5 business myths to ditch now

business_myths.top.jpg By Verne Harnish, contributor

FORTUNE -- Feeling a little disillusioned lately? That's not a bad thing if you're an entrepreneur. There's nothing like humbling economic times to force chief executives to let go of the sacred-cow ideas and grandiose illusions they've been harboring and start building on reality. Some of the smartest business owners I know have fallen for these five myths. Ditch them. It will make your business that much stronger.

1. Gross margins will grow as you get bigger

Not so. My research shows that they typically dip. That was a tough lesson for Jennifer Olsen Welding, who owns a 70-employee Salt Lake City casting company. Her tale: Unlimited Designs won a municipal contract to create a precast building façade in 2009. The trouble was, the $5 million company had to lease extra equipment to do the job. Sales increased significantly, and gross margins declined by 3%. "We would have been better off having no revenue than the revenue that was coming in," she says.

2. Competitors are always unfriendly

Baloney! When Steven Krane tried to get Wal-Mart (WMT, Fortune 500) to carry Raw Essentials, a line of skin-care products he developed with model Carol Alt, the giant retailer expressed doubts about the marketing muscle of his Boca Raton, Fla., firm. So Krane dared to call the president of Hard Candy, a competitor that had successfully launched its makeup in Wal-Mart, to get advice. It turned out that Hard Candy was interested in discussing some joint ventures. Krane also got some critical tips on building his social-media presence.

3. You really know your market

Gathering real data may prove you wrong. Dave McLurg, chief strategy officer and partner at Adaptive Technologies in Scottsdale, was certain that only big companies wanted his firm's software, which helps users predict which clients will be the most profitable. But surprise! After encountering a midsize firm that wanted something like it, he undertook market research that showed that others did too -- only for a lower price -- and launched a new version. "It's turned into a multimillion-dollar division for us that we hadn't anticipated," he says.

4. One size won't fit all

John Warrillow took on endless custom projects at Warrillow, a firm that helped big companies market themselves to smaller ones. Revenues didn't grow because Warrillow was the only one with enough experience to write custom proposals. In 2005 he relaunched the firm, offering one-size-fits-all research and events that clients could purchase by subscription. Providing one product was more profitable, he found, than doing custom jobs. "We went from being flat on the top line to growing at a rate of 25% to 30% a year," he says.

5. As CEO, you know it all

Despite regular team meetings, Bettina Hein, CEO of Pixability, a Cambridge, Mass., company that helps customers market themselves on video, was the last to find out that an instructional video added to the company's site had saved her team 135 hours of customer-service time, worth $8,000 to $10,000 a month. No one thought to mention it to her. "Only in a casual conversation did it emerge," she says. She's now rushing to create 60 more. Had she known, she would have launched the new ones sooner and saved even more money.

--Verne Harnish is the CEO of Gazelles Inc., an executive education firm.  To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
Find personalized rates:
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET


Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.