Many promising entrepreneurs squander precious time and capital because they tenaciously cling to one or more beliefs about entrepreneurship. Some of these beliefs are really myths that can pose significant barriers to entrepreneurial success. Here’s a list of the most harmful myths followed by explanations.
- “If I am the founder, then I must be the CEO.”
- “Our product will create its own market.”
- “You must know exactly where you’re going and how to get there.”
- “Focus exclusively on acquiring customers.”
- “My own talent plus a great product are all I need.”
- “If you do the right things, the money will take care of itself.”
- “Never quit.”
other Myth: “If I am the founder, then I must be the CEO.”
This myth has been around since the beginning of time, but was recently given new life by two movies that, ironically, make the case against the myth. “Steve Jobs” and “The Social Network” respectively portray Silicon Valley legends Steve Jobs and Mark Zuckerberg, who are engaged in non-stop battles to control the companies they founded. The very manner in which they conduct themselves reveals how certain founders can make lousy business leaders. From a SIMA perspective, we have observed that the core motivations that compel an entrepreneur to drop out of college, take on the world, build a better mousetrap, and dazzle investors are often the same motivations that create organizational chaos, unpredictable product development, excessive cash burn and unnecessary conflict.
The role of CEO is a job requiring specific skills and responsibilities: it’s not simply a privilege given to founders. Every founder should conduct this simple exercise to determine their proper role in the company: make a list of your most important contributions to the enterprise (the ones no one else can replicate) and then ask yourself which of these activities you enjoy doing the most. Then ask your advisors and investors to help you craft a job description around those things. Remember, you can always hire someone to be CEO and do the things you don’t do well or are not motivated to do. And, in a successful company, you don’t have to be CEO to exercise control.
Myth: “Our product will create its own market.”
Many entrepreneurs are so in love with their product or service that they’re blind to the existing market conditions. Sometimes there’s little or no market for the product they build. There may not be a compelling enough value proposition, or compelling event, to cause enough people to buy. In today’s market you need to find people ready, eager, and almost lusting after a product that fits a need or pain they have.
And timing always matters. You won’t succeed if your product is a few years ahead of your market’s needs. In “5 Reasons Startups Fail”, David Skok uses the example of EqualLogic’s initial launch of iSCSI. The launch was too early. iSCSI needed the (then non-existent) VMW to really kick their market into gear. Fortunately EqualLogic had the funding to last through the early years.
Myth: “You must know exactly where you’re going and how to get there.”
Perhaps a small percentage of entrepreneurs have a laser-focused goal and a clear plan for getting there. That’s not normal. In fact, Neil Patel in Forbes says many entrepreneurs have no clue how to achieve their entrepreneurial passions. But they have the motivation to engage in a process of trying, failing, trying again, and succeeding, trying again, and trying again. In new or undeveloped markets, it’s rarely clear how things are going to play out. Successful entrepreneurs seem motivated to balance traditional ways with innovative ways. No need to reinvent the wheel, if a wheel is all you need.
Myth: “Focus exclusively on acquiring customers.”
One of the most common shortcomings of entrepreneurs we have advised and/or invested in, is the overly optimistic view of acquiring and keeping customers. While some buyers will respond immediately, it’s rare that enough buyers will jump on board to sustain a startup and produce profits. Do your research. Be certain to understand that the cost of acquiring the customer (CAC) is significantly lower than the lifetime value of that customer (LTV). Skok recommends you take a long and deep look at the answers to two questions:
- Can you find a scalable way to acquire customers?
- Can you then monetize those customers at a significantly higher level than your cost of acquisition?
Myth: “My own talent plus a great product are all I need.”
No company ever succeeds with only a great product and a great founder. The management team must be strong and guided by clear thinking. Most organizations I’ve worked with struggle in at least one of these three areas:
- Poor strategy: They fail to do enough work to validate the product ideas before and during development. This can carry through to poorly designed market strategies.
- Poor execution: They confuse talking with doing and don’t carry out their own plans. This leads to products not getting built correctly or on time. It also can lead to a poorly implemented market plan.
- Poorly developed organization: Most aspiring entrepreneurs never undertake a rational assessment of their own strengths and weaknesses. On top of this, they reach out to friends and family when they begin to hire. Contrast this with top entrepreneurs who stay focused on what they do best and hire great people who possess the critical skills they lack. If you don’t do this, you may have fun for a while, but you will develop a weak team. And poor execution will not be far behind.
Myth: “If you do the right things, the money will take care of itself.”
If you are qualified to assume the role of CEO, you must understand how much cash is left and whether that amount will carry your company to a milestone that will provide the next reason for investors or other financers to open their purse strings again.
You can’t return to investors simply based on the amount of time that’s gone by since you last raised funds. You must return to investors with real world proof that your company’s valuation is now higher and you’ve reached a milestone.
What kind of milestones? Maybe you’ve removed or mitigated a major risk. Or you’ve overcome a technical obstacle. Or you’ve built a prototype and some test customers have reacted positively.
If you’re further along in your company’s development, a milestone might be having a product in Beta testing and getting positive customer reaction. In this case, the positive customer reaction is more important than being in Beta testing.
Myth: “Never quit.”
Who came up with the idea that quitting is bad? Quitting is part of what makes an entrepreneur an entrepreneur. First, most entrepreneurs have to quit something in order to become an entrepreneur -your current job, grad school, or whatever you were doing before you launched your venture. Second, most entrepreneurs have started and quit something prior to their first commercial success. Telsa Motors and SpaceX’s Elon Musk quit. So did Apple’s Steve Jobs. Knowing when to quit is simply being smart.
Let me end with two other myths that often plague the start-ups and innovators I’ve worked with: the mythical ‘big idea’ and the role of luck.
Yes, we all hear the stories about radical ideas and counterintuitive business models that make a huge splash. That happens. But for every unorthodox success, there are many more examples of entrepreneurs who make it big with superior execution of an existing business model in a conventional industry (think Chipotle, Starbucks, Tesla). One could argue that this type of success is even more revolutionary than some next generation technology sensation. Fact is, you don’t need a great idea as much as you need a profitable, sustainable business model.
And while luck is always a factor in entrepreneurial success, it’s not a strategy. You may have heard people say Bill Gates was the beneficiary of a truckload of good timing and good fortune. Certainly Gates may have been in the right place at the right time, but so were many others who did not succeed. Luck is always a variable, but you cannot control for it. Focus on the variables you can control –your hard work, drive, intelligence, and building a great team. So if your ship doesn’t come in, you will be able to swim out to it.
SIMA® International is a worldwide group of consultants who use the proprietary assessment technology, SIMA®, to help our clients make the best possible “people decisions.”
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