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Top 10 Small Busines Myths

Top 10 Small Busines Myth by Jeff Cornwall

From time to time I have written about myths that I see when dealing with aspiring entrepreneurs. Entrepreneur.com has put together their own Top 10 list of Small business Myths that are worth a read for anyone thinking about starting a business.

Several of their myths dealing with financing issues:

Myth No. 1: "The government has grants for startups."

Generally this is not true. There are a few instances where local governments set up programs for disadvantaged people looking to use free enterprise to improve their lives, but they are not that common.

Myth No. 2: "The SBA loans money directly to small businesses."

Another financing myth busted. You still must go to a bank. Some banks work with the SBA program to get small business loans guaranteed by the SBA.

Myth No. 3: "Venture capitalists loan money to startups."

VCs fund less than 0.5% of entrepreneurial ventures, and of those, only rarely do they fund a start-up.

Myth No. 5: "I'll be able to write everything off."

Actually you can, but you will face interest and penalties from the IRS, so I don't recommend it either.

Myth No 6: "I can pay myself whatever I want."

Again, you can, but you'll be out of business in a few weeks. You can only pay yourself what is left after everything else gets paid. You are last in line if you want to make your business work.

Myth No. 8: "I should be profitable after six months, because I'm an expert at what I do."

The article states that most businesses take 2-3 years to make a profit. That is also kind of a myth. I have owned businesses that make profit within a few months, and I have had some that took years. It all depends on the business model and the market. That is why a plan is so important to help you understand what you are getting into. Which brings us to another of their myths:

Myth No. 10: "If I'm not getting funding, I don't need a business plan."

See my comments above...

They also have a couple of marketing myths:

Myth No. 7: "If I create a website, I'll get traffic (or the more popular 'If I build it, they will come.')"

Myth No. 9: "I don't need a marketing plan or marketing materials. This product/service sells itself."

I tell entrepreneurs that they should be prepared to spend 80% of their time selling and marketing early on. Nothing sells itself and no website creates its own traffic.

Finally, one of their myths deals with lifestyle:

Myth No. 4: "I'll have more time to do what I want."

You should assume you'll have some long hours early on. But, if time is important, make sure to build that into your business plans. Plan for slower growth or less ambitious goals if you want to structure time for other things. Also understand that some businesses just demand more of our time by their very nature. For example, if you want to start a restaurant, plan on very few days off, long hours, and no vacations for a LONG time. Know what you are getting into before you start any business and make sure it fits your non-financial and lifestyle goals.

Make sure to go the the Entrepreneur.com article, as it has some great links to more information on all of these topics.

Differentiation -- Smart Marketing Strategies for the Solo Entrepreneur

Are you ever frustrated or hesitant when you talk to prospective customers because you can’t readily explain why they should come to you rather than go to your competitors? Sure, you might have your 30-second elevator speech, but then they ask you that dreaded question, “So what makes you different?” Then, all those self-doubts creep in, and you just aren’t sure what to say. Differentiation can boost confidence--yours in yourself and that prospective customer’s confidence in you!

Dif-fer-en-ti-ate v. tr. To perceive or show the difference in or between; discriminate.

In business terms, to differentiate means to create a benefit that customers perceive as being of greater value to them than what they can get elsewhere. It's not enough for you to be different--a potential customer has to take note of the difference and must feel that the difference somehow fits their need better. (Other words that mean virtually the same thing: Competitive Advantage; Unique Selling Proposition; or Value Proposition.)

As you are building your business, you can use differentiation to attract more customers. Once you have momentum, differentiation allows you to charge a higher price because you are delivering more value to your customers. Make a point to evaluate and adjust your differentiation methods at least annually.

The various methods of differentiating your businesses fall into four general categories:

• Price Differentiation
• Focus Differentiation
• Product/Service Differentiation
• Customer Service Differentiation

Price Differentiation

Differentiating on price is probably the most common and easily understood method. HOWEVER, for Solo Entrepreneurs, caution is in order. On the one hand, potential customers might expect a lower price from you than from your larger competition because they perceive you as having less overhead, etc. On the other hand, cheaper prices can evoke perceptions of lower quality, a less-stable business, etc. And if you compete on price against competitors with deeper pockets, you can price yourself right into bankruptcy. Be creative with this differentiator by competing on something other than straight price. For example, you might offer:

• More value--offer more products or services for the same price.
• Freebies --accessories, companion products, free upgrades, and coupons for future purchases.
• Free shipping, etc.--convenience sells, especially when it is free!
• Discounts--includes offering regular sales, coupons, etc. (see cautions above)

Focus Differentiation

For Solo Entrepreneurs, this is the most important method of differentiation, and in many ways, the easiest. Why? Because as a Solo Entrepreneur, you simply can't be everything to everybody, so you must pick a specific way to focus your business. Once you have done that, you have an automatic advantage over larger companies because you can become more of an expert in that one field --and you can build close relationships with key customers that will be hard to duplicate. For example, you might differentiate yourself through:

• Location--take advantage your closeness to prospective customers.
• Customer specialization--be very specific about what characteristics your customers will have—for example, racing bicycle enthusiasts or companies with a spiritual conscience.
• Customer relationships--know customers really well, form partnerships with them, and get them to speak for you!
• Affinity relationships--associate your product/service with a well-known person or organization.
• One-stop shopping--offer everything your target market needs, in your area of expertise.
• Wide selection (within your niche)—although this one may seem to be the opposite of focus--the key is to be very specific in one dimension and very broad in another.

Product/Service Offering Differentiation

How much you are able to differentiate your product or service offering will vary based on what type of business you are in. For instance, if you are in a highly regulated business, your options may be limited. Explore a totally new market or type of product or service, however, and the possibilities abound. The key to successful differentiation in this category, again, is to know your customers, really, really well. Talk to them often, and you will know what they need most and be able to offer it, long before your competitors know what is happening. For example, your product or service could stand out in one of these ways:

• Quality--create a product or service that is exceptional in one or more ways. Examples: Lasts longer
• Better
• Easier to use
• Safer
• New/First--be the first one to offer something in your location/field.
• Features/Options--offer lots of choices, unusual combinations, or solve a problem for a customer in a way no one else does.
• Customization--as a Solo Entrepreneur, you may be able to more easily handle special orders than big, mass-market competitors.

Customer Service Differentiation

Have you noticed how customer service seems to be out of vogue these days? This situation makes excellent customer service a great opportunity for differentiation and another natural advantage for Solo Entrepreneurs that already know what’s important to their customers. Build your reputation on making customers feel really good about doing business with you. Works great with referral marketing, too. Examples:

• Deliver Fast--next day, or one-hour--make it faster than customers think possible.
• Unique channel--offer a service over the phone or Internet instead of in person or in their office rather than yours.
• Service-delight customers!--it may seem expensive to offer exceptional service--but it pays off in word-of-mouth advertising.
• Before/during/after-sales support--provide technical or other support to customers using your product. --You might use joint ventures to provide that support--but customers will perceive it as being from you!
• Guarantee/warranty--offer 100% money-back, or free replacement parts.
• YOU--offer yourself, your unique blend of talents and skills, to attract customers. Make sure they get access to you, too!

Keys to Successful Differentiation:

• Know your customers, really, really well.
• Pick a blend of differentiation methods that, in the eyes of your customers, truly sets you apart.
• Talk about your differentiation in terms of customer benefits.
• Tell everyone about what differentiates you--often.
• Keep your differentiation fresh by listening for changing customer needs. strategy, marketing, small business marketing, direct marketing, internet marketing, advertising
  

by: Terri Zwierzynski