

It takes three years to build a business - swombat
http://jacquesmattheij.com/It+takes+three+years+to+build+a+business

======
malux85
You're right, and this doesn't just apply to I.T. Startups. My step father
(who is 70 years old, and still on the board of 6 companies) used to always
say to us kids it takes "2 years" to start a company. In the article it says
you break even somewhere through year two, which I think is what my father was
referring to.

My own experience this seems likely too, I started my own startup about 6
months ago,( solo founder, I'm doing it all myself) and extrapolating my
current customer base, and success rate, I think I will break even and then
continue to grow organically at the 1.5 year mark.

On a side note here's some stats to keep you new founders going (just a little
positive news to add to the mix):

\- I'm a solo founder, you can do it too! It's less common, but I have
determination like you wouldn't believe, I am up every morning at 4am to go
for a run before I put in 3 hours of coding before leaving for my day job.

\- I have invested about 500 pounds so far for the cost of the domain and
hosting, that's my total expenditure (excluding my time coding it) I have made
about 7000 pounds so far, in the last few months with my first customers etc.

\- I consider my 'break even' part, to be when I can pay myself a 50,000 pound
a year salary and can live comfortably , I think this will be about the 1.5
year mark as stated above.

Keep going all you solo founders, you can do it!

~~~
biot
I'll chime in with the others in saying that the morning thing is a great
idea. I've been trying to do evening coding for a while but end up just not
having the energy. I put in my best hours of the day at work and coming home
to work by myself on a project often just doesn't pan out. Switching this
around, I can put in time for myself first then head into work and keep going
for the remainder of the work day.

~~~
malux85
Yes mate, my logic was the same as yours ... I got fed up with being tired in
the evenings and decided that my startup deserves the best of me, and my day
job deserves just "regular" me

Evenings are for time off with my partner, we play ps3 together and generally
relax ... I also spend the evenings reviewing my own code / doing
administration and billing and other non brain intensive things ... makes for
a good work/life balance

~~~
jmitcheson
Totally agree. I moved close to my work (10 mins walk) and they let me start
at 10am, so I can code for a couple of hours in the morning. I wish I had your
motivation though... 4am, jesus :)

Can I ask, was it hard building your application 3 hours at a time? I lived
off savings for about 6 months and worked full time, then after the hard parts
were done I transitioned into the arrangement above. Even now I get a little
frustrated as I just get into the swing of things, then I need to leave for
work !

Thanks for posting by the way. I think more people need encouragement that
while incubators are great, you don't need _necessarily_ need them to be
successful.

------
edw519
Great post, Jacques. Thanks for your kind words.

 _People might even consider doing business with you, but nobody wants to be
'first' for fear of being burned._

This can also work in your favor...

It's rare, but sometimes you can find someone who _does_ want to be your first
customer. When this happens, it's solid gold and one of your fastest
shortcuts. Others call them "champions"; I prefer "sugar daddies".

I have had this happen several times with great success. This is how it
usually worked...

Sometimes they knew me, but sometimes I was introduced. In every case, they
were desperately looking for something they couldn't find, sometimes for
years. They would say, "If you could build this, you'd be my hero." (or
something like that). They have offered me office space, access to their
people and systems, and often an advance because it was in everyone's best
interest that I'd succeed. Sometimes, but not always, they wanted equity. And
all of them had peers with similar problems, so Prospects 2 thru x were
already lined up.

We should all be building stuff people want. When you find one of them with
their checkbook open, take a good hard look. It doesn't happen often, but when
it does, it can save you a lot of runway.

~~~
asmithmd1
Your original sugar daddy did not mind that you sold the solution that he
helped develop to other companies?

That is the situation I am in. I have developed solutions to problems for the
US's 4th largest company in a space with hundreds of other competitors. I own
the technology but they would certainly take a dim view of me selling it to
their competitors - and stop using me thus cutting off my only source of
income.

Any ideas how to capitalize on what I have developed?

~~~
edw519
You bring up something I failed to mention: this can be a touchy situation. In
your case, it sounds like you have a great customer, but not a sugar daddy. I
would never do something to upset a current customer.

You could make them a partner so that they can make a little extra money
selling the clever solution they conceived, but that's really hard to do at
the enterprise level. That works much better with a small business alpha male
owner.

Some of the things to consider when taking your sugar daddy's solution to
market:

Are they enterprise? If so, this probably isn't worth the trouble. Too much
red tape and illogical thinking.

Does the solution provide them with a distinctive advantage over their
competitors? If so, it only makes sense that they'd want to keep it for
themselves. If not, they may gain favors among their peers by sharing it.

Is is a horizontal solution? Then there's really not much of a competitive
threat by sharing it.

How opportunistic are they? Some people want to be sugar daddies because
they're jealous of our IT margins. They can make as much sharing their
technology as they do in their primary business.

Does wider use of the technology help their primary business? Some solutions
become geometrically more effective if your trading partners are using them
too.

~~~
onemoreact
That's some good advice.

But, don't forget with enterprise customers you can offer to sell the company
to them. 2-20 million for a long term strategic advantage plus your proven
track record can be seen as net win for everyone. And if negotiations break
down they are less likely to think they already own you.

I would be cautious of any sort of long term profit sharing, but offering to
share a few years revenue from any 'connections' made in the industry can
offset the feeling you are burning them by sharing the secret sauce.

------
hv23
Another data point to support the three year number being thrown about, this
one from the founder of Yipit writing about their early struggles: "It took us
almost three years to know what exactly we had to do during those three days."

[http://viniciusvacanti.com/2011/09/12/the-long-grind-
before-...](http://viniciusvacanti.com/2011/09/12/the-long-grind-before-you-
become-an-overnight-success/)

~~~
sheff
Another data point : Amy Hoy mentions that her first webapp and those of two
other people running SAAS businesses all took 2 years to hit 200k after launch
- add on some dev time and it approaches 3 years.

<http://unicornfree.com/2011/drawing-back-the-curtain/>

------
Duckpaddle2
I just have a small quibble about the statement "3 years to be exact". Having
built several companies over the years, no time line is exact. That doesn't
mean it's not a good estimate, just that the cliche may be taken literally.

However, how does this fit into the "fail often, fail quickly" advice I have
seen so often in this forum? Does quickly mean 3 years? Just a thought...

~~~
davidw
> how does this fit into the "fail often, fail quickly" advice I have seen so
> often in this forum

Welton's rule: for each bit of trite business advice, there is an equal and
opposite bit of trite business advice.

------
FollowSteph3
I concur, it takes much more than 6 months. That's barely enough time to build
the product/service, nevermind trying to build a customer base.

I recently posted my companies revenue chart over the last 8 years, and if
you'll notice in the first 3 years even if there was growth (year 3 was almost
double year 1), it still took a while to really get some good growth:
[http://www.followsteph.com/2011/08/23/landlordmax-2010-best-...](http://www.followsteph.com/2011/08/23/landlordmax-2010-best-
fiscal-year-yet/)

I'd say if you can do it in less than 3 years, that's amazing. Trying to do it
in 6 months is unrealistic, you'd need way too much luck to achieve that.

The good news, as you can see from my revenue graph, is that once you get
momentum behind you, it makes all the difference. After some time you learn
what works and what doesn't, you start to get systems in place, you have a
network of customers, and so on.

Btw, 6 months is barely enough time to even just do split testing on a
website, nevermind trying to implement what you find and test it again. Any
marketing effort takes at least a few months to really get the hang of.

I salute you for being brave enough to share your failure, that's a major
step. As someone else said, you will most likely succeed in the future because
you can see and admit your mistakes. But please do expect it to take more
time. I agree that 3 years is a pretty standard timeframe to get a business
going...

------
richpalmer2
It's tough to overstate the amount of savings you should put aside. I'd say
that even if you save for "18" months - there is a lot that can happen that
you wouldn't even think to put on your expense plan, both in your personal and
business forecasts.

My cofounder and I quit our jobs and had "12" months saved up according to our
plan. 9 months in, and no revenue yet, we found ourselves with no runway left,
and needed to get contracting jobs on the side. As Jacques mentions, when you
take this approach, a lot of your "good time is spoken for".

------
Periodic
A post like this makes me question myself. How do I know when it's right to
declare a business failed?

I joined another person on a startup about six months ago. We have one client
and it might start expanding, but then again, we are two months past our
expected initial launch and at our current rate we won't be launching until
January. He has been getting more excited, but I have been getting less
excited. I'm pretty sure I want to pull out because our delays seem to mostly
be due to poor management by him (it was his project and is his baby) and I
don't really trust it in the long run, however there are some other factors. I
see our growth plateauing when he runs out of friends who he can convince to
pay us, and I am not enjoying working with him.

I get frustrated when people seem to be saying I should just stick it out. Am
I just a wimp who is fleeing at the first sign of trouble? Am I just getting
jitters about the amount of investment? Or am I wisely investing my time in
other activities that will grow my career in other ways? I don't want to
invest three years of my life if the warning signs are all there.

I think my saving grace may be that we haven't formally set up a vesting
strategy, so I could exit full participation and become an early investor
instead. Our lack of paperwork is another one of the warning signs.

~~~
namityadav
Don't quit this business because you can declare it "failed" .. quit it
because you aren't having fun at it (based on your comment)

------
csomar
When I started (3 years ago) I didn't know this. But I was decided: I _must_
make it. And I didn't really care. I saw/read/knew people who made it, I
didn't know how much time/work/effort they put to get to such point, but they
made it anyway.

I pointed a goal, and I realized that my mental abilities can get me there.
Since there are people who did it, why can't I?

I started in my dorm room, living with my family, and having no income for
more than 2 years. Well, I knew little about programming at that time, so it's
fair that it took me lot of time.

Now things started to move, I'm renting my own flat, purchasing my own
Laptops, screens, hardward... I have one full year of savings, so I'm going to
work on projects of my own.

TL;DR: Don't give up. You'll get there. Don't worry. Make sure you don't get
broke and you have enough savings. Leave your job or plan to. Be Happy.

(Anyone has an idea how to have a good GF? I failed in this)

------
happyfeet
Great post.

When I quit my job in big services firm, I went for advice before moving out &
also to say goodbye to one of the vice-presidents (who had run his own start-
up which was eventually acquired by this big services company).

His specific message to me was: make sure you have enough money to last 3
years and make sure all your partners will also be able to stick together for
3 yrs. Because anywhere between 2 to 3 yrs is the inflection point when people
are forced to quit due to whatever circumstances. If you guys can successfully
see through 3 yrs I am sure you'll all figure out ways to make money with your
business.

He advised me to start looking at alternate channels to generate revenue right
from day one: network & find training / consulting opportunities even while
you are building the product. Even one or two weeks of such work in 2 to 3
months will go a long way in sustaining the business was his advice.

------
tchock23
Great post. I would add some advice to this based on my experiences... If
you're just starting out and are having trouble gaining the trust of your
target customers, you should consider seeking out channels through which to
sell your services.

In my example, we built credibility with our desired end clients by building
great case studies working through channel partners. Once we had these
examples under our belt, bigger companies were more likely to trust us. Plus,
the channel partner acts as your sales rep until you can get your own sales
funnel working in-house.

However, I don't recommend this forever, as selling through a channel has its
own set of challenges (e.g., lack of pricing controls, inability to sell into
the account without approvals, potential for the channel to copy your
product/approach, inability to control the client relationship, etc.).

------
ja27
I'm struggling with this idea right now. Some background: I was laid off
recently and am torn between getting another coding job or trying to build a
business. I'm a bit older, married with kids, and only have about 9 months of
savings ready.

So I'd normally never consider starting a business because of this long ramp-
up time, but the "gold rush" of mobile apps is still very appealing. It seems
quite easy to ramp up quickly there. I know a lot of apps linger in obscurity
but I think I understand social / viral marketing well enough to do some
decent app launches. I don't need a big exit, just enough to support a family.

What I can't shake is the persistant question of "why isn't everyone doing
this?"

~~~
bradfa
Look for a full time job half the day and code up your own projects the rest
of the work day. Then, if you find a good paying job you think you'll enjoy,
you win. Or, if you make money doing something interesting yourself, you win.
:)

If you've really got 9 months of salary in the bank, risk 3 of it trying to
build something yourself. If you can get some revenue in the 3 months, maybe
rethink looking for another job. If not, focus more on getting a stable
income. If you're making revenue off your own deal, those 9 months of salary
might last longer, giving you more runway to build the business.

The, "why isn't everyone doing this" is because there's risk and it takes real
dedication and skill. You will most likely fail. Those 9 months of salary in
the bank make failing less daunting. Go for it!

------
mattmanser
I thought he'd stopped reading HN?

The original guy he's talking about was just freelancing. I'm a freelancer and
I made money from day one. A friend of mine quit his job 2 months back. Again,
made money from day one. Difference between us and the guy in the story? We
had contacts and relationships already built from working a few years.

What I'm saying is that most of this article is way off the mark for
freelancing, you won't lose money the first year as long as:

1\. You know how to network and get business

2\. See 1

I'm not even very good at it and I still make money.

Also my old company's MD loved recounting how they were profitable within 8
months. The way they did this as a software vendor was to land a big juicy
enterprise contract and get paid 30% up front. Just as a counterpoint to the 3
years thing.

There are plenty of businesses you can found which can make money very
quickly. It all depends on whether that's the company you want to build,
larger vision, longer lag.

~~~
kragen
> The original guy he's talking about was just freelancing. I'm a freelancer
> and I made money from day one. … We had contacts and relationships already
> built from working a few years.

Yeah, a thing about that is, it's hard to have those contacts and
relationships in place when you're 20. A few people manage it, but most build
up those networks over a period of years.

Another thing, which I didn't realize when I was 20, is that if you make
contacts with a lot of 20-year-olds, when they're 30 or 40, some of them will
be in a much better position to partner with you than when they were 20. The
guy who was working as a manual software tester for a telecom firm at 20 may
be the CTO of a startup at 30; the guy who's struggling through his CS degree
at 20 may be managing a project at Oracle at 30. But he has a lot more time to
get to know you when he's working at the telecom firm or struggling through
CS. So even if you're a world-class connector like David Weekly or Adam
Rifkin, with a Rolodex full of 1500 contacts at age 20, those contacts will be
a lot more valuable for business when you're 30.

------
mikeleeorg
This reminds me of some casinos (perhaps not the more sophisticated ones
though), where playing certain games had a higher chance of success - if you
had enough of a bankroll and staying power to last.

I like the underlying premise of how businesses take time to succeed. The
timing varies significantly with the type of business though. For restaurants,
I've often heard "5 years" as the tipping point. For certain kinds of web-
based businesses, it can be shorter. And for capital-intensive businesses,
perhaps much, much longer.

But basically, you need enough of a bankroll and staying power to last.

------
vaksel
I think it also has to be mentioned that you actually need to be able to
extrapolate that with existing growth.

i.e. have enough realistic potential numbers to make it happen without having
to rely on the hockey stick growth model. "Oh yeah this month we made $300
profit, but with hockey stick growth, we'll be making $50K in 12 months"

------
swombat
I almost agree I actually think it takes three years to build an entrepreneur.
My thoughts in more detail here: <http://swombat.com/2011/10/14/three-years-
business> (not going to repost it in full, since it's quite lengthy).

------
neovive
At YCNYC the AirBNB presentation showed the startup curve and dreaded "Trough
of Sorrow" (<http://adam.heroku.com/past/2008/4/23/the_startup_curve/>). It's
definitely hard to overcome.

------
PonyGumbo
If you can manage to do it while you're working for someone else, it
eliminates a considerable amount of risk. Not always possible, though.

~~~
rick888
It can be done, but it's tough.

I was laid off a couple of years ago and used that as an opportunity to start
a business.

You need to have the right balance of being hungry, which can be solved my
having enough money in the bank for a year or so.

If you have too much money or are too comfortable, you'll never get your app
finished, because there will always be other things you need to do (I've been
there many times). If you are freaking out about making rent, you won't be
able to concentrate either.

------
teja1990
Really good post Jack. It will help to plan your future in accordance to your
startup.

------
brador
I think it was freakonomics that said it takes 10,000 hours to become an
expert...which is pretty much 3 years full time. Could this be a universal
law?

~~~
Hitchhiker
Think you meant <http://en.wikipedia.org/wiki/Outliers_%28book%29> .. at appx
40 hours per week, that's more like 5 years.. which is same as a PhD, black-
belt etc.

~~~
brador
I'd argue business owners don't work just 40 hours a week on their business.
60 minimum in my experience, even more in those early days.

Year 1, Building the business, Year 2, Adapting the business, Year 3,
Improving the business.

That's my take on it.

~~~
Hitchhiker
Righto. Fair enough. I just have a general aversion to these sorts of rules,
mostly because there are around a ton of exceptions .. to the point where one
wonders about it all.

You may have more expertise in this, so deferring it to your good judgment. I
was delimiting my stuff to the Gladwell book which attacks " mastery ".

------
Hitchhiker
<http://www.google.com/about/corporate/company/history.html>

