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New Web Tool Calculates Biz Success Starting a business is not for the risk averse. But in an effort to help entrepreneurs assess just how much risk is associated with launching or running their business, StartupNation.com, a website that provides business advice and networking for entrepreneurs, recently introduced an Odds of Success Calculator. The business valuation device calculates a business owner's odds of success based on eight factors: amount of capital investment, difficulty in obtaining funds, quality of financial management, degree of business planning, annual industry growth rate, management experience, industry experience and timeframe. After a short questionnaire, the online tool computes the probability of success by accessing a database that compares the company against hundreds of thousands of data points of other companies. Calculating risk is imperative for starting any business. But just how accurate and trustworthy is even the cleverest business valuation tool? The Wall Street Journal blog, Venture Capital Dispatch, tested the calculator using Twitter's information. The Odds of Success Calculator gave Twitter a 46 percent odds of success over the next five years. The lack of confidence shown by the online tool for one of the most revolutionary startups underscores the improbability for any algorithm, much less one constructed of only eight variables, to provide accurate or even directional guidance. Think about it. If you were Evan Williams, the chief executive of Twitter, would you quit? That said, the Odds of Success Calculator addresses critical components like debt and management experience for any novice entrepreneur to consider. The calculator was born in response to the growing interest of visitors who wanted to learn whether they were on the right track or not. And the tool's entertainment appeal, with its quick, definitive results, is tough to pass on. --Deborah Song
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Sounds really cool. But is it actually possible to calculate biz success. God if it is really possible...
City of Hotels
The last 4 client launches we did were for entrepreneurs who would have miserably failed at the Odds of Success Calculator. Come to think of it, capitalism in general would have failed this test.
The Odds of Success calculator is a great "concept" that some entrepreneurs may find entertaining. You may even say its a smart marketing hook to get more people to interact with StartupNation and enter their marketing funnel, but it should never be used by an entrepreneur (or prospective entrepreneur) as a decision tool for getting into business.
http://www.encorpus.com
The calculator negatively impacts you if you have a small amount of capital resources in your business, but doesn't take into consideration the start up cost and overhead expenses of the business. It's extremely limited in the amount of information it is taking into consideration. I would put absolutely no stock in this thing whatsoever.
I agree with the other commenters - this calculator could be useful as a general guide, but has major limitations. There's no way to account all of the factors that go into a business' success; there are too many intangibles. The authors of The Power of Small point out that something as seemingly minor as small talk can make a business or save a life. Yet this calculator can't look at these smaller details that often make all the difference.
We think the tool's greatest value is the results page that's full of tips and links to resources that help you increase your odds of success. The value of the score itself pales in comparison to the learning and course correction that the calculator helps people make.
Regarding your conclusions about inaccuracy over a 5 year timeframe for Twitter, it might be interesting to your readers to understand that the long timeframe (5 years) significantly negatively impacted the odds for Twitter to be successful.
I entered all the same data that the WSJ writer did except I put in a 2-year timeframe. Twitter’s odds of success soared to 74%. And they still don't have a clear revenue model.
In theory, I don't like the tool either - the very spirit of entrepreneurship is adventurous, going against "the way it's always been done" and forging ahead on your own, in spite of the odds.
On the other hand, it could be a reality check for rosy-eyed dreamers.
I would use it as one of many indicators of success, but wouldn't allow it to deter me from my dreams.