Top 5 False Beliefs In Business
False Belief 1: A successful business should always have hundreds or thousands of employees
These days the success of a business is perceived by how many fancy offices it has and how many people are working for it. Of course, this doesn’t pay any attention to the fact that the same business maybe posting growing losses every year with no recovery in sight.
The objective of a business is to turn a profit, not to be bloated. The more bloated a company is, the slower it is and the more trouble it gets in if sales slow down. Quite often, what many companies accomplish with 50 people can be accomplished with 10 people armed with the right technology.
Don’t fall into the bigger is always better trap. What is better depends on what kind of business you want to run.
False Belief 2: A successful business should always have huge turnovers
This is similar to the point above. A lot of companies boast about turnovers, which is fine. But why don’t talk about is their expenses. Many companies can clock a turnover of a billion dollars if their expenses are 1.5 billion dollars! But that doesn’t make the business successful, especially if losses keep growing every year.
A business that has a turnover of 10 million dollars but 5 million dollars is its profit is technically more successful than the bigger firm.
Sure, now some people will say a business clocking a billion dollars even with an expense of 1.5 billion dollars can be sold for a lot more. That makes it a potential asset, but not a successful business. Secondly, even successful acquisitions of this size are rare and only work if it makes economic sense for the larger company. Most of the times such acquisitions fail and the company has to either be folded or sold for much less than what the founders hoped.
In other words, if you are lucky it may work, but don’t bet on it. And it certainly isn’t a successful business until it makes more money than it eats up.
False Belief 3: A business should always solve complex problems
Leave that to scientists. A business ought to make a profit. Furthermore, just because you solve a complex problem does not mean you will be rewarded for it. What if the Market just doesn’t care about the problem, no matter how complex it is? There is no reward for that.
Also a business that solves a problem but is then unable to capitalize on it in the market (by being fast enough, or at the right price or with the right distribution) will again fail.
There are countless examples of entrepreneurs trying to solve complex problems and succeeding but then realizing no one cares. What is more important is to solve a problem that the market is willing to PAY for and then capitalize on it in the right way.
False Belief 4: Innovation always makes a business succeed
There plenty of examples of companies that have been truly innovative but have had no idea how to capitalize on it or have not made enough adjustments to make the idea commercially viable and sadly failed.
Edison didn’t invent the light bulb, a couple of scientists before him managed to do the same but they were not able to make it commercially viable. Edison did and the world thinks of him as the inventor. But even if it did not, Edison would still be the one making all the commercial gains from it.
Similarly, Apple did not invent the mouse, Xerox did, but Apple was the first one to make it commercially viable and therefore realized the first commercial gains from it. Oh and Apple did not develop the first smartphone either!
Remember, as stated in point 3, innovation only works in business if it fills a market need and can be capitalized upon quickly for commercial gains.
False Belief 4: You always need to create a product or service before you sell it.
Traditional thinking dictates that a product or a service needs to be created before you sell it. The problem is most new products or services that are created flop badly and often leave the company in despair.
I want you to challenge that thinking. Often, although not always, it is possible to Pre-Sell your product/service before you ever actually create it.
The advantage of this is that it greatly minimizes risk. It gives you the opportunity to validate whether the market actually wants your product. If it works, great. If it doesnt, you can shelve the project without committing huge amounts of time and money to it (do make sure you refund those who made pre-orders though!)
It also gives you the chance to fund the creation of the product and service, through the customer’s money instead of your own capital, provided that the market wants your product and greatly improves your odds of success. This may not be possible at all times and in all industries, but it often is and if done ethically, this is is one of the best risk minimization strategies.