“I want to be my own boss. I am tired of making money for other people.”
“I want to set my own hours and work when I want.”
“After opening my business, I will hire employees to do all the work.”
Long Beach — Those optimistic statements by people planning to start their own businesses are heard again and again by business analysts such as Jill Clifford Scafide, who provides counseling for start-up businesses through the University of Southern Mississippi Small Business Development Center on the Coast. But these perceptions are more myth than reality.
“I think most people have no idea what all is involved when they are starting a small business,” Scafide said. “It is not a simple process. It is not an easy process. Depending on the type of business, some require more regulations and licensing than others. I spend a lot of my time talking about what is not real, and what people have seen on TV or heard about.”
After nearly a decade of counseling people starting small businesses, Scafide has come up with a list of six common myths of small business ownership, starting with the myth that, “You will be your own boss.”
That is one of the most common reasons people give for wanting to start a small business. But she says that no matter what you do, you always still have someone telling you what to do. Those “bosses” can include the IRS and local licensing and zoning officials.
“Customers or clients may not tell you what to do,” Scafide said. “But if you do not heed what they say or how they feel, they may take their business elsewhere.”
The upside to being your own boss, Scafide says, is that you do have the ability to control your own destiny. When you start a business from scratch, you are able to make the decisions about everything from what kind of wallpaper you want in your building to the number of hours you will be open and the number of employees.
“To me the most important part of being a small business owner is getting a chance to do something you enjoy,” she said.
Scafide’s Myth No. 2 is, “You can set your own hours and work when you want.” While this sounds good, the reality is that most small business owners work very hard and long hours in order to successfully launch the business.
Instead of working eight hours per day five days a week, a new small business owner is more likely to put in 10 to 12 hours per day six or seven days a week.
Myth No. 3 is the idea you will hire employees to do all the work. Most start-up businesses can’t afford to support a big staff.
“It isn’t just a matter of getting the business going and letting employees do all the work,” Scafide said. “Most small business owners have to jump in there and do a lot of the work at the beginning until the business becomes successful. Most people can’t afford to hire a lot of employees. You may work harder than if you worked for someone else. Unless it is something that absolutely requires a large number of employees, such as a restaurant or large retail store, lots of small business owners run the business themselves for a long time until they are ready to hire someone. If you can’t afford to hire all the employees needed, you have to be there to do whatever is required to keep the business together.”
Then there are the issues around hiring good employees. Will the employee be reliable and show up on time? Work hard? Be honest? Those kinds of issues are equally pertinent to all sizes of businesses, large and small.
“It is hard in any area these days to find good workers,” Scafide said.
Myth No. 4 is that all the money you are currently making for your boss will now go to you. Many people fail to take into account how many more expenses they have as a business owner than as an employee. There are loan payments, utility bills, maintenance, insurance, costs to restock the inventory, expenses for labor, etc.
“It is not just pure profit,” Scafide said. “I do think people get a distorted idea of what they are going to be making.”
Myth No. 5: You will start a home-based business so that you can work less and spend more time with your family. A lot of people think working at home is an ideal way to balance the responsibilities of work and family. But anyone with small children knows you can’t run a business and take care of children at the same time.
“A lot of people like working at home because it allows them to work while the children are asleep or at school,” Scafide said. “Overhead costs are usually low. That is a big benefit. Depending on the type of business, you can start out with a minimal investment working from your home. You can set your own hours and work when you want. But if you only work three hours per week, you only get paid for three hours per week — not 40 hours per week.”
One of the key factors to a successful home business is having enough discipline to turn off the TV, stop doing housework or laundry and get to work. Some people aren’t cut out for working at home because they can’t separate home, family and work responsibilities.
Myth No. 6 is that you have a great idea for a business and don’t need to research it to know it will work. While it is great to be excited and believe in yourself, that isn’t an adequate substitute for research.
“There always have been and probably always will be scams for businesses,” Scafide said. “I have seen people come into my office who have purchased a package for several hundred dollars, and the package is supposed to give them information and assistance that for the most part they can obtain from agencies like mine for free. A lot of that is money better used to get your business started.
“You do have to research to start a small business, and it is okay to pay for some of that. But a lot of it is going to be the small business owners doing the research themselves. Make sure there is a market for your product or service. If you are the only one who thinks your product or service is great, you aren’t going to make money. You must have someone who will pay for your product or service.”
Other misconceptions include the idea that there is plenty of grant money available to start a small business. Loans are available from the U.S. Small Business Administration. But while about 90% of the people who visit a Small Business Development Center are interested in funding, only about 20% end up qualifying for a loan from a commercial lender.
“We spend a lot of time telling people what is involved in applying for loans,” Scafide said. “They must have a business plan with financial information. They must know exactly what the business is going to do — their inventory, location and number of employees. And it has to be researched.”
Instead of getting a bank loan, many people who start a small business either have savings or borrow from family or friends.
Statistics show that half of all small businesses fail within the first two years. Doing adequate homework is one way to prevent those failures.
Yet, despite all of the challenges, starting a small business continues to be a big part of the American dream.
“There is always someone wanting to start a new business,” Scafide said.
Contact MBJ contributing writer Becky Gillette at email@example.com.