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Three Dangerous Myths in Entrepreneurship

Three Dangerous Myths in Entrepreneurship

By Tim Berry, Guest Blogger
Published: May 26, 2015

One thing that bugs me about the world of entrepreneurship is how often people who ought to know better propagate these three very common and potentially dangerous myths. They come up constantly as I talk to entrepreneurs at meet-ups, business plan competitions, and in classrooms. And I see them every day in blogs and other online content. I sometimes worry that there are people who claim to be startup experts whose experience seems to be mainly reading what other people say and repeating.

Myth 1: Be your own boss

Be your own boss? With due respect to Melinda Emerson’s excellent book with that title, that’s only half true.

When you build a business, you have lots of bosses. Customers, just to name a few. Then there are people to whom you owe money, people who owe you money, people with whom you form partnerships or strategic alliances, and your employees. All of them, at one time or another, call the shots.

And if you have investors, you definitely have bosses. That money buys them a "say" in how you run things. Get used to it.

Want ultimate freedom and independence? Look elsewhere. Wealthy parents are nice. Winning the lottery is nice. Learning to live without money and without any relationships or dependents may not be all that nice, but it's another route to having "no one to answer to."  Starting a business, however, isn't.

The half of “be your own boss” that is true is that when you have your own business, you do have the freedom, much of the time, to decide what risks to take and what hours to work … as long as your customers and investors are happy.  

Myth 2: Getting Investors is Always a Win

Business schools, entrepreneurship classes, and all those blog posts that repeat worn clichés must take most of the blame for this one. After all, it's what we teach: you develop a business plan, get financed, and start. And there is some truth to it. Often, this is a win, and it's good.

But it’s also a myth. Investment is not always a win — and not in all ways.

Finding investors is a conditional win. It's a plus IF…

  1. You need investors and can use the money to grow the business; and
  2. You find compatible investors

We've talked a lot about finding compatible investors, but it bears repeating: getting the wrong investor is like getting in the wrong marriage. It not only implodes your business but can wreck your entire life.

That's why I recommend that if you can build your company without investment, take the chance to do it. It'll be worth the experience of no one looking over your shoulder — at least no one with the clout of an investor. Being the sole owner is a great thing, if you can make it happen.

But, yes, it's also a fact that that's not possible for every business. Some businesses need investment and, in fact, won't survive without it. But if you have options — if it's a choice between growing slowly without investors versus growing faster with them — choose carefully. Slow growth is still growth, and survival is what counts.

Myth 3: The more money, the better

Do a little digging and you can actually find a curious thing: a 1997 Dun & Bradstreet research report on reasons for business failure that lists "too much money" as one of the causes. And no – they weren't kidding.

I think for most startups, there's a "sweet spot" – a point at which the resources match the opportunity. Money gets spent the right way: building the business without overspending. But with a surplus in the coffers, guess what can happen?

I saw this firsthand with my company, Palo Alto Software. If we'd have had more money in 1999, we might not have survived the dot.com crash in 2001. Instead, we didn’t have enough monetary rope to hang ourselves … and it's been a lesson I've remembered ever since.

So if you're thinking you'll be an entrepreneur because:

  • You don't want to answer to anyone,
  • You think having someone else foot the bills for your business would be fun,
  • Or you've got a pile of money stacked up, just begging to be put into a new venture ...

… you may be asking to become a victim of these alluring, but dangerous half-truths.

Think it through. 

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .