Why this attitude may kill your business

14 December 2017 Category:
Business ideas

‘Fake it till you make it’ may be a classic business mantra, but it could be sinking your company.

In recent years, the UAE has become known as a leading location for startups. Perhaps the leading location. Indeed, a huge 95% of businesses in Dubai are SMEs and new enterprises, according to figures from Dubai SME.

The World Bank has shown that while the total number of days it takes to launch a new venture has decreased dramatically over the years (down to just 20 days as of 2016), it takes far longer for a company to become a success and see profit.

What’s more, the chances of a startup failing before it has a chance to flourish is high. Around one third of new companies will close within the first two years of launching, according to the US Bureau of Labor Statistics. There are a great many reasons for this staggering statistic, but for now, let’s focus on just one issue that you may come up against – startups are unable to gain the same reputation and respect as a well-established business.

So should you fake it?

Should you attempt to make your business appear larger and more established than it actually is?

Should you attempt to make your business appear larger and more established than it actually is?

It’s a precarious move that could jeopardise your company’s standing, damage relationships, and ruin your reputation. But there are benefits to it as well.

With that in mind, let’s look at the upside – and the downside – of faking it until you make it. 

The upside – how faking it ‘till you make it can lead to success

Over the years, there’s been a wealth of research into how creating the illusion of success can ultimately lead to it. With that in mind, here are some of the reasons that business leaders often subscribe to this notion.

1. Building trust: Startup founders come up against a major disadvantage known as the ‘liability of newness’ problem. The term was first coined by Professor Arthur Stinchcombe to describe the lack of legitimacy and access to external tools (particularly alliances/relationships, access to resources, as well as clearly defined employee roles) that many new business owners face. Building said legitimacy is difficult in the short-term, given that the venture is still new and the founders have yet to prove their business acumen.

In order to succeed, then, an entrepreneur must seek to build a level of superficial trust. This is a fundamental ingredient in the recipe for success, since building professional relations will be at the core of the company’s values.

To gain this level of confidence, a business owner may create the appearance that the company is more established than it is. Doing so could include creating a virtual business address, using alias emails to make your staff numbers appear larger, or taking on projects and outsourcing some aspects of them.

2. Gain influence: Networking ought to be a major strategy when starting a venture of any type; businesses rely on people and connections. For that reason, you should never underestimate the value of being a social influencer and having the ability to gain power within a group.

According to a 2013 report by the Association for Psychological Science, faking your abilities or appearing more valuable than you are can lead to having a higher rank within a group of people. Those who feel (and therefore express) power or happiness when entering a new group for the first time, find they continue to be perceived in that same positive way for some time afterwards.

3. Confidence = better prospects: It’s no mystery that those with confidence tend to get more opportunities than others. In fact, research from the University of Melbourne found a strong correlation between a person’s confidence levels and their occupational success. After conducting a hundred interviews, researchers found that individuals who reported high levels of self esteem and belief throughout their lives went on to have higher wages and roles than those who did not.

If an entrepreneur can exude a level of confidence in their dealings, no matter how immature the venture may be, they may be able to influence its success. That is to say that believing in your company from the very beginning could be the key to making things work. 

Downsides – why faking it can lead to your downfall

Given what we have discussed so far, it’s understandable that many believe in the power of the ‘fake it till you make it’. However, it’s by no means a blanket solution to every problem the new entrepreneur encounters.

In fact, it can actually have counterproductive results.

1. You get caught: Mastering customer relationships early on can make all the difference to the lifespan of a business. Since customer acquisition costs more than customer retention, the greatest way to create a sustainable business is to keep your clients coming back for more. For example, in the financial sector, a 5% jump in customer retention leads to an astronomical 25% boost in profits, according to Bains and Co. Should a client catch you in a lie, they will lose faith in your abilities – and once lost you’re unlikely to regain the trust, or the client.

Mastering customer relationships early on can make all the difference to the lifespan of a business.

2. Reputation damage: In the same vein, if you are found out to be actively deceiving those around you, your reputation will take a big hit – whether that’s with prospects, clients or your internal team. Soon enough the truth comes out and when it does your reputation as a business owner will likely be damaged irreparably.

The Harvard Business Review recently reported that companies with a publicly ‘bad’ reputation had to offer employees a salary increase of 10% to acquire the same talent as other businesses. In short, the consequences of you ‘faking it’ could well cost you more in terms of staffing.

3. Overestimate your ability: Finally, in the course of faking it, you may start to believe your own hype. That, in turn, could lead you to overestimate your abilities and take on projects beyond your capabilities. If you’re unable to fulfil the requirements of projects for your clients in a timely manner, it will have a negative effect on your retention rates which, as we’ve covered, can be catastrophic for your bottom line. 

Tips for getting the balance right

While to a certain extent, new business owners may wish to fake the scale and standing of their venture, this can be a tricky endeavour. The solution, as with so many things in the professional sphere, lies in balance.

So here are some final tips that will aid entrepreneurs in striking the right chord from the offset.

1. Identify (and strengthen) areas of weakness: Faking it often means compensating for discrepancies within the business. While disguising these is a short-term solution, entrepreneurs must not overlook the importance of dealing with them. It’s a wise move to make plans that will help to bolster these areas and improve the business on the whole.

Luckily, here in the UAE, there is an array of incubators and support systems in place that can aid startups in most areas. As part of the national Dubai Entrepreneurship & SME Development Agenda, sector-based advancement programmes and advisory services are being set up all over the country. Therefore, business owners have no excuse for failing to strengthen their arsenal.

2. Outsource to meet demands: In the initial phases of business, outsourcing could well be the solution to many of your problems. Should you encounter a project that is too large to complete, you may wish to take it on regardless and contract out the work you cannot fulfil.

There are approximately 24,000 outsourced white-collar workers and 60 contract-staffing agencies in the UAE currently, according to an annual report by Grayfoard Consultants. Hence, finding the right workers to aid you in projects ought to be a straightforward and seamless task.

There are approximately 24,000 outsourced white-collar workers and 60 contract-staffing agencies in the UAE currently, according to an annual report by Grayfoard Consultants.

3. Avoid deceiving your clients: Above all else, you must understand that faking it is not the same as actively deceiving your clients. As we’ve covered at length, genuine deception can ruin your reputation and standing. Entrepreneurs should use their own judgement and savviness to determine what is appropriate in each situation and what is not. 

A balanced approach

In the end, the ‘fake it till you make it’ attitude may yield results in some instances, but shouldn’t be relied on too heavily. As the leaders of the future, we should set goals of strengthening areas of weakness within our companies and staff, understanding that faking it is at best just a temporary and potentially fragile solution.

Setting up your own business has never been easier. Virtuzone takes care of it all so you can focus on what matters – building your business. For more information about company formation in the UAE mainland or free zones, please call us on +971 4 457 8200, send an email to info@vz.ae, or click here.

About the author: Neil Petch, Chairman at Virtugroup
About the author: Neil Petch, Chairman at Virtugroup

With a history of business successes, Neil Petch is well known in the UAE and beyond as a visionary entrepreneur with a passion for helping others establish and grow their own businesses. Neil founded Virtuzone in 2009 and quickly established it as the region’s leading company formation expert, before launching Virtugroup, a holding company that has a wider mandate of supporting startups from establishment; to successful market entry; and all the way through to exit.