Beating the Small-Business Odds

Tom Peters

I recently had dinner at a new Italian restaurant near my home. I'll go back. The staff was cheerful, instructive, and professional. The food was well prepared. The owner-chef had spent about six years, off and on, visiting relatives in several cities in Northern Italy. He's worked up a unique menu. In fact, the experience brings alive a bit of Italian history and culture, along with good food. (This case is disguised. The town is small; the owner, a friend—and it would be inappropriate for me to tout his establishment.)

Did my town really need another Italian restaurant? If you'd asked me a few weeks ago, I'd have said no. Now my reply is an emphatic "yes."

The majority of new businesses quickly go bust. And though owners have probably mortgaged their homes to the hilt, most that fail deserve their sad fate. But some start-ups do thrive. What separates winners from losers?

1. Signature. Question No.1 for the prospective business owner: In 25 words or less, how is my concept (for a plumbing company or software house) notably different from those of others? If you can't succinctly explain how you're special to "the man or woman on the street," you're headed for trouble.

2. Soul. The enterprise should make your prospective customers say "Wow," "Neat," "Holy smokes." That is, it should grab, startle, surprise—for example, feature an amazing guarantee, stupendous service, or even extraordinary vehicles. If you start a new cab company in a Northern city, soul might be an unrelenting commitment to spotless cabs (inside and out), despite winter slush that makes competitors' hacks look like motorized mud balls.

3. Passion. The life of an entrepreneur is occasionally exhilarating and almost always exhausting. Only unbridled enthusiasm for the concept is likely to see you through 17-hour days (month after month), and the painful mistakes that are part and parcel of the start-up process.

4. Details. While the overall scheme must be an attention getter, only superb execution will win the day. At the restaurant I visited, the menu gives the genealogy of every dish; the furniture comes from the region of Northern Italy that inspired the restaurant; guests are invited to tour the kitchen and chat with the chef; recipes are available upon request (with no missing ingredients); and the restrooms live up to the rest of the experience!

5. Culture. "Corporate culture" sounds like the province of Apple Computer and Federal Express. Guess again. Culture counts even for the one-principal consultancy supported by a part-time administrative assistant. The spirit, energy, and professionalism of that part-timer set the tone for your service offering.

The upshot: Most things the "big folks" do apply to you. Spend time sharing your vision with that part-time assistant, so that she or he gets it and transmits it to customers and vendors in a host of tiny ways. Consider profit sharing today, not tomorrow. A weekly or biweekly "What's up?" lunch is a must if you have even one employee.

6. Community. A friend started a real estate brokerage a few years ago. By the time she'd added her second employee, she was a pillar of her 35,000-person community. No rule says that only the local banker or car dealer should organize the program to raise funds for a special library program or send the high school band on a well-deserved trip. Participating in community affairs, with time more than dollars, is good business from day one. It gets your name around, adds to your distinctiveness, and, best of all, makes you an attractive employer (which is the key to long-term success).

7. Meticulous books. A good accounting scheme is not complex; to the contrary, a ninth-grader should be able to understand your books. But those books must paint an accurate, timely, and crystal clear picture of how your business is working. Better yet, your bookkeeper-financial adviser should buy your vision—and be buddies with the local banker. His or her credibility, more than yours, will get you that $7,500 line of credit that will, bet on it, be necessary at some point (e.g., after an ice storm knocks out power to the restaurant for six days, and $6,000 worth of perishable inventory rots before your eyes).

8. A pal. Whether a business partner or spouse, you desperately need someone to counsel with—someone whom you trust, and who supports you but is not a flatterer.

9. Perseverance. For Sam Walton (Wal-Mart) and Anita Roddick (The Body Shop), the path to success was marked by early snafus. There are a million things—literally, I think—to learn about running a business. No matter how many good books you read (start with Running a One-Person Business by Claude Whitmyer, Salli Raspberry, and Michael Phillips) or how many colleagues you consult, you'll do most of your learning the hard way. The key word, of course, is learning. Walton and Roddick learned from their early pratfalls, made adjustment after adjustment, and eventually came up with a winning formula.

10. Good luck. (Believe me, it helps!)