Question

What are the most common myths about small businesses? What are the facts that contradict these myths?

Answer 1

Small business owners believe a lot of myths about how to run their companies. These are things they assume to be true, but when put into practice, simply don’t work. Here are the top business myths, and the facts about each of them.

1. The customer is always right. If the customer was always right, every company would be out of business! Running a business at the whim of the customer will never lead to a profitable company. However, since the customer is always the customer, it is important to see things from their point of view, listen and empathize. The next step is to firmly set their expectations from the start so they will be satisfied at the end.

2. Build it, and they will come. This is not the Field of Dreams! Just because a founder builds it does not mean customers will line up to buy it. The corollary to this myth is that customers will always buy the best product. Success in business is really about building the best distribution and marketing for the product. This is where so many business owners forget to focus.

3. Sales is the most important number. In measuring financial performance, sales are vanity, cash flow is sanity. It makes no sense to grow the sales of a company if they keep losing money over a period of time. Is there less money at the end of the month than at the beginning? Fail! Successful small business owners focus on cash flow and know how to read their cash flow statement.

4. Team work is about building consensus. While the success of the company does depend on building a great team, let’s not get confused. Steve Jobs always said that consensus is not the same thing as collaboration. The leader sets the direction and the team needs to be able to effectively work together to accomplish that objective.

5. Customers only care about low prices. Some of the best companies in the country deliver low price and great customer service—like WalMart, Southwest Airlines and Costco. Since most things are a commodity, small business owners will not be successful competing on price. They need to focus on the value their solution brings to solving the pain of the customer.