Appearance Counts for Successful Start-ups

A new, three-year study of 830 Americans actively involved in starting small businesses has found that the participants who were successful shared the ability to make their businesses appear legitimate and fully operational early in the startup process. Personal characteristics of the entrepreneur such as level of education did not affect the success of the venture.

Half of the start-ups surveyed in the Panel Study of Entrepreneurial Dynamics, written by Scott Newberg of Villanova School of Business and Enro Tornikoski of the Seinajoki University of Applied Sciences in Finland, which appears in the “Journal of Business Venturing,” evolved into successful businesses.

“People are likely to buy products, work for, and give money to entities that are credible, that they perceive as operational,” said Newbert, according to inc.com. “Organizations that make their fledgling operation appear more legitimate than it might actually be are better able to access customers and recruit employees.”

The study’s authors defined a successful business as a venture that had made a sale, hired employees or received external funding.

While Tornikoski and Newbert found an entreprenuer’s revious experience with a sgtart-up had little influence on a successful outcome for the business, the collective experience of the start-up team, including employees, mentors or advisers, and financial backers, did influence successful ventures.

“It is an advantage to have some amalgam of start-up experience within the team,” Newbert said, inc.com reports. “Even people who have started a successful business in the past can fall victim to the ‘sample size of one’ because they are limited to that singular experience”, he adds. “A more diverse set of information about what seems to work and what doesn’t, seems to be helpful.”

One surprising conclusion of the study was that whether or not the entrepreneur had created a business plan made little difference in the success of the business. Newbert interpreted this finding to suggest that entrepreneurs might become too attached to their original ideas. Things change rapidly in an emerging businesses, he says, and it is important to be flexible, inc.com reports.

Staples’ founder Thomas Stemberg, now a partner in a venture capital firm, says that he doesn’t “get hung up on business plans.” As guest columnist for inc.com, Stemberg writes that Staples’ original business plan said that the company would never deliver, but within a year they had changed course on deliveries. “One thing entrepreneurs know for sure: If they do well, the business will get bigger. Always be preparing for bigger,” he says.

Entrepreneurs “dream big dreams and construct detailed business plans,” Stemberg says in the inc.com column, “which is fine. But it's nowhere near as important as putting in place as early as humanly possible the people and systems that will carry them through their journey, no matter what unexpected directions changing markets or technology force them to take.”

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