Fearless Money

AHA! I found the main source of the discouraging lie so many repeat without thinking. You know the lie, "8 out of 10 businesses fail in the first five years, and another 8 out of 10 of those fail in the next five years.". It is from “The E-Myth Revisited” and it is complete bull.

Those numbers are a classic example of lying with statistics. They count all business state-changes as failures, and assume that all ends-of-businesses are failures. If you follow the supposed web 2.0 business model of building to flip, and against all odds you make it happen, have you failed? By this way of thinking, you would be counted as a failure. The business is no longer in existence, it got absorbed. So, a failure, even if you made millions. Ridiculous!

Perhaps you killed your LLC in one state to create a Delaware Corporation. That’s a normal move in the early life of a lot of businesses which are growing and thriving. By the E-Myth way of calculating, that would be a “failed business.” That’s a skewed statistic indeed, and I think people need to challenge it more often.

As an even more basic observation, let me point out that studies show that more than half of businesses which really do go out of business do so for reasons which have nothing to do with “failure”. They are for personal reasons such as relocation, family issues (including divorce). In the majority of these cases, the profitability of the business was never in question, in fact the majority were profitable when they closed the doors.

Starting a business is hard, but it really isn’t the complete crapshoot that the lying statistics would have you think. Don’t let the doomsayers and the seminar peddlers (like the E-Myth people) lie you into making you think it is any harder than it actually is.

For what it is worth, I do like a lot of what I read in “The E-Myth.” There’s a lot of value in there, but when a book starts with a lying twist on statistics, purely to pump an agenda of “look how wrong everyone else is and how right I am”, I personally have a hard time looking past the lies for the nuggets of truth. In fact, I question whether it is worth my time, which is why I’m having a hard time finishing this book.

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