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Make Money. Be Amish

Half of all new businesses fail in five years.

Unless they’re Amish.  Amish businesses have a 95% success rate.  The Amish economic engine — in places like Ohio, Indiana, and Pennsylvania, where the recession has hit especially hard — is roaring.

Jason Zasky, in FailureBlog, asks Erik Wesner, author of Success Made Simple: An Inside Look at Why Amish Businesses Survive why this is so.

He offers a brace of interesting answers.  One, they don’t sue:

In the business realm, it can be a bit of an Achilles heel…I ran into a number of Amish businesses that  had not been paid by dealers, resulting in thousands of dollars in losses. They typically have limited  means to recoup money. An Amish person may hire a lawyer to draft a letter, but that is usually where  legal involvement ends. So unscrupulous outsiders may take advantage of Amish this way, and some have.

Amish, on the other hand, tend to get the word out to others in the community quickly if there is an  individual passing bad checks, for instance. Word gets around and if you treat people well, others will  learn about it quickly in Amish communities. The opposite is true as well.

Another reason — they keep costs down:

Amish tend to run lower-overhead businesses. One reason is that there is less of a cultural expectation  to deck a business out in frills such as air conditioning and plush offices. Amish businesses are typically operated at home, often in a shed or old building converted for the purpose. Amish tend to be  efficient in how they use resources. An aversion to waste is built-in to the Amish mentality.

Also, they try to build lasting businesses:

The idea of humble leadership is another good example. Amish frequently express the idea that “I’d  never ask an employee to do something that I wouldn’t be willing to do.”  Amish bosses are often  involved in the work in a hands-on way, rather than simply delivering orders from a remote office. This orientation has something to do with the productivity and longevity Amish bosses get out of their employees.

A third idea would be the approach to growth. Viewing employees as family, rather than a disposable input, tends to make you approach decisions more cautiously. A side benefit has been a very low rate of failure among Amish businesses. In light of the numerous high-profile business failures, not to  mention recent “bubbles” driven by greed, a measured approach to growth may be wise.

There’s a lot going on, apparently, besides barn raisings and pie baking.

  1. Jason Hart

    Another point is that Amish businesses tend to make simple things extremely well. Unless I’m way off base, civilization will always require food and furniture. Swing through Plain City, Ohio, and you’ll see great Amish food right across the road from great Amish furniture.

    All the other considerations are important for running a successful business – but first, it helps to be good at making something people need!

  2. Scott R

    Also keep in mind that Amish expectations necessarily produce less risk: the goal of a humble, secure life is less crash-and-burn inducing than the goal of millionaire- or billionaire-hood. More attempts to take those pie-baking enterprises national (or international) would result in a heck of a lot more bankruptcies. The Amish model is idyllic in its way, but America would not be America if our great risk-takers were similarly prudent and circumspect and humble in their ambitions.

    I say this as someone who is basically following the cautious, “Amish” way in my own business. Yes, I have a near-zero risk of bankruptcy, but I often feel as though I’m shirking my “American duty” to expand, embrace risk, and so on. Three cheers for George Savages of the world.

  3. Erik Wesner

    Very good point Scott on risk (and, actually, on the meaning of success)–I’ll just add the caveat that you do find the high-flyer segment among Amish as well.

    But you are right, the small-scale sensibility would help to tone down the risk factor across the board. You find some Amish who might actually restrict growth in deference to church expectations.

    There can be tension there at times, and I wouldn’t be surprised to see Amish businesses gradually scaling up over time. It’s happening already, with a number of firms selling nationally and even internationally (though employment greater than 40 or so is still very rare–no Amish GMs yet–which I guess is a good thing!).

  4. Rob Long
    C

    Absolutely, Jason. And if you’ve reduced your mental bandwidth down to just those essentials, I’ll bet it’s easier to see what people really need — a chair, a delicious pie, a place to sleep — rather than what they don’t.

    Years ago, in Maine, I spent some time with the Shakers in Sabbathday Lake. (Not Amish, but there are similarities…) And they all had amazing focus and concentration. I wonder: can that be taught?

  5. Erik Wesner

    Rob, many thanks for picking up Jason’s piece on my book.

    Amish willingness to put the brakes on life may strike some as backwards.

    But: in some ways it may leave them stronger–both as a society and in more specific realms such as business. Holding onto traditional values are a big part of that strength as well (as G.A. points out).

    And the focus/concentration question you ask is a good one. I think the ability can be learned–or rather absorbed–but an environment of reduced distractions helps. Not that Amish live free of distractions, but they tend to minimize them by their lifestyle choices.

    Great podcasts by the way. More Sajak!

  6. G.A. Dean
    Rob Long:

    …Amish tend to be efficient in how they use resources. An aversion to waste is built-in to the Amish mentality….

    …The idea of humble leadership is another good example.

    The Amish didn’t invent this style of living. What’s remarkable about the Amish is what they preserve. Values like frugality, humility, resourcefulness, and personal involvement, were once commonplace, even recently.

    These were once values associated with conservatives/Republicans. Remember when Dick Nixon could remark about Pat’s “Republican cloth coat” and everyone understood what he was talking about? Perhaps the popularity of Scott Brown and Sarah Palin and the Tea Party reflect a longing for a return to these values.

  7. Rob Long
    C

    Wow. Hey, Erik, welcome to Ricochet! I had no idea you were a member when I posted that piece. But awfully glad to have you here. And “More Sajak!” is the battle cry around Ricochet HQ, too.

    It’s an interesting question, about mitigating risk. I have a friend who takes a radically different view of the classic entrepreneur. The cliche is, a typical entrepreneur is a risk-taker and a gambler. His view, though (after a lot of research) is that most entrepreneurs are risk-averse. They go to huge lengths to avoid taking any unnecessary gambles. In that way, the guys who started Google or Facebook or HP are lot more like Amish businessmen.

  8. Erik Wesner

    Rob, have enjoyed the podcasts since hearing the first (was that way back in Feb?) You guys are too entertaining to miss. Looking forward to more.

    I think the anti-cliche business risk view of your friend actually makes more sense. The gambler version is more the Hollywood take on business. Good businesspeople work hard to minimize risk (when they can).

    The ‘bets’ are just smaller in the case of the Amish, when the companies are 5-10 employees and their families, vs. 500 or 1000 or 10,000.

  9. FeliciaB

    Erik, I’m very curious, what prompted your passion for research on the Amish? It is a fascinating subculture with many variations. In a way, they remind me of native Central Americans where I grew up.

  10. Erik Wesner

    Hi Felicia, I had a lot of direct contact with Amish in settlements across the country through a previous career working for a publisher, and as a result became very interested in Amish society.

    You are right that there is a lot of diversity among the various Amish groups. There have actually been one or two attempts by Amish to settle in Central America, one was in Honduras, but was short-lived.