For small business owners, consultation means fewer missteps

May 04, 2011
UC's Jeremy Woods investigates pitfalls made in small business decision making by interviewing Cincinnati-based entrepreneurs. Credit: Dottie Stover, U. of Cincinnati

If small business owners want to avoid costly mistakes, it pays to consult with others.

That's the finding of new research from the University of Cincinnati that will be presented both nationally and internationally – first on May 6-8 at the Family Enterprise Research Conference in Grand Rapids, Mich., and again on June 15-18 at the International Council of Small Business Conference in Stockholm, Sweden.

The research was conducted by one-time entrepreneur Jeremy Woods, currently a doctoral student in UC's College of Business. With this research, Woods has set out to integrate his hands-on business experience with evidence-based studies. His interest in small business decision-making mistakes stems from his activities as the owner of a licensing business in the international music industry, a time when he made serious errors related to product design and pricing.

Because he is all too familiar with the pitfalls of decision making in small business, Woods is researching escalation of commitment, a phenomenon where business owners justify increased investment in a course of action based on the cumulative prior investment, even if the cumulative cost of continuing with the original course of action outweighs the expected benefits.

"In other words, small business owners continue to pursue failing ventures simply to prove that they were right," says Woods, " We've all had the 'I'm going to make this work' feeling, but sometimes the best decision is to walk away – an action that doesn't come easy for driven and determined entrepreneurs."

Fortunately, according to Woods' research, the escalation of commitment phenomenon can be avoided by systematically seeking the input of respected colleagues.

"Consultation with outside advisors can bring more information and fresh perspectives into the decision-making process and convince business owners to pursue alternative options," says Woods, who based his research on the Panel Study of Entrepreneurial Dynamics, a national questionnaire sponsored by business professors studying entrepreneurship. The questionnaire surveys more than 1,200 start-up business owners across the country. Woods mined that data and discovered a significant correlation between consulting with outside advisors and achieving revenues sooner.

Woods will now take his research further. Starting in May, he will work with more than 400 research participants, including small business owners and graduate business students, presenting each with a business scenario involving pursuit of a sluggish sales prospect and experimental manipulations for consultation with outside advisors. After reading the scenario, research participants will answer questions about the decision-making process, including their confidence level and their perception of the value of the course of action they are pursuing.

"This is when the real fun begins," says Woods, who looks forward to conducting in-depth interviews this summer with small business owners. "Not only do we have the opportunity to give small business consultants some concrete, empirical findings to justify the value of their suggestions. We also have the opportunity to work together with small business owners to identify practical ways to choose between alternative courses of action."

Explore further: Study looks at stock market performance of polarizing brands

add to favorites email to friend print save as pdf

Related Stories

JPL teaches how to get space contracts

Oct 16, 2007

The U.S. space agency's Jet Propulsion Laboratory is sponsoring a workshop to teach small business owners how to obtain space-related contracts.

Yelp to let businesses comment publicly on reviews

Apr 09, 2009

(AP) -- The review Web site Yelp, which has garnered some criticism from the businesses put under its microscope, will soon let those businesses and others respond publicly to customers' critiques.

Recommended for you

Which foods may cost you more due to Calif. drought

15 hours ago

With California experiencing one of its worst droughts on record, grocery shoppers across the country can expect to see a short supply of certain fruits and vegetables in stores, and to pay higher prices ...

Performance measures for CEOs vary greatly, study finds

Apr 16, 2014

As companies file their annual proxy statements with the U.S. Securities and Exchange Commission (SEC) this spring, a new study by Rice University and Cornell University shows just how S&P 500 companies have ...

Investment helps keep transport up to speed

Apr 16, 2014

Greater investment in education and training for employees will be required to meet the future needs of the transport and logistics industry, according to recent reports by Monash University researchers.

User comments : 0

More news stories

Newlyweds, be careful what you wish for

A statistical analysis of the gift "fulfillments" at several hundred online wedding gift registries suggests that wedding guests are caught between a rock and a hard place when it comes to buying an appropriate gift for the ...

Can new understanding avert tragedy?

As a boy growing up in Syracuse, NY, Sol Hsiang ran an experiment for a school project testing whether plants grow better sprinkled with water vs orange juice. Today, 20 years later, he applies complex statistical ...

Roman dig 'transforms understanding' of ancient port

(Phys.org) —Researchers from the universities of Cambridge and Southampton have discovered a new section of the boundary wall of the ancient Roman port of Ostia, proving the city was much larger than previously ...

Crowd-sourcing Britain's Bronze Age

A new joint project by the British Museum and the UCL Institute of Archaeology is seeking online contributions from members of the public to enhance a major British Bronze Age archive and artefact collection.

Better thermal-imaging lens from waste sulfur

Sulfur left over from refining fossil fuels can be transformed into cheap, lightweight, plastic lenses for infrared devices, including night-vision goggles, a University of Arizona-led international team ...

Hackathon team's GoogolPlex gives Siri extra powers

(Phys.org) —Four freshmen at the University of Pennsylvania have taken Apple's personal assistant Siri to behave as a graduate-level executive assistant which, when asked, is capable of adjusting the temperature ...