Passion is something we associate with drive and energy, qualities we need to launch and maintain a successful business. But can our passion be of detriment to our business success? Noam Wasserman of the The Wall Street Journal thinks so, and I tend to agree.
This week I read Mr Wasserman’s article, “How an Entrepreneur’s Passion Can Destroy a Start Up” in which he argues that passion left unchecked ‘can sink a new business’, irrespective of your superb business idea. A great business idea is not the same as a great business.
Now this viewpoint seems a little extreme since, without passion many new businesses would not have survived the startup phase. The startup phase is often fraught with difficulty and it is the entrepreneur’s passion that drives the business to success.
However, Noam based his strong views on his findings following 15 years of research. He discovered that entrepreneurs allowed passion to cloud their judgment, and pointed to Four Key Passion Failings:
- Entrepreneurs launched too quickly without testing whether their product or service was financially viable.
In other words they did not have the expertise to develop a viable business model.
- Their business plans were overly optimistic about the take up of their ‘brilliant’ business idea. A survey of Harvard Business School graduates found that only 4% of business plans were on target, proving that business planning is a specialist skill.
- Entrepreneurs were poor at dividing equity, which often lead to acrimonious splits when the business started to generate income.
Such splits at the early stage of a new business often lead to their demise.
- And finally, founders are not always the best people to take the company forward after the startup stage, as this requires a different set of skills.
Now although Noam’s article is quite brutal, I found myself agreeing with almost everything he said. As a professional Business Planning Expert I often meet clients that assume their passion will translate into business success, and are surprised that their business stalls or is failing. Having an expert guide you through the business planning process, at whatever the stage of your business, IS the difference between success and failure.
It is a well known fact that 70% of new startups fail in the first three years of business. And why is the failure rate so high? I’ll tell you: the single most cited reason for business failure of a new startup is the absence of a good business plan.
So it’s great to be passionate about your business idea, but it’s even better to be passionate about a business with a robust business plan.