Mantras of Business That Could Kill Your New Business

You should be careful not to believe what you hear and always do your own research as the facts behind the following three well known mantras will show.

Considering the constantly increasing and shifting job expectations of today's employers and the diminishing financial, social and personal benefits of working for someone else, it's not surprising more and more people are choosing to test the their abilities by choosing to start their own business. We all can fall in love with the idea of steering our own boat toward greener shores we've briefly glimpsed above the walls of the privileged few while tending their gardens. Dream of creating a work environment congenial to our own work harmony, raking in unlimited amounts of shekels for ourselves and those we love, and meet life's challenge on our own ground. This is why thousands of inspiring entrepreneurs bravely push off from the safer shores of our modern form of corporate slavery and form their own businesses each year in North America. But the sad reality of new business ownership is that over half will fail within the first two years. They will collapse for a variety of assorted reasons, most often because the founder held some misguided beliefs. After interviewing and talking to dozens of successful entrepreneurs over the years, three misconceptions emerge that proved to be deadly to the independent business aspirations of many beginning entrepreneur.

Mantra #1: If you build it, they will come.

The feature film Field of Dreams, starring Kevin Costner, illustrates the first of the business-murdering myths. In this film, baseball loving Costner fights through all kind of personal and professional obstacles to construct a magical baseball field, and then people traveled from around the country to see it. The movie showed us all the trials and tribulations he encountered while building his field of dreams, and yet once it was built, people started magically appearing to take a look at his field. Many beginning entrepreneurs fall into this trap of believing customers will magically appear once their doors open and willingly hand over their hard earned golden trinkets. Magic has little to do with marketing, research and a good product at a competitive price, let alone the motivations of customers with little time to waste and even less money to drop in a bottomless bucket. Business owners believing this mantra will find that not only will they not come, but they won't even notice.

While countless business owners spend fruitless hours designing brochures or working on the look of their logo, they spend no time at all identifying how to reach their potential customer, and how to convince these prospective customers to buy their products of services.

Mantra #2: Doing what you love is the key to success.

Have you ever noticed that there is a considerable distance between owning a restaurant and making good food? A large percentage of successful entrepreneurs enjoy running the business more than they enjoy what their enterprises sell or market. A love of what you do for a living is good, but a sound business requires a professional attitude toward the running of the every day issues of your business. Because turning your love into a business ultimately means running your love like a business if you want to be competitive in today's global market. You may turn your love into a business, but the company will most likely fail unless you run it like a business you love and not a love you turned into business. Successful entrepreneurs understand the importance of running a company like a business that you love and not a love that makes you money.

Mantra #3: A profitable business is a successful business.

This myth could be related to the second one, because just because your making money doesn't mean you're business will have long term success. The products you sold today won't be profits until tomorrow and therefore can't pay your bills today. Sadly, many entrepreneurs find themselves without the on-hand cash to pay for today's payroll or the rent. Many businesses would be successful if the owners understood that cash flow is all that really matters for any independent business. The sales numbers look good on a spreadsheet and certainly create the visual illusion of solvency, however many businesses will go bankrupt while waiting for these sales to turn into profits.

A nice example of the "profit" myth was shared by a colleague Frank with me one day. Frank had a division of his company that sold promotional products via catalogue to customers. For reasons he couldn't figure out at the time, while his profits were soaring according to the books, his cash was being depleted from his bank account at an alarming rate. When he went to his warehouse, he found out he had a large collection of TV's in storage. The firm had shifted from small items to large electronics because the profit margins were much higher with these products. But then Frank discovered that the TV vendors wanted payment in cash on delivery, where hi s prior vendors could be paid up to two months after delivery. This meant that the more successful his company was at selling TV's, the more cash he needed to carry the inventory. The financial institutions were uncomfortable lending shekels on TV's stored in a warehouse, so he had to scale back his business or it would have eventually failed. Hard to imagine that increased sales would increase the likelihood of failure, but in Frank's case it did. This type of situation can occur often in today's complicated business world. A profitable business doesn't always translate into a successful long term business.

The ultimate lesson here is to always watch your cash glow; ensure you understand the timing of payments, both in and out. Make sure you build a cash-buffer, because invariably money takes longer to come in than to leave. Remember that cash is the lifeblood of your business, while profits are the oxygen that will in the long term keep your business from asphyxiating.

Succeeding in business in today's global marketplace is hard enough without complicating the affair by assumption, so don't stumble over any of the three mantras above like so many others!