Common sense dictates that business success is determined by the obvious, having a smart business idea, well-funded and working hard. But I can tell you that not only these three factors are not so important at all, but they can all really work against you! Also, what really matters may surprise you … and I’ll talk about that later.
Why are you listening to me?
Of course, I have an MBA from Harvard, but I also have a business. experience. Lots of experience. But what separates my knowledge from many other entrepreneurs who write about business is that I have a wide choice of businesses. I have founded dozens of businesses, from home painting at home to what has become one of the leading book publishers in the US, from newspaper businesses to online and multimedia companies. I have had many tremendous successes, but also many failures … and I can tell you that you learn key lessons from business far more from your failures than from your successes!
So you have a smart business idea … It’s a red flag!
Forget about a smart new business idea that will change the world! It is certainly possible that your new idea will have massive success, but your best chance of business success will not be proposing a new idea, but instead pivoting on an existing idea. For example, I am thinking of a hairdressing franchise with a sports theme. A very old business idea with a tricky twist.
Unless I’m chasing a completely new idea, that doesn’t mean I’m completely disappointed in the opportunity to be hugely successful like, say, Microsoft or Amazon. If this is our point of view, then I have news for you. Microsoft didn’t create the first PC operating system, the first spreadsheet, or the first word processor. But they created viable versions and brought daylight to market, including forcing IBM to install their operating system on their first PC.
How about Amazon wasn’t the first online bookseller? No, it wasn’t there. Before Amazon, there were not one but several online booksellers. Amazon just surpassed them and positioned them.
How about being well funded … there’s nothing wrong with that, right?
Yes, raising big money for your startup is a problem. First, keep in mind that venture startups have a very high failure rate: 75%, according to one well-known study. Also, I once read an article in the New York Times that referred to research that showed that the success rate of venture-backed companies is inversely proportional to how much money they raised. In other words, the ones that raised the most money were the most likely losers.
It reminds me many years ago when one of my friends proudly told me that he was joining an extremely well-funded startup that invests and buys 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 financed firms tend to fail more than poorly funded firms? Because undercaped firms are forced to develop a mentality of being modest and pared down. How important is it in business? This is incredibly important. This is how Walmart came to dominate offline retail and how Amazon became dominant online retail. But apart from retail, this is important in any other business.
Think about it! If your fixed cost structure is 20% or 30% less than your competitors, you can make many other mistakes, but still succeed in business! I’ve always run my business at low cost, with unheard-of low overhead, and it helped me especially when I entered industries I knew nothing about and made some big mistakes.
Surely nothing could be wrong with hard work?
Yes, there is something wrong with that! Generally, hard work is a great attribute and can go a long way to the success of your business. 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 or wrong direction. As entrepreneurs, we tend to dive into work first and think about it later … a crucial mistake. And like other people of the human race, we tend to be habitual creatures, doing business the same way and avoiding thinking or trying new ways of doing business.
So what are the secrets of business success?
In a nutshell, the keys to success are above all that you need to have tremendous drive. It’s not exactly the same as working hard, but it looks like it. Taking a new business to the point where it truly appears to be successful is likely to take longer than you initially thought, and will likely have a lot more twists, turns, and challenges that you think.
Your business success can be measured by several critical options
So the urge to keep going is very important. But this alone is not enough. You also need to make a few decisions right and learn a few skills along the way. I discuss these key decisions in my 7 Keys to Starting a Successful Business article and video.
You can run your business like a dog for years, but if you make the wrong choices for a few big decisions, chances are you’ll always fight up the hill if you’re lucky your business survives at all.