The Way to Wealth (12 page)
Authors: Steve Shipside
There’s a fine line between confidence and arrogance in business. Or, as Franklin put it,
‘Great estates may venture more, But little boats should keep near shore.’
Confidence often provides the ‘get up and go’ that is essential to success, but if it tips over into arrogance it is likely to lead to bad judgement, taking on more than you are truly capable of and overestimating your abilities.
DEFINING IDEA
…Action and reaction, ebb and flow, trial and error, change—this is the rhythm of living. Out of our overconfidence, fear; out of our fear, clearer vision, fresh hope. And out of hope, progress.
~
BRUCE BARTON, AMERICAN AUTHOR, ADVERTISING EXECUTIVE AND POLITICIAN
A recent study by the University of Leicester and the Economic and Social Research Council found that those business people most confident of their ability were also the most likely to fail. Dr. Pulford, from the University’s School of Psychology, said, ‘When success depended on skill, overconfidence tended to cause excess entry into a marketplace…market-entry decisions tend to be over-optimistic, with the inevitable result that new business start-ups tend to exceed market capacity, and many new businesses fail within a few years.’
The commonest reason for this was that the overconfidence led them to leap into new ventures without sufficient research or respect for the opposition and the hurdles to be overcome. In particular, they overestimated the capacity of a market to support a new player, and the attraction that their novelty would have for existing customers.
Overconfidence is more common than you think. Consider these figures from investment advisors The Motley Fool:
• 82% of people say they are in the top 30% of safe drivers.
• 86% of Harvard Business School students say they are better looking than their classmates.
• 81% of new business owners think their business has at least a 70% chance of success, but only 39% think any business like theirs would be likely to succeed.
So what can we do to ‘keep near shore’?
The first step is to honestly admit our own limitations. That means being realistic about what we really think we can do and not confusing it with what we dream of being able to do.
The second one is to remember that we are always learning and we simply never know enough. There is no substitute for good research and the tools for researching a market have never been better or more easily available—but all the tools in the world are of no avail if we don’t bother to use them.
The third step is to beware of presumptions. Never presume that competitors are wrong simply because they don’t have your forward-thinking attitude. It’s tempting to dismiss the established opposition as being slow-moving, entrenched dinosaurs and, who knows, maybe they are. But if you allow yourself to work on that assumption without examining the reasons for their behaviour you may be missing a major hurdle to market entry.
HERE’S AN IDEA FOR YOU
…Picture your own company from an outsider’s point of view, and try to be objective about the likelihood of its success. You will need help, so ask an unbiased third party about the chances and the risks. Now for the tricky bit—listen to them.
We’re often so busy getting on with business that we don’t really have time to learn from our mistakes but, as Franklin would have been the first to point out, learning is what distinguishes the smart from the stupid: ‘
wise men learn by others’ harms, fools scarcely by their own’.
DEFINING IDEA
…I always tried to turn every disaster into an opportunity.
~
JOHN D. ROCKEFELER
Nobody wants to dwell on the possible downsides of commerce because if we focused on everything that could go wrong we’d probably never get out of bed in the morning, never mind get into business. Totally ignoring the potential pitfalls, however, is nearly as bad as cockiness and overconfidence. According to UK bank Lloyds TSB, nearly half of all small businesses fail within their first three years, and while one in five businesses suffers some kind of major disruption in a year a crushing 80% of small and medium enterprises (SMEs) fail to recover if it happens to them and close down within the next eighteen months.
The vast majority of smaller enterprises have no emergency plan to cope with major troubles such as flooding, fire, vandalism or terrorism and yet it is precisely the SMEs that have the least resources in reserve to keep them afloat if they are forced to stop trading for any period of time. Be absolutely honest; have you drawn up your worst-case scenario? And if you have, do you have a plan for dealing with it other than curling into a small ball and hiding under your desk?
If you came up short on the above question then it’s time to follow Franklin and look around at ‘others’ harms’. Trade publications are a pretty good starting point since there isn’t an industry newspaper in print that doesn’t lead with the cock-ups of your peers. Missing deadlines, penalty clauses, power cuts, industrial accidents, mass layoffs—they are the stock in trade of your industry press and while it certainly isn’t cheerful reading, it is a mine of information on the things that can go wrong. Instead of the schadenfreude of watching your opposition struggle in terrible circumstances, consider carefully how badly your own enterprise would be hit if it faced a similar or worse scenario.
Think carefully about the following:
• Are you insured for damage to your stock, your premises and your possessions if disaster strikes?
• Are you protected in the event of loss of earnings so that your bills will continue to be paid even if you or your business have to cease or restrict trading?
• Do you have a fallback plan and an emergency fund to keep the business ticking over until you can get back to full speed?
Insurance is a great thing, but don’t get too smug just because you’re insured. The real mark of preparation is not being compensated for the disaster a year after your company closes; it’s keeping your company’s head above the flood waters until everything is back to normal.
HERE’S AN IDEA FOR YOU
…Don’t forget your data. Would you survive without order books, customer contact details and intellectual property? No, so don’t just back them up locally to tape or CD—a hosting company can provide you with a mirror copy of all crucial data hosted on a remote server away from your premises.
Franklin thought the principle of learning from other people’s mistakes was such a good idea he opted to say it all over again—in Latin.
‘Felix quem faciunt aliena pericula cautum’
, he intoned which, if your Latin is a little rusty, roughly translates as ‘happy is he who learns caution from the perils of other people’.
Worst-case scenarios are helpful but there’s a less painful way of learning from others than drawing them up. Franklin’s point that ‘wise men learn by others’ harms’ is the thinking behind the whole process of mentoring which is rapidly gaining popularity as an alternative to traditional consultancy.
DEFINING IDEA
…Learn from the mistakes of others. You can’t live long enough to make them all yourself.
~
ELEANOR ROOSEVELT
If you’re running an SME then a business mentor provides a number of roles. They are a sounding board for your ideas and a trusted third party ready with unbiased opinions about the wisdom of your plans. They also go a long way to easing the loneliness that goes with shouldering an SME on your own. After all, who else can you freely turn to? Of course you have a bank manager, friends and family but, unlike all of them, a mentor really does want to talk about your business and is happy to spare whatever time that takes.
But most of all they’ve been there, done that and got the T-shirt. Which means they bring with them all of the mistakes they themselves made and the answers to those mistakes, without you having to go through that painful process yourself. A mentor also brings with them all the networking contacts they have made during the course of their own entrepreneurial activities which can prove an invaluable short cut for the SME in a hurry.
Typically a mentor is someone who has ‘made it’, in whatever terms they define ‘it’, and now has the time to give something back. If they’re any good, they are also in the learning business themselves and aim to pick up as much from you as you will from them. Which brings me to the last and most wonderful thing about a mentor—mentoring is usually free since the quid pro quo is the learning exchange. If you’re running an SME then good, free advice is not something you can afford to pass up on.
It’s not difficult to find a mentor and while there are paid-for services available online there are also a lot of programmes being offered by the governments of the UK (try local government and organisations like The Prince’s Trust), Canada, NZ, and the US (try the Small Business Development Centers). Remember that with a mentor the more you put into it the more you both get out of it, so try to meet up as much as possible. That in turn means it’s best if you get on well enough to spend serious time in each other’s company—so choose wisely.
HERE’S AN IDEA FOR YOU
…Start by ‘auditioning’ a number of possible mentors. Begin by brainstorming your goals for the relationship, then arrange to meet a select few for a ‘one off’ meeting to find who you click best with. See which person has the most input on your brainstormed list and take it from there.
Franklin was keenly aware of the dangers of overconfidence or brashness, but don’t confuse that with lack of commitment. Pussyfooting around was no more desirable in Franklin’s day than it is now or, as he put it,
‘handle your tools without mittens; remember that the cat in gloves catches no mice.’
DEFINING IDEA
…Success or failure in business is caused more by mental attitude than by mental capacities.
~
SIR WALTER SCOTT
Even if the phrasing sounds somewhat old-fashioned, the thinking is bang up to date. Entrepreneurship isn’t a business model but an attitude, and one that thrives on getting down and dirty with the nuts and bolts of the business which you have made your own. You will need deep reserves of commitment, self-confidence (not to be confused with arrogance, do note), persistence and the initiative to be a true self-starter.
Before taking the plunge into your own business venture try the Attitude Check List:
• You believe that failure is not an option.
• The goals of this enterprise are 100% yours.
• You have crystal-clear objectives.
• You are ready to step up to the plate and ask that others around you do the same.
• You recognise that there are risks but are excited by the challenge.
• Quitting is not an option.
• You know exactly what you need to do to take this business to the next level.
• You know exactly what it will take to deliver on your promises.
• You inspire those you work with.
• You’re not afraid to make commitments around the business.
Can you tick off ten out of ten on that list? If not, it doesn’t mean that you shouldn’t be taking the plunge but it does mean there’s an area that you are not completely convinced about. If that’s the case then you need to address it now. Commitment to succeeding is a crucial part of the formula and, odd though it sounds, people are often as afraid of success as they are of failure. If you answered yes to the above questions but are still hesitating, then ask yourself if you are more nervous about the risks of success than failure. A lot of us hold back because it’s easier to coast along than to admit that this time we are going for gold.
The other point to remember is that unless you are going solo, you’ll have co-workers or employees, and for you to succeed they have to be every bit as motivated. You should be an inspiration to everyone you work with but being a role model is only a part of that strategy—you will also need to think yourself into their shoes, understand their tasks and motivate them to share the same drive. Pussyfooting around is not an option with other people any more than it is with yourself. If you are in any way uncertain when discussing your mutual goals with your co-workers, then you are creating potential danger areas for misunderstandings later.
HERE’S AN IDEA FOR YOU
…Getting hands on doesn’t have to mean micromanaging. Really knowing the nuts and bolts of a business can make you a more inspiring leader and give you the edge in negotiating with your staff, so don’t distance yourself from the engine room—roll up your sleeves and get stuck in.
