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.