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Berkonomics

Is it YOU or your great plan?

So, what do you think is more important?

There may be more choices here. But the most important ones for any size business, including start-ups, is: Do you believe it should be the quality of your management team, or the plan you execute so brilliantly toward your success?

Do you want a unanimous answer right away?

Checking with professional investors from angels to VC’s, the answer appears to be near unanimous: the quality of the proposed or actual management team comes in a strong first before the attractiveness of the business plan itself.  The quest for a great management team is not a fluke, but rather a result of backward looks at the failure rate from past investments by those same angel investors and venture capitalists.

Here’s a test:

Several weeks ago, we published statistics of start-up and company failures. If you read that analysis of statistics for startups and early-stage businesses, you have learned the truth that at least half of the businesses backed by professional early-stage investors will die within three years or less.

And it’s a tough test at that.

[Email readers, continue here…]   That reality is a tough one for the professional investor, almost as tough as for those entrepreneurs who lose their businesses.  The latter can start new businesses, flush with the experiences gained from the previous effort and much the better for it.  But the investor’s cash is lost forever – and the experience gained usually is just another notch in their investor belt.

And here is the conclusion:

It is the management team, most often led by a passionate entrepreneur with experience in the industry, which makes the biggest difference between success and failure, even for businesses built upon less than sterling basic ideas.  Among professional investors, almost all would rather back a great team with an average idea before backing a great idea and inexperienced team.  It comes back to coachability and flexibility, also our insight from several weeks ago.

Great teams always have the advantage.

As a reminder of that conclusion: Great teams are flexible and have the advantage of experience in seeing the pitfalls before them from their past.  They are coachable in that they have taken advantage of the vast experience of others in overcoming obstacles and finding ways to speed a product to market faster or create a service whose quality exceeds that of the competition.

Of course, you could be the exception.

None of this is to say that an inexperienced entrepreneur cannot lead a great new business.  But it would be foolish to try without being surrounded with as many experienced co-leaders as possible from the outset.   As a start, that smart entrepreneur will soon “know what they don’t know”, an important qualifier for success in any business endeavor, when combined with the willingness to fill gaps in knowledge with help from those who have the experience to do so.

Even if you are not considering taking in money from professional investors, this advice would serve you well in protecting your own monetary investment.

  • Denise Anthony

    Great insight!

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