Passion alone is typically what drives a founder to get a new business off the ground. Start-ups have little other fuel to make them go; their futures are completely dependent upon the founder's zeal and dedication to the idea.
Unfortunately passion and dedication are typically not enough. In fact, 80 percent of new businesses fail within the first five years, according to a study by Inc. and the National Business Incubator Association.
So what's the cause of this failure? According to consultant, investor, and author John Bradberry, the cause of these failing start-ups is also the same driver for many successful businesses: Passion. Bradberry argues that falling in love with a business can cloud one's judgment when making decisions around the business.
Bradberry is fully aware that his latest book, 6 Secrets to Startup Success, will be a tough reality check for some readers. Starting a business demands an incredible amount of hard work, long hours, and very little compensation. In an interview with Bradberry, he explains why passion alone can't fuel a start-up, and why supplementing excitement with realism and preparation is what's key to successfully sustaining a fledgling business.
What is the passion trap?
The passion trap is a cycle: A pattern of beliefs, choices, and behaviors that are linked to each other. It's a self-reinforcing pattern. Each of us has probably been a true believer in some great idea, some big idea. If I have an idea that I believe in strongly, that's a core belief I have, so I make decisions and choices based on those beliefs. I also interpret data from the environment that tends to support my beliefs, and then I take actions, and those actions create some kind of results that can be evaluated.
There are two sneaky things about the passion trap, it tends to operate at a subconscious or unconscious level, so we're often not aware that these cognitive biases or these filters are at work, and we actually believe that the world or the marketplace is confirming our thesis about the business.
The other thing that's sneaky about the passion trap is that it feels good, and there's a lot of feel-good culture in a lot of the entrepreneurial literature—not only the literature, but the support systems, the communities around entrepreneurs and start-ups, is often all about "follow your passion." I think there's a reinforcing belief that says if you're following your passion, feeling great is a signal that you're on the right path.
Is the passion trap what inspired you to write your book?
I set out to do an immersive study of what I would call "success factors among start-ups," so I brought my own experience and observations, but I also looked at the academic literature and the popular literature, both hard copy and online. At first, I was alarmed at how many businesses really do fail and the high percentage of start-ups that don't make it, and I became more intrigued with what's going on there. Typically, a lot of these ideas are good ones, and the founders are pretty talented people.
I found the main reasons why businesses fail or succeed are not all that complex. They're fundamental mistakes that founders make, like assume market demand is there when it's not, or they don't raise enough money, or they don't watch their expenses closely enough. I looked for underlying causes. I began to see a pattern: I called it "entrepreneurial traps," because I think there's more than one trap that a new entrepreneur tends to fall into.
One I called the money trap, is when someone ends up with their back against the wall, they're running out of cash, and at that point it's too late to raise money typically, because investors aren't going to be enamored with a desperate entrepreneur. The other I called the capacity trap, which is when an entrepreneur is stretched so thin that they can't or won't come up for air and bring on additional talent or resources in order to grow the business, so they're just like a rat on the wheel.
Then there was another trap. I called it the "idea trap," where someone is so emotionally attached to their idea that it creates a chain of events and misjudgments; over time, I began to call that the passion trap. Frankly, it just played better in the public with publishers. It had a little more stickiness as an idea. So I wrote the book to tell that story. I see so many unnecessary stories of failure, where the idea is a decent one, but not perfect. The founding team is talented, the funding is there, but the level of awareness and the ability to take a real honest look at both strengths and weaknesses is not there.
Could you share an example of someone being a victim of the passion trap?
There are four founders that are profiled beginning on page one, and you follow their stories through the book. One of them, named Lynn Ivey, is the most persistent, resilient founder I've ever known, but she got caught in the passion trap in a big way.
She and her investors built a facility for senior healthcare—an adult daycare center—and were certain that the market was there. The nature of that investment is what I call an "unforgiving strategy," when you invest four to five million dollars in a facility before you can even test the product. You're stuck if there's not market demand for the product. It's not like a software program that you can just pivot and try something else.
The day where I sat with Lynn Ivey, she was [talking about] the movie Field Of Dreams, about "building it and they will come." She had built the facility, but they were not coming. I remember the taste in my mouth and the feeling in my stomach. I was a fan of this start-up and they had a lot of backers, but it was the realization that maybe there's not a market there, and what do you do now?
In the truest sense, the story was in there as a cautionary tale. It's not a failure story because she's been able to convert to non-profit status and is actually slowly gaining her client base, and in reality she may have been five to 10 years ahead of her market. It was an idea that was too early for its time.
The last page of the book has an example of her serving these clients that she does have, and the incredible impact she's having. She's still not turning a profit, but because she's been able to convert to non-profit status, she's still standing. She's been able to flex and reformulate as much as she can, given the nature of the product that she's built.
Another example we use in the book is the story of the Segway. Steve Jobs, Steve Case, and John Doerr, the famous venture capitalist, all predicted it would be the most impactful product since the personal computer, and it was going to change the way cities were designed. They pumped a couple hundred million dollars into the manufacturing facility, and I think they were projecting 50,000 sales per month, but after five or six years, I think it had only sold maybe 50,000 in total.
So, the smartest business people that many of us could even think of got swept up in the belief that this product was too good to fail. Unfortunately, no one sent the memo to the customers. It's an incredible technology and very innovative, it's just that the fundamental laws in business were in play, like the idea is not great until the market says it is.
Must one compromise excitement in order to avoid the passion trap?
I think you can get the best of both worlds. What I'm really trying to combat is this sense that it's an either/or: that passion and reason, or passion and logic, are opposites. Some people would even say passion and planning are opposites, because if you really plan something forward, it entails thinking about elements of reality that are going to bring you down. But if you think of a start-up as an aircraft, passion is the fuel and the engine. It creates velocity. But logic and reason are the engineering and the steering mechanism; you need both, and you're not going anywhere exciting without both. What I explore a lot through the book is how can you get both? How can you make the most of your enthusiasm while not being blinded by it, and putting the right fundamentals in place?
There's a phrase I use in the book called "earned optimism," and that's really the state that I'm after when I'm trying to get a business off the ground, or advising a business. It's that kind of optimism you get after you've really thought through what can go well, what could go wrong, and what our contingencies are, should our plan not unfold as positively as we've hoped. It's staring down the monsters under the bed and knowing that you can withstand that. You've planned for enough financial cushion, and you've built your financial projections in a way which will allow you to go more slowly, if necessary.
One of the most violated rules of the start-up process is that things take a lot longer than founders hope, and they usually cost a lot more. That idea of having earned optimism is feeling like you can sleep better at night, precisely because you've been willing to work at your idea, warts and all, and you're able to embrace the naysayers instead of ignoring them.
Many founders assume the competition is not very strong or that there's no competition. But I've never seen an idea or start-up where there wasn't pretty strong competition. There are a few notable examples where you're absolutely the first in your space, but if I had a nickel for every founding team I've met with where I start raising questions about the competition and they get visibly agitated. It's like global warming: I don't have a necessary political stance on global warming, but if it affects me, I want to know about it. It's treated as data: the more data the better.
Your book talks about this idea of "founder readiness." How can you prepare for being a founder?
There is plenty to do. I was at this conference for two days in Atlanta, and there was a panelist talking about how you can't teach entrepreneurship; people are born, or not, as entrepreneurs. I take issue with that. I have studied people who are successful, and I think there is a certain hardwired set of qualities that prepare people for entrepreneurship, but it's much more than that. It's about what will prepare you for what it takes to get a business off the ground. It includes who you are, why you're doing it, your experience, your expertise and knowledge—there's a whole set of factors. That stuff makes a difference for most businesses.
There's a fairly popular book from [Inc.com blogger] Scott Gerber, called Never Get A Real Job, and the idea is, "don't ever work for somebody else." The minute you get out of school, do a start-up. That will work in some cases, but the data shows that twice as many successful start-ups and tech start-ups are founded by people in their 50s, rather than in their 20s, and there's a reason for that. Going down some career path, learning an industry and learning a discipline, and doing it on somebody else's nickel—working for someone else—can be really valuable in terms of preparing. I think there's certain disciplines or functions that are more useful than others, and an industry focus is helpful. If you've been involved in a particular industry, you recognize the patterns, and that's the industry you found your start-up in. You're going to be better than someone else that's coming from a different market.
Sales and marketing experience is incredibly helpful. The process of having to go out and understand customers and clients is something that not every founder has, and it's an advantage if you do have it. It's hard to learn management from a book, so if you want to build a business someday, it makes sense to go into a job working for somebody else for awhile where you actually manage a team. And you can learn whether or not you're cut out for managing a team—it's okay not to be cut out for it, just make sure you're in a role where you don't have to do that, and somebody else does.
What do you want readers to take away from your book?
Stay flexible. Don't confuse passion and preparation, and understand that how you feel emotionally about your business is not necessarily the best indicator of your odds of success. Do what you need to do to increase your odds of success from a logical standpoint, and I'm not knocking feeling good, just don't use that as the barometer or metric for progress.
Almost every robust, healthy business looks different than the founder first envisioned. Very different. There's some examples of that in the book where someone starts out thinking they're going to start a restaurant—Stacy's Pita Chips is a great example. They started out with the intention of starting a health food restaurant, and had a lunch cart business on Boston's streets because they didn't have enough money to rent space for a restaurant. Along the way, they started serving these leftover pita bread chips to the people waiting in line for sandwiches, because they didn't want people in line to abandon the line. One thing led to another and people went crazy for those pita chips, and the restaurant started selling the pita chips in groceries. Then, one thing led to another thing and they abandoned their restaurant plan, got fully into the consumer food business, and ended up selling to Frito Lay a few years later for $50 or $60 million. That was all because they were willing to pay attention to what the market was telling them.
This is replicated so often in success stories that I've studied. Your first idea is a starting point, so treat it as an experiment. That's what I mean by being flexible. You can be committed and determined, and at the same time, be ready to move on a dime if you get data that tells you the path you're on isn't going to work.