Honesty Is An Entrepreneur’s Secret Weapon


A version of this article previously appeared on Forbes.

Standing on the courthouse steps, moments after receiving his permanent residency Green Card, John Lennon was asked if he harbored a grudge against the Nixon Administration for tapping his phone, putting him under surveillance and mounting a multi-year attempt to deport him. Without missing a beat, John smiled and said, “Time wounds all heels.”

Truer words were never spoken.

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Not only was the phrase apt in Lennon’s case, it is also highly applicable to the business world. In the pre-Internet age, it was easier to successfully execute a business model based on screwing everyone once. Although this has never been a particularly effective approach, it was more plausible before the Internet allowed consumers to effortlessly share their experiences on a global level.

In order to be successful at multiple, successive ventures, you cannot leave a trail of broken relationships and angry stakeholders in your wake. Dishonesty can result in near-term gains, but it never leads to a successful, life-long career.

Honesty Matters – Honest

Multiple surveys confirm that honesty is one of the most common traits of serial entrepreneurs. In his book, The Entrepreneur’s Manual, Richard White cites a survey of venture capitalists which ranks honesty as the single most important characteristic for serial success.

In their book, The Leadership Challenge, James Kouzes and Barry Posner reference three surveys, each of which lists honesty as the most admired trait among successful leaders. This characteristic was valued over other important attributes, including competency, visionary skills and charisma.

Successful serial entrepreneurs know that their professional relationships are valuable assets worthy of careful nurturing. Employees, investors, customers and suppliers seek entrepreneurs they trust.

Sales to existing customers traditionally account for the majority of a startup’s revenue, ranging from forty to sixty percent of annual sales, according to the authors of Guerrilla Selling. In most instances, it is less expensive to maintain an existing customer than to cultivate a new one. Thus, entrepreneurs have a significant incentive to develop and maintain long-term stakeholder relationships built on honesty and trust.

Dishonesty increases the friction associated with establishing such stakeholder relationships and is thus a major handicap to success.

Three Things About You

Startups are all-consuming. At times it can be tempting to compromise your principles in order to meet a short-term objective. One way to avoid rationalizing unscrupulous behavior, in the name of survival, is to establish a strong corporate culture that defines acceptable ethical boundaries and acts as guideposts for you and your employees.

Guy Kawasaki encourages entrepreneurs in his book The Art of the Start to reflect upon the following: “It is the end of your life. Write down the three things you want people to remember about you.” It is preferable to be remembered as someone who failed with dignity than someone who won dishonorably.

As John Lennon realized, time settles all accounts. Unethical behavior might help you achieve a monthly, quarterly or even an annual goal. However, unscrupulous decisions will ultimately jeopardize your venture’s chances of long-term success. Protect your startup’s honesty advantage by always doing the right thing, no matter who is, or is not, watching.

Follow my startup-oriented Twitter feed here: @johngreathouse. I’ll never tweet about dishonest politicians or that killer burrito I am about to devour – just startup stuff.

Image : Wikipedia


John Greathouse

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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