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How to Deal with Stupid New Business Ideas

By GEOFF WILLIAMS

February 5, 2010

Someone comes to you with an idea for a new business and asks for your opinion, as an entrepreneur. No doubt about it. The idea looks dead on arrival.

But think carefully before you speak. If you tell the truth, you crush someone’s entrepreneurial spirit. If you say nothing or feign a thumbs up mentality, you could regret it later when the poor guy or gal goes down in financial ruin.

So what should you say?

Obviously, there’s no right or wrong answer, but everyone we spoke to seems to agree about that speaking carefully part. So here are some thoughts to consider before you open your mouth.

Be honest. “You’re not being a very good mentor or advisor if you don’t tell someone what you really think,” says Anthony Citrano, a photographer and entrepreneur who has started four companies.

Donna Flagg, president of the Krysalis Group LLC and author of Surviving Dreaded Conversations, concurs with Citrano. “I can’t think of a good reason why someone would withhold what they think or how they feel, especially when it could be beneficial to another person. That said, I do not think it’s necessary to tell someone that he or she has a ‘stupid’ idea. Being mean is not the same thing as being honest.”

Instead, lead the discussion to why the idea is unworkable. Play Devil’s Advocate, or think of yourself a business therapist, there not to tell your patient what to do, but to guide him or her to the right answer. “Entrepreneurs by their very nature don’t take no for an answer,” says Citrano. “They can’t be told something’s not workable. They have to come to that conclusion on their own.”

If you think it’s a stupid idea, but this person wants to pay you to make the business work, ethically, should you accept the money? It’s your call. “If you’re a consultant and give away free advice, you’re giving away the only thing you have to sell,” reasons Linda D. Henman, Ph.D., president of Henman Performance Group, based in St. Louis. She considers it unethical to tell entrepreneurs their business isn’t workable before agreeing to be a paid consultant. “Unless I have taken the time to understand your business, how could I possibly give you advice? The other thing to consider is liability. If I give you advice, and you haven’t even hired me yet, I incur all the legal liability associated with my advice with none of the benefits.”

But you can always back out of the project without giving advice, if you really think this business is a losing proposition. That’s the route Steve Dubin, who owns PR Workzone in Kingston, Massachusetts, takes. He says, “I get approached by many entrepreneurs who think they’ve got the next pet rock. More often, they have Lawn Darts — something either dangerous, stupid or of little interest to sane people.”

He says that “for the obvious miscue, we wave the white flag. For the odd shaped peg, we give it a shot.” And because of that, he sleeps well at night.

Before you dismiss an idea, remember that no matter how unworkable the idea, it may work. Now, this doesn’t discount all of the above — if you truly think an idea for a startup is idiotic, you have to hold true to those beliefs. But it can’t hurt to have an open mind about the idea either.

Eva Rosenberg, who writes a syndicated tax column for Dow Jones’ Marketwatch.com and holds tax workshops, was humbled a couple times on this score — and is now very careful about labeling any business idea stupid.

Back in college, a buddy in Rosenberg’s marketing class was so impressed with her marketing ideas that, just before the semester ended, he offered her a position in his new company. He was going to invest in a fleet of airport vans, pick up travelers at their front door and take them directly to their terminal. It would cost about $20 per person.

Figuring people could get a bus for $3, she didn’t see the appeal, politely begged off, and next thing she knew, her classmate had created a thriving company that he later sold for a hefty sum.

She also remembers going on a job interview back in the day. The interviewer described what the cable TV company did, as Rosenberg listened respectfully, all the while thinking this business would never fly — not when people had seven, maybe eight, free TV channels at their disposal. Who was going to ever pay to watch TV?

“I thanked the kind man and backed out of there carefully, since clearly, I was dealing with a lunatic,” says Rosenberg, before adding ruefully: “You already know what happened to the cable industry.”

Geoff Williams is a frequent contributor to Aol Small Business. He is also the co-author of the new book Living Well with Bad Credit