There are some myths about starting a business that many entrepreneurs tend to believe, leading to doubts and concerns as to whether it is worth the effort.
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Here are some common myths that can interfere with your mindset while starting a business. We take a look at whether there's any truth to these entrepreneurial myths.
Myth#1: Financing a new business is very costly
This is not true – a normal startup is only about $25,000, which can easily be reimbursed once the company has been up and running. Many profitable small businesses have been started with only a few thousand dollars.
There are many alternatives to spending a large amount of cash – some successful entrepreneurs borrow things instead of paying for them, and rent instead of buy.
Another way entrepreneurs can save money on startup costs is to pay employees commissions instead of salaries, or offer equity-sharing to startup employees. Not only is this less costly, but it gives employees that extra motivation to keep sales up.
Don't let this myth stop you from starting a business. Creative entrepreneurs can find many money-saving ways to start a business. They figure ways to get around having to have a lot of financing money and are able to launch a successful business with little capital.
Myth#2: It is a good idea to go to venture capitalists for start-up money
Unless you start a computer or biotech company, this is not true.
Venture capitalists only fund about 3,000 companies per year, and only about one quarter of those companies are just getting started.
The odds that a start-up company will get money from venture capitalists are very slim. According to VC firm Draper Fisher Jurvetson, they get 10,000 business plans a year and invest in only 15 deals. Other estimates but your chances of raising VC money at about one in 4,000. This means that your company will most likely not get money from venture capitalists, so it is best to not even consider the idea.
The good news is you can be successful without venture capital funding. In fact, according to Inc Magazine, not even 1% of the 300,000 or so companies growing at 20%-plus a year are backed by VC money.
Myth #3: Banks will not lend money to start-ups
According to Federal Reserve data, banks account for 16% of all the financing provided to companies that are two years old or younger.
This is higher than most financing sources that many entrepreneurs go to. It is definitely a good idea to go to a bank for start-up money, because your company may have a better chance of receiving a loan than you might think.
Myth#4: When it comes to the growth of a start-up, an entrepreneur's talent is more important than business choice.
While it is great to be a talented, highly skilled entrepreneur, the industry you choose to start your company is the higher priority.
Your business choice can easily make or break the company, so be sure to be careful while making this decision.
For example, the odds that you will make the Inc. 500 list of the fastest-growing private companies in the U.S. are 840 times higher if you start a computer company than if you start a hotel or motel.
Industry choice has a much greater effect on a business than an entrepreneur's level of talent.
Do some research to figure out what types of companies make successful businesses, and look for the types of industries you should stay away from.
Choose a business that is not only right for you, but has a reputation of being highly successful.