Follow on Facebook
Follow on TwitterMyth No. 1: The same number of entrepreneurs buy an existing business as start from scratch.
Fact: some three-quarters of new businesses are started from scratch.
Myth No. 2: It takes years to start a business from scratch.
Fact: Most businesses are established within six months, but those thinking about or avoiding starting a business tend to assume that it takes substantially longer, on average, deterring some from starting up.
Myth No. 3: It’s hard to get a bank loan to start a business.
Fact: While it may be slightly harder to get a start-up loan without a track record, only 10-20% of applications for a business loan are rejected, overall. There is, however, one group of entrepreneurs for whom this myth is actually reasonably accurate: individuals from lower socio-economic groups who lack their own capital.
Myth No. 4: A business plan is the most essential element in start-up.
Fact: Although many non-entrepreneurs believe this to be the case, business owners who have been through the process tend to downplay the importance of a business plan in favour of obtaining finance (although a business plan is usually required to raise finance). The learning process that accompanies the actual construction of a business plan is often considered to be more important than the plan itself. For some, it may prove to be a deterrent to start-up if they feel that cannot draft a business plan.
Myth No. 5: Small businesses don’t generate much turnover in their first year.
Fact: The average income, forecast by new entrepreneurs for their first year of trading, is only half of the figure actually achieved by small businesses.
Based on research undertaken for the DTI’s SBS.
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This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
[...] Top 5 Business Startup Myths by John Crickett [...]
“There is, however, one group of entrepreneurs for whom this myth is actually reasonably accurate: individuals from lower socio-economic groups who lack their own capital.”
Actually, married women of all races, people with black skin and hispanics have trouble even if they have capital. They can be rejected based on ownership of “community property” rather than their own capital, but you’re this is not a problem with middle class white or Asian men.
It is discouraging, but not if we attack this myth: You must have external financing to start your own business.
Kate,
I’m not sure I agree many of the successful business women I know are married and I definately don’t agree that you need external financing to start your own business, in fact I’m a firm believer in starting with your own capital and bootstrapping.
Sorry John- I think we’ve misunderstood each other.
Picking up on your theme, I’m saying THE MYTH is that you need external financing.
From my own experience, I can definitely vouch for the fact that self-emplyed business people can and do fund everything themselves.
Kate, ah, sorry I’d misunderstood
Thanks for the comments, John
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] -Top 5 Business Start-up Myths at Business Opportunities and Ideas [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Business Opportunities and Ideas – This blog did a review of our site and as a result we are doing a review of their blog. I hadn’t heard of this blog since they contacted us but I am glad they did as it is a great resource. This blog is about business ideas and opportunities that John Crickett spots, thinks of or just hears of and think are rather cool. I thought this was a great idea for a blog and will start to read it on an ongoing basis. My favourite posts include: Top 5 Business Myths and Advertising that works. [...]
[...] “It’s hard to get a bank loan to start a business” is a startup myth according to Business Opportunities and Ideas. Add to Del.icio.us | Digg This! | Technorati | Blinklist | Furl | [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
[...] Top 5 Business Startup Myths by John Crickett [...]
Great tips. Starting is easier than people realize, but it’s also the easiest part.
Interesting blog.
I am surprised that you didn’t add another to your list
“All small businesses will lose money in the first year”.
I hate it when I hear people say this because I believe that it just sets them up for a period of poor performance and easy excuses.
We planned to lose money, we are losing money. Bingo we are on target.
Complete nonsense of course.
I don’t have the statistics but I believe that most small businesses should be aiming to make a good profit in Year 1.
OK it may not be as much as they’d like and I don’t believe in paying salaries out of the business until the business can afford it
Because it’s only the top 5
While planning to loose money is not a good idea, for some businesses it’s unrealistic to expect to turn a profit with the first years. Amazon is an example of this, it ran for several years at a loss as it developed a capital intensive infrastructure and pursued a strategy of rapid global expansion.
I would argue however such businesses are not small businesses.
I’d suggest all small businesses should be looking to be profitable ASAP and should keep refining their plans until they establish how to do so.
Hi – interesting results. I’m surprised to learn that only 10 to 15% of small business start ups are turned down for a loan. Perhaps the figure is higher for those who get a DTI loan guarantee, but they should realise that they’ll be paying a significant chunk of cash to do this.
I have a good trading history with my bank and a year ago I sold one business and started another, which has been trading for about 8 months. I just called them re: an overdraft to enable us to take on larger contracts and my bank manager said that although my track record will go in our favour, I only have 10 to 15% chance of being accepted.
I guess it all depends on the amounts you’re borrowing too.
Regarding profits, I think it all depends on the type of start up. You could probably set up on your own cleaning windows, with little cash outlay and become profitable very quickly.
On the other hand if you need to lay out a lot of cash initially and employ staff straight away, you’re not going to get profitable in a couple of months.
Interesting blog by the way. I’ll certainly be reading more.
Catherine,
Thanks, yours looks interesting too.
[...] Some light relief As a counter-weight to depressing economic news (although how often have you heard the powers that be say something like “everything is going fantastically well. Business rates are down, orders are streaming in across all industry sectors, and there’s absolutely no excuse for businesses not to thrive…” ), here are some recent examples of entrepreneurial innovation that may provide some encouragement. A north Devon farmer is diversifying by trying to set up a swingers’ club in a nearby village. Following the BSE crisis in the late 1990s he first set up a holiday park and then moved into weddings and functions in a nearby barn. (Wonder what kind of market research was carried out…) An American investor based in the UK has won an international design competition for his Reactiv cycle jacket, which changes colour as the cyclist brakes. Initially starting with LEDs stuck on with gaffer tape, Michael Chen moved on to incorporate a traffic-light signal system – red when braking, green when accelerating and amber when turning, to give motorists clearer visibility of cyclists’ anticipated actions. More from the BBC website here. Animal dung coffee at £50 per cup is being sold in a London department store (with all profits going to Macmillan Cancer Support). The reasoning is that Asian palm civets (they’re a bit like a raccoon) are said to pick the best coffee berries. If you want more detailed information on the processes involved (!) visit the BBC website here. If you’re looking for more down-to-earth inspiration, try looking here for some business opportunities and ideas. Filed under: starting up, Microsoft Small Business: Business climate, business planning [...]
i don’t imagine the current financial climate will help matters any!
Hi John
Starting a business does seem daunting and its better to hide behind these myths then do it. As an entrepreneur that has helped many people start their own business its easy to hide behind the myths then face the FEAR.
Just found this page and need to leave a few notes.
People start up a business with only some of the skills they need.
The end result is a great business product, or service, or process, or whatever their strength, but a huge financial headache, no reporting paperwork, and many minor broken laws, waiting to be picked up on by some local official – if that is their weakness. People always seem to over estimate their strengths, and underestimate their weaknesses!
The other aspect that successful businesses do is to keep going back to the business plans, and their profit and loss documentation. If you don’t know exactly what you are doing, on paper from day to day, how will you know if you are actually making money or actually able to pay your bills in 3 months time?
Ignoring your business plan is a sign that you are not going to be one of the 30% who last longer than 3 years.
We must not forget that banks are ‘fair weather friends’ and with startups the ideas are bought by the reviewer at the bank. The moment you start feeling the pinch they will come down heavily. Good luck to all startups, if i can help drop me a line.
Another myth that often scares entrepreneurs is related to the “8 out of 10 small businesses fail” statistic. 80% of small businesses don’t fail because small business success is difficult to achieve. 80% of small businesses fail because the people who start them make stupid mistakes–borrowing too much money early, failing to plan and budget, not setting realistic expectations for sales, allowing emotions to cloud business judgment, etc. Nice article.
I agree fear is often the factor that prevents us from achieving our goals… people are amazed that you go it alone – not realizing that the transfer from big company to small business, whilst being the best thing I have done, was not entirely voluntary!