur, but overconfidence isn't one either. Opportunity cost is the greatest cost entrepreneurs pay and therefore, getting tied up pursuing a business that isn't going anywhere can be very expensive. That's why entrepreneurs should be prepared to recognize when a business has reasonably failed and be ready to move on, even if they're going to fight as hard as they can for success.

Photo credit: chego101 via Flickr.

Patricio Robles

Published 17 August, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2391 more posts from this author

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John Courtney

John Courtney, CEO and Executive Chairman at Pay on Results SEO, Content Marketing, Social Media, Digital PR, PPC & CRO from Strategy Digital

Having set up my busness nearly 15 years ago, I can vouch that most of these ideas do not work! My acquired knowledge? Innovate, plan and budget. Innovation (product, service, even name e.g. Orange) makes you different to your competition, and that's just essential. Planning your business strategy and tactics is just common sense, but most people do it all to rarely. Budgeting is boring but allows you to see where your business is going financially and therefore reduces stress, which is caused by uncertainty. There, you are as wise as me now!

John Courtney

Strategy Internet Marketing

about 6 years ago

Brian Anderson

Brian Anderson, Marketer at Sporting Index

Nice article Patricio.

I think bootstrapping is wonderful. But it is also different from being underfunded. If I had more money than I needed for my startup, I'd still do as much as I could myself or through cost-effective means. I think there is a middle ground you have to reach between being underfunded thus *having* to do everything yourself and getting VC capital too early and it going to your head with your appointment of a west-end PR agency.

Agree with "The competition sucks". You may think that there are things that you can do better than XYZ company, but that fact that they are established and (look to be) surviving means that they are still ahead of you in any pecking order. And you never know; that thing that you plan to do better than them might be in their next product release, coming in a few days time.

And I also agree with your point that failure may have to be an option for some entrepreneurs. A friend of mine was fairly wet behind the ears when he started his first business. It failed, but it didn't completely crash and burn. The experience he picked up along the way managed to help him land a great job on a great salary - now he saves what he can and will soon start again on the road to entrepreneurdom.

about 6 years ago

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harly

you have write some good ideas in the blog.One of the very first things you'll need to do is firm up the type of business you want to start and to create a business plan for your new venture. Your plan including how you are going to get customers through marketing activities is a key document that shows your path to profitability. You may also need it to get finance and a bank account. Thanks for sharing the nice information.

about 6 years ago

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Paul

Ah, the business plan, where would we be without them?

I'll tell you, quite successful actually! Well, that was ten years ago.......

There are more start ups each day, than there was each month, coupled with the slight financial ‘blip’ we are currently facing means in today’s digital market a well thought out plan will give your business the edge when looking for finance, plus a bit of cash to match the bank helps too!

As Adrian quoted “Document your detailed plans on a napkin." It’s a start, but don’t hand it to, you bank manger just yet..... 

about 6 years ago

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Rob Drummond

I think another problem for new ventures is paralysis. Many seem to wait until the recession ends, or until they've bought and read a 17th book on their chosen business, or some other reason. So while I think that having a business plan is absolutely essential, it can be equally important to get going, quickly - and to try and test whether your idea is profitable as quickly as possible. For internet based businesses PPC has made testing a business idea easier than ever.

about 6 years ago

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Kathy

I was offered a substantial ownership position in a start-up once if I were to join the team. The goal of this endeavor was to ultimately trigger a buyout. But, like you suggested, if you are focused on a buyout, then you aren't focused on sustainability. That was one of the major deterrents that made me decide not to partake. I felt that the business model was flawed from the start. What silicon valley company is going to want to buy another company that does not have a sustainable business model?

about 6 years ago

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Lawrence Mitchell

Useful post. Whilst a business plan might be an academic exercise in many cases, I find that the art of actually writing thoughts down brings enormous clarity that saves time in the long-run. I'd also recommend finding appropriate mentors or coaches quite early on in the process to tap into knowledge and skills that you may not have yet. Again, this will save precious time.

about 6 years ago

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Laura

This is a useful post which, though I don't agree with everything, does bring to light some good points for discussion. Entrepreneurship is fluid and ever changing in so many respects, but in so many other ways it continues to stay the same. Entrepreneurs today go through the same things entrepreneurs last year, two years, five years ago went through - issues with finance, how to write a business plan, employing their first employee and so on. I think the best way to learn about entrepreneurship and being an entrepreneur is through the experiences of others - something advocated and demonstrated by business reality website http://www.inafishbowl.com By continually learning from each other and bringing things into debate, entrepreneurs can continue to progress whilst avoiding costly mistakes.

about 6 years ago

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