Common sense would dictate that business success is determined by the obvious things having a clever business idea, being well financed and working hard. But I can tell you that these not only these three factors not that important at all but they can all actually work against you! Furthermore, what really matters just might surprise you…and I will get into that later.
Why should you listen to me?
Sure, I have a Harvard MBA but I also have business experience. Lots of experience. But what separates my knowledge from that of many other entrepreneurs who write about business is that I have a wide variety of business. I have started dozens of businesses from a home-based house painting business to what became one of the leading book publishers in the US, from newspaper businesses to online and multi-media companies. I have had plenty of huge successes but also a number of failures…and I can tell you that you learn key lessons about business a lot more from your failures than your successes!
So, you have a clever business idea…that’s a red flag!
Forget a clever new exciting business idea that’s going to change the world! Sure, it is conceivable that your new idea will be massively successful, but your best chance of success in business is not going to be coming up with a new idea but instead to make a twist on an existing idea. For example, I think of the barber shop franchise with a sports theme. A very old business idea, with a clever twist.
If I don’t pursue a totally new idea doesn’t this just mean that I totally give up on a chance to become a massive success like let’s say Microsoft or Amazon. If that’s our perspective then I have news for you. Microsoft didn’t create the first operating system for the PC, the first spreadsheet or the first word processor. But they created viable versions and they marketed the daylights out of them including getting IBM to install their operating system in their first PC.
What about Amazon weren’t they the first online seller of books? No there were not. There was not just one, but a number of online booksellers before Amazon came along. Amazon just outperformed and out positioned them.
What about being well-financed…there’s nothing wrong with that, right?
Yes, raising a lot of money for your startup is a problem. First, keep in mind that the venture capital startups have a sky-high failure rate: 75% according to one prominent study. Furthermore, I once read an article in The New York Times some time ago that referenced a study that showed that the success rate of venture backed companies was inversely proportional to how much money they raised. In other words, those that raised the most money, were the most likely to fail.
This reminds me of years ago, when one of my friends told me proudly he was joining an extremely well-financed startup that was investing and buying the very best of everything, including the best people. Well they also had one of the best bankruptcies.
Read Also: How To Become A Successful Entrepreneur
So why do well-financed firms tend to fail more than poorly financed ones? Because undercapitalized firms are forced to develop of mentality of being frugal and cutting corners. How important is this in business? It’s incredibly important. It’s exactly how both Walmart came to dominant offline retail and how Amazon came to dominant online retail. But beyond retail it’s important in every other business.
Think about it! If your fixed cost structure is 20% or 30% less than your competitors you can make a lot of other mistakes but still succeed in business! I have always run my businesses on a shoestring, with unheard of low overheads and this helped me particularly well when I have entered industries that I know nothing about and made some big mistakes.
Surely there can’t be anything wrong with hard work?
Yes, there is something wrong with it! Generally hard work is a great attribute and can go a long way to helping your business succeed. But you don’t want to work so hard that you burn out. And just as importantly you don’t want to work hard on the wrong thing or the wrong direction. As entrepreneurs, we tend to dive into work first and think about it later…a crucial mistake. And in common with other people of the human species we tend to be creatures of habit, doing business the same way and avoiding thinking about or trying new ways of executing our business.
So, what are the secrets to business success?
In a nutshell, the keys to success are first that you need to have tremendous drive. This is not exactly the same thing as working hard, but it is similar. Getting a new business to point where it really feels successful is likely going to take longer than you initially think and also is likely going to have a lot more twists, turns and issues that you think.
Your success in business could be determined by just a few critical choices
So, the drive to keep going is very important. But it alone is not nearly enough. You also have got to make a few decisions correctly and learn a few skills along the way. I discuss these key decisions in my article and video, The 7 Keys to Starting a Successful Business.
You can work like a dog on your business for years but if you make the wrong choices for a few critical decisions, chances are that you will always be fighting an uphill battle-if you are lucky enough that your business survives at all.