Sunday, October 16, 2005

Amish Entrepreneurs

I recently finished a book about how the Amish are leaving the farm because of the high cost of farmlan, and are starting businesses, and how, despite having less than a high school education, with little experience in business, with very little familiarity with technology and, of course, with limits on how they can use technology, they are doing better at it than a lot of non-Amish.

I was particularly struck by this statistic, at the start of chapter 12 of Amish Enterprise, by Donald Kraybill and Steven Nolt:
The story of Amish enterprise is largely a story of success, with only scattered tarnishes of failure. The default rate among small business in general is rather sobering, however. Nearly one-quarter of new American firms fold within two years, and some 63 percent close their doors within six years. During the 1980s, the rate of business failure nearly matched that of the Great Depression. The Amish launched more than 40 percent of their business ventures in the 1980s, but surprisingly, fewer than 5 percent of the Amish operations failed.

Wow! How do they do it?

Well, the authors don't lump all the reasons for their success in one place, so I'll miss some, but here are the reasons I remember:

- They start small, often in their homes or in outbuildings near their home.

- They start (and stay) simple, which keeps their costs down. Their culture frowns on luxuries and showing off, either for them personally or in their businesses. So their overhead is low. They're not big on splashy advertising, either, so they - to some extent - avoid one of the big costs of business - marketing. (I guess when you avoid self-promotion, you really have to rely on word of mouth.)

- They don't mind hard work (they're coming from a farming background, remember) and are willing to work long hours. What's interesting is that they don't regard work and family as separate and competing. They try (not always successfully) to make it a family activity. Mom and Dad run the business and the kids sweep up or do other chores.

- They are scrupulously honest. People like doing business with people they trust. Duh!

- They focus on high quality.

- They live simply, which means "cheaply," so they can charge less and still make a profit, and since they're not spending the money on indulgences, much of the money they make goes back into building their businesses.

- They help each other. If a business is having trouble, other Amish business people help out.

There are other things, like - well - just being Amish, which attracts customers because of its novelty, but the other things I can think of aren't transferable. If you pick up the book, by the way, it's a sociological study, not really a business book

This also reminds me of a most excellent business book, called Good to Great (Jim Collins), which I read a while ago. The one thing I remember without reviewing is what the author regards as the main reason why some companies that are just chugging along in their industry suddenly (apparently suddenly) break out of the pack and become excellent and remain so for at least 15 years. It's not what you think. It's not a great plan; it's not a brilliant CEO; it's not clever financing or deal making; it's not a revolutionary product, it's not "getting control of the purse strings" - it's a humble but determined CEO. He (or she) is determined to make the company successful, but figures he doesn't have the skills to do it himself, so he humbly hires the best possible people.