Being a small business owner requires that you make decisions—often on the fly, and in the face of ambiguity and risk. But when you understand how your mind can trick you during the process of making these tough calls, you can better determine when it’s really best to go with your gut, and when to ignore it.
Here’s a look at four mind tricks all business owners can transform into tools that contribute to greater success.
Mind Trick #1: The endowment effect. The endowment effect causes us to value things we perceive as “owned” more than things we don’t. Researchers have found that sellers who perceive themselves as owners of an item tend to value it 2.5 times more than identical items for which they feel no ownership.
How to Use It: The degree to which you embrace the title of small business owner may dictate your long-term success—especially when running a profitable business becomes challenging. Regardless of whether you maintain a full-time job and consider your business “a side gig,” run your business from your dining room table, or manage a team of exactly one (yourself), own it! Introduce yourself as a business owner at networking events, make it your “title” on social media profiles—and most importantly, embrace it in your own mind. Believing you are an entrepreneur could be the secret sauce to succeeding as one.
Mint Trick #2: Pro-innovation bias. This mind trick leads you to ignore where an idea or product might fall short in the eyes of the public, simply because it’s unique, new to market, or interesting to you.
How to Use It: Test before you invest. The principles of “The Lean Start Up” method are founded on this notion, for good reason: You can be “too close” to your own idea to judge it objectively. Taking a moment to seek the unbiased opinions of others can save you immeasurable amounts of time, energy—and money. Free tools like Survey Monkey and the many social media channels that are at your disposal instantly connect you with people who are more than happy to give their input.
Mind Trick #3: Survivorship Bias: This tendency to focus only on the ideas that support what you want to happen can create costly blind spots in judgment. If you want to open a paper store, for example, this mind trick might lead you to focus on the fact that there are two others in your area that have thrived for decades—while making it all too easy to ignore the many digital trends that have put many print stores out of business.
How to Use It: Expand your competitive research to include the worst-case scenario. Studying what your competitors do is par for the course when you own a business—but do you examine what those who are now out of business did that contributed to their demise? Being mindful of your competitors (even those of days past) missteps can be among the most important research you conduct.
Mind Trick #4: Zero-Risk Bias. Though business owners tend they view the risks, they take as calculated and strategic decisions, humans are inherently wired to reduce uncertainty. It’s basic survival instinct. Unfortunately, inertia can be more costly than the chances you do take when you own a business.
How to Use It: When you’re grappling with risk and uncertainty, put it in context. Seek out as much quantitative data as possible and focus on the outcomes you wouldn’t normally consider. If you’re debating an expansion of a product line, for example, your tendency may be to focus on the costs of marketing new products, and potentially, holding inventory you can’t sell. Once you explore the other side of the coin, however, you may find that hindering the growth of your business produces far greater risk than assuming some period of uncertainty.