Friday, November 21, 2008

When the Truth Hurts

A recent episode of CBC-TV’s Dragons’ Den addressed a pain point of mine regarding entrepreneurship: the tendency of people’s friends and families to not speak the truth about their business ideas.

I am as big an optimist as anyone. I know business miracles can happen, and outrageous successes can come from unlikely products and organizations. But they don't happen often. So when someone describes a business idea they want to pursue that I don't think makes sense, I usually tell them what I really think. Because I believe that people need fair and objective feedback, not uncritical cheerleading.

But not everyone agrees. Many friends and family members seem to believe in nonjudgmental encouragement. And that’s probably okay for peewee hockey players, aspiring ballerinas, and other people who are clearly willing to invest their time and commitment to master a discipline.

Businesses, however, are different. Achieving a business dream can cost years and tens (or hundreds) of thousands of dollars. If you join the swim team and don't make the nationals, you can still say it’s been a tremendous experience: you've learned a lot, met great people, and you're in great physical shape. In business, if you run up the bills mucking around with unpractical prototypes and ideas, you risk piling up debts that you’ll never pay off. And you probably won't have learned much except what didn't work.

The Dragons were generally supportive of a women who had created a harmless, if dull, board game – until they found out that she had spent tens of thousands developing the idea and ordering inventory. Maybe she had never heard of product testing. Or maybe nobody had wanted to hurt her feelings. But somebody in her life should have had the guts to tell her this was a dumb idea, not worth wasting another cent on. (If I recall correctly, the money came from mortgaging a home, so the loss could turn out to be devastating.)

How do you tell a friend or loved one their idea stinks? Very carefully. Consider cloaking your comment in the language of business: “Where is your business plan? Have you done market testing? Did you have any industry experts look at this? Who are your customers? Have you talked to any of them about whether they would be willing to buy your product/service once it’s ready? How much would they pay for it?”

Startup experts I've consulted on this topic admit that 50% to 75% of entrepreneurs skip the market-testing stage. They feel it’s too expensive, or will take too long. Or maybe they just don't want to hear the feedback.

Maybe pilots should skip their pre-flight checklists for the same reasons. Perhaps I should try to drve from Toronto to Winnipeg without stopping to buy gas, ’cause that would just slow me down and cost me money. Proper preparation (including market research) is always essential, because the cost is so high if you get it wrong.

Dragon Kevin O’Leary is great at telling people, “I forbid you to work any more on this business.” We may change the words a little, but that's a skill we should all develop.

What do you think? Leave a comment below, or send me an e-mail (rick-at-rickspence.ca).

2 comments:

Lauren Friese said...

I have mixed feelings on two things addressed in your blog:

1) Dragon's Den and Kevin O'Leary in particular. I sometimes find it hard to watch the show because of how condescending he is toward some of the entrepreneurs. I used to watch the British version and it wasn't as harsh, and because of that, was more entertaining/easier to watch.

2) Related to (1) but more a comment on the whole message of the post- that friends and family should not blindly support projects that they do not believe are 'sound'. I agree with this to some extent however history has shown us that some of the 'least likely' ideas have prospered in a huge way.

Personally, I was/continue to be lucky as an entrepreneur to receive a mixed bag of advice, harsh criticism, and blind support.

Rick said...

Thanks for your comment, Lauren. I agree that miracles can happen. But friends don't let friends bankrupt themslves hoping for miracles.

They need to offer encouragement mixed with caution: "You're not betting the farm on this, are you?" "Can I introduce you to my friend who knows this industry really well...?"

Many entrepreneurs get carried away and need candid feedback - whether they like it or not.