Three Myths About Starting Your Own Business

Three Myths About Starting Your Own Business

Mistakes that hurt countless would-be entrepreneurs.

Many people dream of shedding the corporate life and starting their own companies.

They imagine creating the next Google or Apple. From Steve Jobs to Bill Gates to

Pierre Omidyar, many of the world's richest people on the Forbes Billionaires List

started as entrepreneurs, so it's little wonder so many believe that's the path to wealth

and happiness. But getting a company going is hard and takes sacrifices, especially in

this down market. More than 50% of companies fail in their first five years. Their

founders spend much of that time skipping vacations and luxuries and sometimes even

meals.

I've started three businesses, and I've invested in others as an angel investor and

venture capitalist. I've often struggled and failed. My second start-up made $7,000 over

three years while I lived in a $200-a-month apartment. With another one I gained 25

pounds during the first year, thanks to too many hurried dashes to McDonald's. But I'm

glad I chose the entrepreneurial path. I like the challenge of creating something from

scratch.

I've learned a lot from my experiences. Before you venture out on your own, I offer you

three myths about starting a business that I wish I had known before I began.

The first myth is that you should spend a lot of time preparing detailed business plans.

Many business school professors and consultants recommend writing them with lots of

scenario planning and financial projections. Far too many entrepreneurs lock

themselves up for six months to labor away creating the perfect plan. The problem is

that markets change so quickly that you don't really know how consumers will view your

product. Those six months would be better spent better developing a product and trying

to sell it.

What has always worked for me is to write five to ten bullet points listing what I hope to

accomplish and several back-of-the-envelope financial projections. Be realistic in your

revenue projections. Too many entrepreneurs predict that their companies selling

plastic flowers or whatever will hit Google-like profit levels within five years. But how

many companies ever become the next Google ( GOOG - news - people )? Be realistic

in your projections.

Instead of writing a detailed plan with unrealistic projections, focus on figuring out

those five or ten points and then get moving actually building a company. Every three

months, look at those bullet points and see if you need to add to or change them. A

business plan should serve as a guide, not a bible. Naturally businesses need to evolve

to take into account changing market conditions.

The second myth is that as an entrepreneur you have to develop the coolest, most

innovative product. Instead you should ask yourself, will anyone actually buy my

product?