The Realities of Entrepreneurship Series - It Takes Time – Part 1

No one wants to hear these words. See, when you tell someone those words, the virtue that comes to mind is patience, and that is something very few people have.

Have you ever tried telling a child to wait until a specific time for ice cream? Or have you ever told them that you will take them for the weekend to the zoo or a favorite trip to the mall for take away? How many times would those children keep “reminding” you of the coming day and whether it has reached yet? And when the day comes, how many times will you be asked what time precisely you are starting off?

Hilarious as that may sound? The truth is that impatience that is common in children still remains embedded in adults. Many have just not learnt how to embrace this quality at all and as a result, are prone to seek short cuts and end up becoming more likely to fall for the next “get-rich-quick” scheme doing the rounds.

Let me make this very clear – true entrepreneurship is going to take time and not just a brief period of time but a long time to really master.

In my early days of learning I came across a truth that I have never forgotten to this time. I speak about it all the time and share with you today. I know it as the 1 – 3 – 5 – 7 principle. More elaborately put it says, it takes one year to break even, three years to become sustainable, five years to become profitable and seven to become world class.

There are always going to be exceptions on both sides of the equation but that statement generally holds very true to a very large extent. Let me break it down in more detail in the remaining paragraphs to help you understand what is specifically meant by it.

One Year to Break Even

This is where many don’t get it. Your business is like a new born baby, it needs milk and constant care from day one, especially for the first 90 days, then 180 days, then all the way to the fifth year! The analogy with an under five child is striking in that these are the most vulnerable years for children and the levels of care needed are superior to adults, hence the whole “Under Five” moniker to adequately term new businesses.

This then means for the first one year, the likelihood of really making any profit, let alone becoming sustainable is tough for most. This is why it is also a very bad idea to start a new business with either too much money (like our example of Mr. Julizya Banda) or borrowed money. Both are just plain bad options.

Instead one should start with as little capital (read little money) as possible and grow the business organically. Let the business go through all the teething pains that often affect them so severely because as they do so, the owner learns along the way through experience how to overcome the challenges. This way you use just enough money and adopt innovative and smart ways to remain afloat.

If you have too much money on the other hand, you simply pump more money into the process without examining exactly what the problem is in the first place. In business over-capitalization is a leading reason why many businesses fail. Yes you read right – over capitalization!

So, as you “struggle” past all the challenges a new business faces, you will learn how best to remain afloat and if done correctly, you will soon find that you are now breaking even – meaning that you are now making back all the money you invested in the business from inception. This takes on average about one year to happen.

Three Years to Become Sustainable

Sustainability is the holy grail of all new businesses. How does one manage to achieve this? The answer is so simple that most miss it because they always get caught up in the day to day running of the business. You achieve sustainability by doing the two most important things in a business, the absence of which failure is guaranteed regardless of what systems and processes or even capital that business may have.

These are i) how to get in front of customers and ii) how to make sales. Everything else is just detail. If you can learn to get in front of customers from day one and start making sales, this is the most effective way to ensure your business becomes sustainable fast. At the end of the day ask yourself these two questions (especially as a new business), how do I get in front of potential customers and how do I make sales in the process (how do I convert them into paying customers?)

If your activities, especially in the beginning don’t involve these two above, you are doomed. Let it all center on customers and sales – period! The rest you will learn and correct as you go.

In our next article, I am going to conclude this first in the series “The Realities of Entrepreneurship” subtopic by examining the other part of the equation, that being 5 years to become profitable and 7 years to become world class.

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