Entrepreneurial Myths: October 2006 Archives

My friend Rhonda Abrams blogged last week about an interview she heard with a professor from a "distinguished university" (that may have been the problem right there):

I recently heard a professor from a distinguished university say on the radio that 90 percent of new businesses fail.

To me, that's like hearing fingernails scraping on a blackboard. I've looked at statistics of business births and deaths closely, and I know of no credible study showing anything close to a 90 percent failure rate.

She is correct.

Credible studies show success rates five years out (the normal time line for such studies) to be around 50% +/- 5%. And as I've said many times, smaller studies of those who have gotten trained and educated in the process of starting and growing a business find success rates as high as 80-90%.

This urban myth is perpetuated by the histrionic media who loves find evidence of doom and gloom even when it isn't real, and by ignorant and uninformed "experts" who are too lazy to do the research needed to find out the truth.

(Thanks to John Russell for passing this along).

I love to collect entrepreneurial myths that those of us who work in the world of new ventures have observed over the years. On of my former students (Chip Hayner) passed along this list of myths from the world of technology start-ups from Rondom Ramblings. It is both humorous and very much on target for many would-be entrepreneurs in any industry.

Here is a sample:

Myth #4: What you think matters.

Reality: It matters not one whit that you and all your buddies think that your idea is the greatest thing since sliced pizza (unless, of course, your buddies are rich enough to be the customer base for your business). What matters is what your customers think. It is natural to assume that if you and your buddies think your idea is cool that millions of other people out there will think it's cool too, and sometimes it works out that way, but usually not. The reason is that if you are smart enough to have a brilliant idea then you (and most likely your buddies) are different from everyone else. I don't mean to sound condescending here, but the sad fact of the matter is that compared to you, most people are pretty dumb (look at how many people vote Republican ;-) and they care about dumb things. (I just heard about a new clothing store in Pasadena that has lines around the block. A clothing store!) If you cater only to people who care about the things that you care about then your customer base will be pretty small.