The Story You Tell Yourself About Your Business Might Be Wrong. Just because your explanation makes sense doesn't mean it's true.
One of the dangers of owning a business is that nobody knows it better than we do. Or at least that's what we believe. The longer we've been running it, the more confident we become in our understanding of how it works. Unfortunately, confidence and accuracy aren't the same thing."
Ask us why we target those customers, why we price the way we do, why we aren't growing faster or making more money, and we'll have an a very confident explanation for you every time. The answer will be logical and will fit our experiences in the context of what we believe about our customers, our competitors, and our industry.
It can also be anywhere from a few degrees off the mark to dead wrong. I know because I've done it. When you've spent years building something, you develop a strong sense of how you believe it works. But how you believe it works and how it actually works are not always the same thing.
Nothing Fails Like Success
Stephen Covey said nothing fails like success. Because we've been successful, we trust ourselves and our way of doing things, so we stop checking.
Don’t get me wrong, experience is a real advantage. After enough years in business, you’ve seen most problems before. You’ve watched companies outgrow their systems, you’ve watched good people fail because the organization around them was a mess and you’ve seen average products beat better ones because somebody delivered them the way customers valued. So when a new problem shows up, you don’t start from scratch, you probably already recognize it.
That is where it gets dangerous. The problem in front of you can look like one you've seen before - and not be the same problem. The more confident we have become at recognizing patterns the easier it is for us to believe we know the answer and quit looking for anything else we might not be seeing.
I see this in the entrepreneurs I work with all the time, and I catch it in myself doing it too. Someone starts explaining a problem and before they've finished, I think I know what's going on. Maybe I do. Or maybe I recognized something familiar and stopped listening before I understood what made this one different.
Experience should tell us the right questions to ask. It shouldn’t give us a reason to stop asking them…I'm still working on that one myself.
When a Question Feels Like a Challenge
I brace myself every time I ask an entrepreneur a question that challenges their explanation, because I never know what I’m going to get. Some get curious. Some stop and think. And some start defending.
I understand why. They’ve made years of decisions based on how they understand the business. Their money, their time, their reputation, and a good piece of their identity are in it. When I question the explanation, it can feel like I’m challenging their worth and ability.
I’m not. At least I’m trying not to. What I’m trying to do is get them to examine the thinking and beliefs behind their explanation.
Most owners don’t push back out of ego. They push back because they’re buried. They have a dozen problems on their desk, and an plausible explanation lets them mark this one as handled and move to the next. So when I question it, I’m reopening something they thought was closed and adding even more work and stress and friction to the pile.
That’s a fair reaction. But a problem they’ve justified isn’t a problem they’ve solved. It’s still costing them, and they’ve stopped looking at it.
It cuts both ways. When a student pushes back on me, my first reaction is: just because you don’t like my answer doesn’t mean I’m wrong. True. But just because I don’t like your challenge doesn’t mean you’re wrong either. And having more years in business doesn’t make my read correct.
So it’s not about them, and it’s not about me. Neither of us gets to be right because of who we are or how long we’ve been at it. It’s about testing our assumptions, mine included, and seeing which ones hold up.
Having an Answer Isn't Knowing the Answer
Entrepreneurs make decisions with incomplete information every day. We have to. You make an assumption, act on it, and adjust. Nothing wrong with that.
The trouble starts when the assumption hardens into a belief and the belief starts getting treated like a fact.
I hear the same statements from owners over and over. “Our customers are price-sensitive.” “We can't find good employees anymore.” “Our market is saturated.” “People won't pay for quality.” “We just need better marketing.” “We tried that. It doesn't work.”
My response is always the same: how do you know?
Most of the time, they don't. They have a story they've repeated so long it feels like a fact. Sure, in my experience, “we can't find good employees” is usually a management, training, or organization problem. “People won't pay for quality” usually means people don't value what you're selling. “Our market is saturated” usually means your offer isn't compelling enough. “We need better marketing” usually means customers tried you and didn't come back.
Now, I know those won't be the reasons every time that problem comes up. But my experience gives me a pretty good idea of where to start looking. That's the value of experience. It helps me form an educated assumption, but I still have to test it to find out whether I'm right.
Because if you never check your assumptions, you can spend a lot of time and money solving the problem you think you have, while the real problem goes untouched.
Logic Isn't Evidence
You can build a logical explanation for almost anything. Sales are down because consumer spending is down. Margins are down because labor costs went up. Employees leave because the younger generation has different expectations. Customers don't come back because the competition is discounting.
Every one of those sounds reasonable. Notice what else they have in common: none of them is your fault. That should make you suspicious.
A reasonable explanation is not a verified explanation. The test isn't whether your story makes sense. The test is whether the evidence supports it better than the alternatives. That's a higher standard, and meeting it starts with three words most owners hate saying: “I don't know.”
Know, Believe, Find Out
Here's the exercise I put entrepreneurs through. Take the explanation you're most sure of and sort it into three piles.
• What I know. What can I back up with reliable evidence? Numbers, records, what customers actually did.
• What I believe. What seems likely based on my experience and my assumptions?
• What I need to find out. What information would tell me which explanation is the right one?
Be honest and the first pile will be smaller than you expect. Most of what owners tell me they know belongs in the second pile.
That's fine, as long as you call it what it is. Things move between piles as you learn. What's not fine is going out to collect evidence for a conclusion you've already reached. That isn't investigating. That's building a defense.
What Would Convince You That You're Wrong?
This is the question I want you to sit with: what evidence would convince you that your explanation is wrong? I don't mean what would make you more confident, or what would support the decision you've already made.
Say you believe customers aren't buying because your prices are too high. Are your competitors charging more and still growing? Do your customers tell you price isn't their main concern? Are your most profitable customers the ones who care least about price? If any of that is true, price is probably not your problem, and cutting it will cost you margin and fix nothing.
You don't have to drop your judgment every time someone disagrees with you. But you should be able to tell me what evidence supports it and what evidence would change it. If your answer is that nothing could change your mind, you're not examining a business problem anymore. You're defending a belief.
The Goal Isn't to Be Right
My job is to make entrepreneurs better thinkers. I'm not trying to get you to memorize frameworks or repeat business terminology, and I'm certainly not trying to get you to agree with me. I want you to understand your business well enough to spot the real problem and make the call yourself.
That puts the same demand on both of us. You have to question what you believe, and so do I. Sometimes a student who pushes back is defending an assumption. Sometimes they're seeing something I missed. The only way to tell is to look at the evidence instead of arguing about who's right.
So the next time someone challenges your explanation, before you defend it, answer three questions:
1. What do I actually know?
2. What am I assuming?
3. What would convince me that I'm wrong?
You don't get better as an entrepreneur by winning arguments about your business. You get better by understanding it accurately enough to make good decisions.