Image by: Aaron Pruzaniec
By Dexter Lunde
You’ve got the start-up money. You’ve got a fantastic idea for a business. You’re sure that it’ll make you millions and if not millions, then at least you can live comfortably and happy. You’re a realist. You’ve got investors lined up to help you get your genius idea off the ground. You’ve done your research. You know what to do to get your business started.
But what happens after that? There are tons of misconceptions about that first year of business. Here are the most common and the reality. About forty percent of businesses that start from scratch will go out of business within the first few months to a year of business. Don’t be in that forty percent.
#1) I Have Enough Money Saved Away for the Costs…
There are always hidden costs and fees that you weren’t expecting. There are a lot of startup fees in general: entrance fees to trade shows and to marketplaces, gas for company vehicles, business cards, signs, business phone bills, website host and maintenance fees, seminars to improve your knowledge of trends, etc. Know that when you think you’ve saved enough money, you haven’t.
Planning for the “un-plan-able” seems difficult. There are classes (that you can find at your local community college or online), that will inform you of those surprise start-up costs. Check your local colleges for their business courses.
#2) I’ll Be Making Money Right Away
The first week will be spectacular. All of your friends will come in. They’ll bring their friends. Then, after the first couple of weeks or so, business is going to die down. Building that loyal following isn’t going to be easy. That first year will be one of your hardest. 12 to 14 hour days will be the norm for a while. You just need to make sure that you’re ready to put in that amount of dedication (if not more).
#3) I’ll Need A Storefront or a Business Office
A lot of businesses don’t actually need a storefront. Some can work perfectly from home: freelance writers, cleaners, a lot of products that can just be sold online, etc. I suggest that if you’re making a product that you’re offering to the public, sell online first. Also, go to places like farmer’s markets, street fairs, and garage sale shops to sell your product.
What is a garage sale shop? It is a marketplace where small businesses and individuals can rent a certain block of square footage. Their items are sold there by the renter. He gives you the profit, you pay him a fee for the space, and you get exposure without having to be there all the time (though you will need to go for maintenance and to restock). Build a base of loyal customers before you decide to open a storefront.
#4) I Have Tons of Investors to Back Me Up
Startup CEO Nick Hughes gives this great tip for first time start-up businesses,
“Unfortunately, investors will lie to you. They will tell you straight to your face they are interested, want to learn more and actually want to invest. This, most likely, is a lie.”
Don’t put all of your eggs in one basket. Don’t even count on a dozen baskets because when you really need 5 baskets, you’ll find that you only have one reliable one.
The same time, if you raise too much money in the beginning (on crowdfunding websites, or just general start-up investors), you may take that money for granted. Don’t make that mistake. No matter how much money you think you have, you need to prioritize so that you know how to spend your funding when money gets tight.
#5) It’ll Be Awesome Being My Own Boss
This one isn’t necessarily a misconception. Yes, it will be great to be your own boss. However, the day-to-day stuff isn’t glamorous. Like I said before, 12-14 hour days. It’s going to take a lot of hard work before you start to experience those advantages of being your own boss. Those things just don’t come overnight.
“But I get to sleep in and go into the office whenever I want.” Early-rising business professionals are the most productive. Several studies have shown the benefits of getting up early and how that correlates with success.
“But I’ll get to make my own hours.” Bank of America took a poll of their clients who were also small business owners and found that 72% of them work more than 40 hours a week. Gallop.com (a start-up website) noted that
“Nearly half of self-employed Americans (49%) report working more than 44 hours in a typical work week… Self-employed Americans stand out as those most likely to work atypically long hours, in many cases upwards of 60 hours per week.”
Some of you may be a bit deterred from these tips and misconceptions. No one said that being your own boss was going to be easy and if they did then they were lying to you (or they’ve never done it themselves).
It can be a rewarding job but it also comes at a cost. If you can make it through that first year, you’ll get followers and you’ll begin to see an improvement during the second and third year of business. That’s when you’ll get in your groove.