I'm about ready to concede. I frequently have debates with colleagues about whether or not a new business idea will fly. I tend to focus on the idea, while a couple of my colleagues assert that the idea is almost irrelevant. As far as they are concerned, the only thing that matters is the person behind the idea.
And I have to admit they have a lot of evidence to support their position.
I have seen ideas that I thought were fantastic — new technology, patent protection, dramatic benefits to customers, low capital needs, everything — that evolved into a business that crashed and burned. And I've seen ideas that I thought were crummy — easily copied, no new technology, no patents or copyrights, high marketing costs, and entering markets with lots of competitors — that did incredibly well entrepreneurially.
Look at the list of the 100 hottest new companies in Entrepreneur magazine. They include a backpack company, a children's furniture store, a mortgage company, a car-armoring business and lots of other companies that would seem to be simply "me too" ideas against large, entrenched competitors. But somehow they pulled it off.
I have read many studies indicating the major factors that predict success, and the lists look very reasonable: sufficient capital, new market with new idea, experience and relationships in the market by the entrepreneur, barriers to new competitors, credible marketing plan, etc. But I have also seen companies that seem to fit every factor perfectly — and still don't make it.
I guess I am coming over to the belief that the most critical variable is the hardest to measure and quantify: the personality traits, skills and character of the entrepreneur. If you are investing in a business, it is primarily a bet on the entrepreneur.
Here is my list of personality traits, skills and character qualities that seem to be most critical for a successful entrepreneur:
First, does the entrepreneur have the "street smarts" to make it? Almost all new businesses start along the original path of the business plan only to hit brick walls. Successful entrepreneurs quickly (before money runs out) figure out what the alternatives are and make immediate changes. Sometimes that requires changing marketing tactics or even the product or service itself. But it invariably requires understanding the problem and changing. And swallowing pride.
Second, does the entrepreneur really have passion? Experienced entrepreneurs frequently say that starting a new business can't simply be about making money. The reason that desire for money is insufficient is that virtually all new businesses run into serious problems at one time or another. It stops being fun, and not even the hope for a lot of money will give the entrepreneur the energy to continue. The entrepreneur has to be pretty passionate about the business or the delays, the naysayers, the reluctant investors and other difficulties will doom the business.
Third, the entrepreneur must make a firm commitment to high ethical standards right from the beginning. The aphorism that honesty is the best policy is true and based on long experience. For example, selling a product or service on misleading claims is certain death. In the short run you might have the cash from the sale and that may keep the business alive for a while, but in the long run you will have no business.
I wish I could give you a definitive list of factors that would allow you to separate the businesses that succeed from those that fail. But I guess I am coming to the conclusion that it is the ability to look deep into a person and know who he or she really is that is most critical. And the person you need to most critically, honestly, dispassionately understand may be yourself.
Hal Heaton is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at email@example.com.