Updated on January 29, 2019
Top 5 Business Misconceptions
Learn 5 Common Business Misconceptions
Assumptions are defined as ideas that are thought of as true prior to making decisions. Unfortunately, assumptions happen a lot in the world of business too, especially when someone might be developing their strategies, doing planning, and making crucial decisions. Such conjectures typically get standardized as disclosure of risk and uncertainty.
Most of the time, business happens in relatively unsure settings, and it’s actually necessary to make certain assumptions in order for stratagem to move ahead. Threats can be recognized through documenting assumptions.
Many times, you might come up with some fresh ideas once you brainstorm some likely assumptions that can help you in coming up with your different business strategies.
Here are 5 kinds of frequent business assumptions:
1) Financial Assumptions:
Even when profits are made, it can take months to years to pay down any initial investments. Many early enterprises are thought to fail because the owners charge in thinking that their sales will support their business operations. The imagine that their sales volume is going to be so great that they’ll make enough money to cover operations, pay debt service obligations, and still make a profit. That’s rarely true for a new business though, so they need to account for loan amounts and investment figures needed to operate their business until actual profitability in a few years in their business plan that they present to others or use on their own.
2) Assumptions About Their Customer Base:
Another big assumption is that customers are going to line up to buy any products and services offered. The if you build it, they will come attitude assumes that the volume will be high enough to come up with enough sales for there to be consistent long-term profit. Still, you should factor in that many customers will stay with competitors. It’s wise to figure out two numbers. The first is how many customers you need a day to make enough sales to meet your overhead. If that’s 50 people a day, then you need to aim for 250 to 500 in order to be sure you actually make money.
3) Resource Assumptions:
It’s very dangerous to assume that key talent is going to be present and available. While you can certainly advertise your openings to the best talent out there, they might either be rising up someone else’s ladders or starting their own firms and gigs. It’s quite essential to grab whatever talent you can and then curate them internally to fill your needs.
4) Assumptions About Profitability:
Every entrepreneur has some level of ambition down deep inside, and profitability is a specific ambition. On the other hand, the assumption of profitability must be validated through market research, sales projections, and financial planning that is all based on hard data and grounded reality. Once you can cover overhead and development, think about paying down start-up costs and debt, and only then can you start thinking about profit. Eventually, your pricing strategy has to factor in sales volume and profit margins.
5) The Expertise Of Management:
Products aren’t created equally or automatically, and businesses don’t run themselves. Starting on the plan or assumption that only the company founders alone can run their business to profit will always be a road to ruin. A company creator might come up with bright ideas for products and services the market hasn’t seen before. However, that won’t mean they come already educated and skilled in doing things like organization, marketing, legal matters, tax issues, financing, and accounting, among the million other things it takes to run a business.
Dilbert and Dogbert Discuss the Idiocy of Preposterous Business Assumptions
There are of course other misconceptions and assumptions in the world of business, but these are the 5 big ones.