“Why aren’t we rich yet?” is a question we receive more frequently than you would think.
Of course the statement almost never uses the word “rich”. Instead it is words like: “higher sales”, “earlier delivery”, “more customers”, “Government Approval”, etc. But the root cause especially with young entrepreneurs is the same, namely, “Why does the process take so much longer than my expectations?”
It is at that point that we have a discussion with the client about the difference between what we call “Internet Time” and “Real World Time”.
It is most likely a function of both age and the length of my experience curve that I can almost always predict when a client will reach the “Why are we (fill in goal of your choice) yet?” moment. If you are a parent you know the point yourself when travelling with young children. So we talk about the why. The following are a few points about why “Real World Time” usually goes slower than “Internet Time”.
Raising Funds – the pitch is great, why is there no check?
The average time to raise your seed round is 6 months. This information is per The Startup and is focused on software startups. If you are in physical products and have an average network, expect the length to be twice that. However if you have had no luck after 9 months, you may want to re-examine your concept.
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First Customer – when will I get the next one?
Photo Credit: Sunita Biddu
The nature of your product or service has an impact on how long your selling cycle will be. Think airplanes vs sneakers or ERP vs a calendar app. Also important is the price – the higher it is, the more people will be in on the decision and the longer it will take. Expect the time to be twice as long as you think it will be. Just because your Facebook ads are running, that doesn’t mean you are getting orders. Scale your time frame based on what you know about your products selling cycle. Your competitor data will give you an approximation as to when you need to get nervous.
The Government – always takes twice as long as it should!
If your product or your manufacturing process requires an approval from any government agency either local or national, you will be in for a special treat. For example, the USDA estimates that it takes 1 to 6 weeks to get an import permit for plant or animal based products. However, receiving authorization as an USDA-inspected facility for your food production plant can take more than a year –everything halts while you make the requested changes to your HACCP plan or to your facility. Physical changes may also require you to get local permits (i.e., for an exhaust system for your kitchen).
Growth – everybody else is growing so much faster!
Your estimated growth rate will never be fast enough to even match the predictions you made in your investor presentation. Here is a reality check in the form of a study by Equidam. For consumer products, growth the 1st year is 376% and 119% in the second year. Contrast this with industrial and commercial services which is at 108% and 66%, respectively. So check your business plan to make sure the numbers are realistic. For easy benchmarking, you may want to look at the Inc5000/500 list.
Photo Credit: Equidam
We are there now!
While impatience for results is an important characteristic for an entrepreneur, make sure the impatience is focused on the right cause and the right numbers.
More important is that you have the persistence and patience so you make the right decisions to reach your goals.