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The Three Deadly Myths of Business Success

Uncovering the three most deadly myths of business success

By Joe John Duran

We all love the idea of running our own business. We dream of creating our own work environment, making unlimited amounts of money for ourselves and those we love, and working on our own terms. That's why more than one million new businesses are formed every year in the United States. But the sad reality is that half of those businesses will fail within two years. They will collapse for a variety of reasons, most often because the founder held some misguided beliefs.

We interviewed dozens of successful entrepreneurs for Start it, Sell it and Make a Mint (John Wiley & Sons) and found there were three misconceptions that proved to be deadly to independent businesses:

Deadly Myth #1: If you build it, they will come.

The movie "Field of Dreams," starring Kevin Costner, illustrates one of the biggest business killing myths. In that movie, baseball loving Costner fought all kinds of obstacles to build a magical baseball field, and then people drove in from all over the country to see it. The movie showed all of the frustrations he encountered in building his field, and yet once he had it built, people began to appear magically. Similarly, many business owners believe that customers will simply pour in. This typically doesn't happen, though. If you do not market and sell your services, not only will they not come, but they won't even notice!

While many business owners spend countless hours designing brochures or working on the look of their logo, they spend remarkably little time identifying how they will reach their potential customers, and how they will get these prospects to buy their products or services.

Here's one interesting example: Mark opened a yoga studio in a busy part of the city. He spent a small fortune building a gorgeous studio with three large yoga rooms, marble showers, and a zen-like trickling fountain. Many yogis agreed it was a beautiful retreat. He was a well known instructor so he never doubted people would come. He had also recruited other good instructors to teach at his studio. He opened his doors and, after six months, only two or three people were showing up to classes. Nowhere in his budget had he planned on such a low turnout. It wasn't long before his gorgeous studio faltered - all because Mark bought into the "Field of Dreams" myth.

Deadly Myth #2: Doing what you love is the key to success.

There's a huge difference between making great bread and running a great bakery. Most successful entrepreneurs enjoy running the business more than they enjoy what their business does.

Maria is a middle aged woman who loved designing dresses. She had slowly grown her dress business out of her home. After a couple of years she had six employees and spent more of her time on operational and administrative issues. She hated being taken away from designing and suspected there were many things she didn't know about running the business, but she simply ignored several of the brewing challenges. She had turned her hobby into a business, but the company eventually failed because she never ran it like a business. Successful entrepreneurs understand the importance of running a company like a business.

Deadly Myth #3: A profitable business is a successful business.

Do you have the right stuff to make it as an entrepreneur?

A major reason that 50% of newly formed businesses will fail is that the person who started the company doesn't really have the aptitude or skill sets needed to succeed.

You can take a free diagnostic test that tells you whether you have what you need to make it before you take the leap at www.startitsellit.com. The site has a proprietary Entrepreneur Scorecard T that gives aptitude and skill scorecard along with tips on how to improve your likelihood of success. It takes about 6 minutes to complete, and can provide some valuable insights into your strengths and weaknesses.

Remember tomorrow's profits won't pay today's bills. Sadly, countless entrepreneurs find themselves at the last minute realizing they don't have enough cash in their account to make payroll or pay for their rent. Many businesses would be saved if the owners understood that cash flow is all that really matters for any independent business. It's easy to design a spreadsheet that creates an illusion of profits. However, many a business goes bankrupt while waiting for those profits to arrive.

A nice example of the "profit" myth was shared by Jeff. He had a division of his company that sold promotional products via catalog. For some reason, while his profits were supposedly increasing by huge amounts, his cash was being depleted from his bank accounts at an alarming rate. When he went to his warehouse, he found out that he had a large collection of TVs in storage. The firm had shifted from small gadgets to large electronics because the profit margins were much higher. But then he discovered that the vendors wanted payment in cash upon delivery where his prior vendors would be paid up to two months after delivery. This meant that the more successful they were at selling TVs, the more cash he needed to carry the inventory. The banks were not comfortable lending money on TVs in a warehouse so he had to scale back the business or he would have failed. Hard to imagine that increased success would increase their likelihood of failure, but it did. This type of situation occurs often for businesses. A profitable business is not necessarily a successful one.

The lesson here is simple: concentrate on cash flow. Ensure you understand the timing of payments, both in and out. Make sure you build a buffer, because invariably money takes longer to come in than to leave. Remember that cash is the lifeblood of your business. Profits are not!

Succeeding in business is hard enough; don't let these three myths trip you up!

Written by Joe John Duran CFA, author of Start it,Sell it & Make a Mint, 20 wealth creating secrets for business owners (John Wiley & Sons). For more free entrepreneurial tips and tools visit http://www.startitsellit.com

To get a sample of what Duran has to say, and experience the dynamic way in which he says it, please please listen to this book trailer at http://www.startitsellit.com/booktrailer.htm


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