Don’t believe everything you read. Or hear time and again, even from really smart people. That goes double for some of the business “truths” we’ve all heard many times. If you’re thinking of starting your own business, take a step back and consider what advice you should ignore.
This post originally appeared on Inc.
Just ask Lloyd Shefsky, professor at the Kellogg School of Management, and author of Invent Reinvent Thrive. After interviewing many successful entrepreneurs and conducting careful research, here are some well-known business “facts” he thinks we all should question.
Starting A Business Is Riskier Than Working For An Existing Business
We all know this to be true, and yet . . . not necessarily. “Everyone uses the number, give or take, that nine out of ten new businesses fail,” Shefsky says. But analysing Kauffman Foundation data on entrepreneurship, Shefsky learned that while 90 per cent of new businesses may fail, only a small percentage fail within the first year. Instead, the failures are spread out over five to seven years. And that means we should take a second look at the “truth” that most new businesses fail quickly.
After all, he notes, most businesses do disappear sooner or later. “If you look at the Dow Jones in 1900 and 2000, only one company — GE — was on both,” he says. So what the statistics are telling us, he says, is that it can be tough for any business to adapt to changing market conditions over a period of several years. “Things change and an entrepreneur has to adapt and reinvent some or all of the business to cope with that change,” he says. “That’s the part where many people fail.” Long-standing businesses may be just as vulnerable in the face of rapid change as young ones are.
Before You Start a Business, Work In The Industry To Learn About It
This often-repeated piece of advice sounds like a no-brainer, doesn’t it? But Shefsky says there’s a real drawback to this approach: You may become so well educated on the industry’s rules and norms that you won’t spot opportunities to make a unique impact.
That’s what happened when Thomas Stemberg — whose background was in groceries, not office supplies — first got the idea for Staples. Rather than working in the industry by learning about it, Shefsky says, Stemberg conducted extensive research, talking to both industry insiders and customers. From the customers, he quickly learned two valuable lessons. First, large companies were spending enormous amounts of money on office supplies, often more than they themselves realised. And second, they’d willingly accept a little inconvenience if they could meaningfully reduce those costs. That flew in the face of industry “knowledge” that offices needed their offices supplies available within a block or two, or by delivery. Had he spent time working in the industry he might have accepted it as truth.
Don’t Listen To Naysayers
You’ve not only seen this advice in many business books and websites like this one, but also in Hollywood movies from Mr. Smith Goes to Washington to the Lord of the Rings trilogy. Perhaps buying into this tradition, most of the entrepreneurs Shefsky interviewed roundly declared that they’d ignored their doubters too. “But with detailed questions it became clear they’d done anything but ignore them,” he says.
For instance, Howard Schultz, who bought Starbucks as a small coffee roaster and turned it into a national chain, pitched his idea to hundreds of investors, all of whom turned him down. Rather than ignoring them, he learned something important: his description of the chain he hoped to build needed a revamp. (He’d been describing it as selling extra-strong coffee unfamiliar to most Americans at a much higher price than any other coffee.) And rather than being stubborn with his pitch, the rejections and criticism helped him refine his idea into something viable.
Naysayers may be negative on your idea for many reasons — they may be justifiably worried for your finances, they may be projecting their own low tolerence for risk onto you, or, like the distributors who discouraged Stamberg from starting Staples, they may have their own reasons for dissuading you. The only way to find out, Shefsky says, is to keep researching till you know as much as you possibly can. It can be foolish to blindly ignore all criticism without understanding its basis.
“You have to know your industry in and out,” he says. “You have to know more than the naysayers.”
Minda Zetlin is a business technology writer and speaker, co-author of The Geek Gap, and former president of the American Society of Journalists and Authors. She is a regular contributor to Inc.com and Inc.magazine. She lives in Woodstock, New York, with her husband Bill Pfleging, four cats, and a large number of computers.