Over the course of my time consulting with businesses and talking to friends and family who have businesses, some common business concepts (or maybe better to say, expectations) tend to come up on a regular basis. If I didn’t know any better, I would believe them just as they believe it themselves. I’m sure you have heard it, or even say it, yourself. But when you hear or say these business beliefs, you need to ask yourself, “who made these concepts law?”
The problem with saying or believing these concepts is that you’ve automatically set your own ceiling for the business without pushing the limits of it. Below are some of the top 5 business myths I’ve heard and where they may have originated.
1 Lower prices mean more customers
Almost all of my clients adopt this theory in some form or fashion. They feel that they need to keep their prices “competitive” (usually means lower than the competition) otherwise they won’t get the business. While there are some businesses that make their buying decision exclusively on price, most will buy on value.
This mindset probably comes from the long term success of Wal-mart that is the low price leader. Problem is, most businesses are not a Wal-mart that has the economies of scale to keep their cost low enough where they can set their prices below their competition and still make a good profit.
So if you set your prices equal to the value you bring (not what you THINK your customer will pay) you’ll be surprised how many more customers you attract. Otherwise, if you continue to keep its prices “competitive” you will continue to struggle with building sustainable profits to be able to reinvest into your business to bring more value to your customers.
2 Don’t expect to pay yourself a real salary for 2-3 years
This is a common expectation for startups. I’ve even seen 2-3 year forecasts for startups where they actually plan to not take a salary and just live off of whatever is left after all expenses are paid! What a way to set your own limitations.
Where does this expectation come from? I have no idea other than copying what their friends and family have done and said. The key thing is, they are planning to not take a salary. What if you plan to take a salary and come up with an innovative business strategy that will allow you to do so? People are solutions oriented. So if you and your advisers put your mind to it, you will come up with a business strategy that will allow you to produce enough income to take a salary in year 1.
Stay tuned next week as I round out the last 3 Common Myths I hear when I touch on “that’s how we do it,” “working hard,” and “that’s impossible.”