Plain Luck Or Smart Business Sense: How To Tell The Difference

Knowing the difference between good business sense and luck can save you from missteps.

A little luck can go a long way in growing a business, but as I discussed in a four year old post from my Inc. magazine column, the challenge is knowing the difference between good business sense and plain good luck.

I’ve had my share of luck over the years, but sometimes being lucky can give you false confidence. In my column, I referred to my chain of fast-casual Japanese restaurants, Kobeyaki, which currently has six locations in the New York City area.

“My partners and I want to take the chain national someday, for which we’ll need outside investment, but our immediate goal is to prove the concept and the model. That means having five to seven profitable locations throughout New York City.”

We chose high lunchtime and dinner traffic areas for our first two locations. They were a big success very quickly. Riding on the high of our first two successes, we chose a third location in a more residential area, and immediately ran into problems. Sales were half as well as the other two locations. Suddenly I was doubting the business sense that guided us to choose that spot. Then two financial investors experienced in building restaurants stopped by and later visited with me in my office.

Upon hearing about the disappointing performance of our third location, they advised me not to worry too much about it. In fact, what they found surprising was how quickly the first two restaurants became profitable. Normally it takes up to a year or more to get established. It turned out that our third location was behaving more like most restaurants. Now, don’t get me wrong.

“Our success hadn’t been luck. We’d deliberately chosen the first two locations because of their foot traffic. The lucky part was that, without realizing it, we’d short-circuited the typical process for building a following. That, in turn, had the unlucky consequence of giving us false expectations about how fast we could do it elsewhere.”

The realization shifted my thinking about the third location. Instead of talking about closing its doors, my partners and I looked for creative ways to build a following. That location is doing fine now, and we’ve since added three more.

“I’m lucky those two guys stopped by.”

You can read my article in its original form at Inc. Magazine’s website.

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