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The Fatal Assumption

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Crunchy sweet graham cracker crust. Organic, extra-tart lemons. Glistening meringue exploding from the top of a pie like a billow of clouds in the sky. Katie’s pies were magnificent. But a fatal assumption was on the horizon.

For years everyone said, “Katie, your pies are so good, you should start a pie business.” And so she did. She called it, “Katie’s Pies From The Sky.”

From the day she opened it was a busy, fast-growing place. But the more Katie’s business grew, the more it seemed to fall apart:

– Out-of-control costs.

– A bookkeeping mess.

– Not enough lemons but too much meringue.

– No plan for the day and no vision for growth.

Customers loved Katie’s pie but refused to come back because the pies were often sold out.

Eventually things became such a mess that Katie longed to return to her 9-5 job. She wondered, “how did what started out so good turn out so bad?”

What is the fatal assumption?

In his book, “The E-Myth Revisited,” my friend Michael Gerber observes that small business owners make Katie’s mistake day after day. They start a small business with “the fatal assumption.” It’s the #1 reason why 40% of new businesses fail within two years.

The fatal assumption is a mistake made by bakers, musicians, writers, lawyers.

People like Katie, who because they are excellent at doing the technical work of a business, they go into business for themselves. But because they only know the technical work of that business, the business is doomed from day one.

The fatal assumption:

because you know how to do the technical work of a business you think you know how to build a business that does that technical work.

This just isn’t true. Doing the technical work of a business and operating a business that does that technical work are two different things.

While it sounds counterintuitive, knowing how to do the technical work of a business is often the greatest liability for new business owners. Why? Because it makes them think they know how to build a business that does that technical work.

Overcoming the fatal assumption

Novice entrepreneurs often don’t realize that an essential skill for succeeding in business is knowing how to hire, fire, plan, budget, manage and market. Interestingly, if entrepreneurs had to hire the technical work done, they would be forced to focus their time on making their business work.

I personally observed this business truism with one of my sons, Corey. He founded what is now a multi-million dollar INC 500 company. Yet at the time, he had little knowledge of how to do the technical work of that business. He simply hired it done.

My advice to new entrepreneurs? Partner with an experienced entrepreneur who knows how to build a business, any business.