4 Millennial Misconceptions About Entrepreneurship
--Assuming that consumers are not price/cost-sensitive.
There's a reason college students are notorious for eating fast, unhealthful food. It's cheap.
Here's something that hasn't changed in the 40-plus years since I graduated college: Students have no money.
And it costs more to produce high-quality healthful food than it does the junk stuff, leading to higher prices (most) students cannot afford.
To their credit, most students are fairly good at calculating the true cost of their merchandise and services. But they assume -- often wrongly -- that consumers in the real world would knowingly and willingly pay that price.
--Not taking laws, regulations or taxes into account.
Whenever I look at the cash flow projections submitted by student teams, there is always -- I mean always -- a glaring omission: The students fail to include a line item for "legal, accounting and professional fees."
OK, I get that many of these students haven't taken the business law class yet in their programs or plan to skip it because they don't intend on becoming compliance officers when they graduate.
But too many business plans I review fail to take into account laws, regulations and taxes that would have a big impact on the operation and profitability of the business. A handful of these plans involve models that are outright illegal (for example, clickwrap agreements that prohibit customers from using competing products or services), and I really hate to burst their balloons when I bring this up during the judging. (OK, OK, I really do enjoy it, but it always makes me the "bad person" on the panel nobody wants to have dinner with afterward.)
The days of "capitalistic acts between consenting adults" are long over. The government is your partner in every entrepreneurial business, and your strategy for making that partner happy (or at least satisfied) needs to be part of your plan.
--Adopting overly "flat" management structures.
I need not point out that there is a strong and growing inclination toward socialism in today's young people. Their professors have rightly touted the benefits of a flat management structure -- one that rejects the rigid hierarchical pyramid of management layers, which used to be the norm -- but for entrepreneurial companies, most student teams go too far.
I judged a plan recently in which the five team members actually referred to themselves as "co-presidents" and said they would manage their business by consensus, with unanimous agreement required for major decisions.
Nice and democratic, to be sure, but try selling that to an investor who wants the quickest possible return on his investment and needs to know where accountability lies in the organization.
Democracy is a great way to run a country, but it creates obstacles to performance -- witness the gridlock in Congress right now -- and encourages groupthink among the management team.
Like it or not, somebody has to "person up" and be the boss.
Cliff Ennico (firstname.lastname@example.org) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.