Entrepreneur pitch competitions like this presume the experts are right. Photo CC by Vin Crosbie on Flickr
I’m not a big fan of business plan or startup competitions for small towns. I especially don’t like shark-style pitch competitions.
I do love that you’re taking action to support more startups and entrepreneurs. I like that you’re including training and support for everyone who participates. (You are, aren’t you?) I can even live with the package of services you’re awarding as prizes.
Here’s what I have a big problem with: You’re trying to pick winners.
Let’s go back to the Idea Friendly behaviors list to see what’s wrong with that.
Which set of behaviors describes the competition/shark model? That’s classic Old Way. It’s a formal process closed except for those selected to join, with a few people in control who decide in isolation which one business idea to bet big on and hope it doesn’t fail.
What does New Way business encouragement look like? It’s going to be an informal, chaotic way of bringing together a lot of people, maybe even a crowd of people, all trying their business ideas with small tests, connecting everyone with resources and support, and helping them learn from the smallest failures possible. There is no judging.
The idea Friendly way to encourage new businesses in your small town could be any of these:
- It’s a “come try your business idea” pop-up fair
- It’s a combination of business training and actual business doing
- It’s giving support to the people you find who are already trying tiny business ideas so they can learn and grow
Which way will generate more business startups? Which way generates more actual tries, more small fails, more learning?
If you’re with me in concept, but you already have a competition project you have to work with, let’s slide it a little more towards Idea Friendly on the behavior scale.
How can you make your existing business competition more Idea Friendly, even if you’re in a small town?
- Add a pop-up event where all the contestants can test out their ideas for a short try. Invite the public and let attendees vote with their money.
- Spread the prizes out to a lot more than just one winner. Have a year’s worth of free rent? Don’t award the full year to one winner. Award one month each to 12 contestants. Split up your big prize package of services, too.
- Match the prizes to the contestants who could most use them. Give the marketing help to the one who has a promising start but just needs to reach more people, and give the business counseling to the one who has never been in business before and is likely to have more problems that they aren’t sure how to deal with.
- Turn your judging panel into “venture capitalists of new ideas.” Their job isn’t to pick one winner. It’s to match up each person with the resources, opportunities to test, and services that will best help them succeed.
The old way feels more efficient because you’re focusing all the benefits on the one or few most likely to succeed. But how do you really know who will succeed? Even experts aren’t as good as crowds at picking the best one, as James Surowiecki pointed out in the Wisdom of Crowds. For all their caution, venture capitalists, well-trained loan officers and even business advisers will admit they have backed businesses that failed.
And how efficient is it to award the same prize package of services to the single winner, no matter what their business needs are? How many services go unused or are actually wasted?
Instead of aiming for efficiency, shoot for effectiveness. You’ll be more effective by backing the crowd than backing only one. You’ll be more effective by matching the services to the startups that need them.
Take the judging away from a few selected judges and turn it over to the crowd. Let the people vote with their money. Because the ultimate judgment of whether a business will succeed belongs to the customers.
This article originally appeared in A Positive View of Rural, Becky’s weekly newsletter. You can get her special articles in your email by signing up here
I will not sell or rent your name to anyone else because I wouldn’t like that either.
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Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband have a small cattle ranch and are lifelong entrepreneurs. Becky is an international speaker on small business and rural topics.
You and me both regarding the issues surrounding business plans. Not only are businesses plan competitions a waste of time, so is the time and efforts to complete them. There’s an old military quote that is appropriate here, “No plan survives contact with the enemy.” Same goes for meeting your customers in the marketplace. While working on a business plan helps orient you mind in business terms and processes, getting back up from failure is the only rule for success.
Think three to four steps ahead at the 30,000 foot level, but looking too far up and out can skew your views next to the ground.