Two people in my house — who shall remain anonymous — believe they are the foremost authorities in weather forecasting. Never mind that one is a COO and one is a high school student. (Oops, did I say anonymous?) Who needs to take meteorology or atmospheric science classes when you have eyes and can see when rain or snow is coming on “the radar”?
Of course, professional meteorologists aren’t always accurate either, but there’s a lot more to weather forecasting than simply looking at a map with a cursory knowledge of cloud formations under your belt.
My armchair atmospheric scientists aren’t alone. We frequently overestimate our own abilities, and almost all of us are guilty of it now and then.
One study found that 88 percent of Americans rate their own driving skills above average, and yet, statistically, someone has to be in the lower half. (It’s definitely not me.) Tragically, according to this psychological phenomenon, The Dunning-Kruger Effect, (or “Illusory Superiority”) those who have the least amount of experience are most likely to overrate their own skills.
Dunning-Kruger in Business
When we apply this fascinating human trait to starting, growing, and running a business, it doesn’t take long to understand the business failure rate. The Small Business Administration says that about two-thirds of businesses with employees survive at least two years and about half last at least five years.
After all, who among us hasn’t dreamed up the “perfect” business over dinner, staring at an empty retail space across the street? How difficult could it be to draw up a business plan, find real estate, fund and launch a new business, position it in the marketplace, advertise, find more real estate, cultivate new clients, hire dependable and knowledgeable people, develop new markets, stay on top of industry changes, lease equipment, manage accounts payable and receivable, payroll, taxes, and on.
There’s so much of time and effort in each of these tasks — many of them are very involved, even for those with expert skill and knowledge.
It’s not easy. But we often don’t realize it until it’s too late.
When it comes to starting, funding, growing, and running a business, leveraging all your available resources, including the financial experts at First Business, just makes sense. Especially when you consider the Dunning-Kruger Effect — what are the chances that you’re overestimating your abilities to optimize your business cash flow, attain a small business loan, or to grow your business organically?
As a bonus, consulting with financial experts is less time-consuming and costly than going back to school for an advanced degree in meteorology. But who needs that when you have eyes and a radar?