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My dad had great ideas for businesses. Yet each one he started failed for him. Why, because he has such unrealistic view on how long the payback period will be.

My dad had great ideas for businesses. Yet each one he started failed for him. Why, because he has such unrealistic view on how long the payback period will be. He even founded with a partner what is now a national company, but at the time it did not make a big profit in the first year, so he sold his share of the business. He had "Get rich Quick" fever, and never saw that bussiness rarely become an overnight success.

birdyrooster 4y ago
Interesting to think that the company which he divested from may have made it because of his exit.
- petemc_ 4y ago
  Unless you have some information you're not sharing, this is a pretty horrible thing to say.
  - anonymous_sorry 4y ago
    Is it horrible to suppose that someone might not be well-suited to the task of driving a business from nothing to a national concern? Because I personally suspect that of most people, including myself, and don't think of myself as particularly mean-spirited. Also, the offspring of the man in question identifies an aspect of his temperament that led to things turning out the way they did.
  - tnel77 4y ago
    I don’t feel like it’s horrible. If one of your founding members is focused on getting rich quick while the rest are trying to invest in the company long-term, then his departure very well could have helped the company ultimately succeed.
rrrrrrrrrrrryan 4y ago
One of my finance professors mentioned that ~70% of business fail in their first two years, and ~90% of those failures are purely due to a lack of working capital, not due to any fundamental flaw in the business plan. If they kept doing the same thing and just had more money and time, things would have eventually worked out. People start businesses for emotional reasons, not logical ones, and vastly, vastly underestimate the amount of money they'll need to get the thing off the ground. Entrepreneurial people are inherently optimistic, (and they have to be), but he said their estimates were typically off by ~5x. If you think you need a million dollars of runway, you probably need 5 million. If you think it'll take a year to achieve profitability, it'll probably take 5 years.
- yunohn 4y ago
  > due to a lack of working capital, not due to any fundamental flaw in the business plan. If they kept doing the same thing and just had more money and time, things would have eventually worked out. Ironically, that’s what VC funding aims to provide - capital to extend runway and improve scale quickly. Whereas the reality is VCs support negative unit economics and absurd customer acquisition costs.
- moonchrome 4y ago
  > One of my finance professors mentioned that ~70% of business fail in their first two years, and ~90% of those failures are purely due to a lack of working capital, not due to any fundamental flaw in the business plan. Having seen my share of failed businesses - I'm very skeptical of these numbers.
  - dtgriscom 4y ago
    ... skeptical in which direction?
  - mindwok 4y ago
    Also skeptical. How would you determine if a business would have succeeded if it had working capital to continue?
    - chii 4y ago
      If the theoretical unit economics works out, _and_ that the market size allowed for the scale that those unit economics required?
    - rrrrrrrrrrrryan 4y ago
      Imagine you're starting a restaurant. When you start a business, your costs basically fall into 3 categories: initial costs (like furniture and stove-tops), fixed costs (like rent and bare-minimum employee wages), and variable costs (like raw input ingredients and additional labor to handle additional business). As long as your revenue is growing each month, and you're making money on each individual sale (as determined by your variable costs), you'll eventually achieve profitability. When I say most new businesses have no fundamental flaw in their business plan, I mean that most businesses make money on each sale (e.g. they're not selling burgers for less than the cost of ingredients and the labor to prepare it), which is not that surprising. What is perhaps surprising is that the business is also usually growing each month and they're on a path to eventual profitability, yet they run out of money and fail anyway. When starting a business, you're not convincing investors and debtors that your business model is sound (most are), but rather, that your business model is more sound than most other businesses that they can invest in.
toss1 4y ago
Yup, just about every time I've read of an 'overnight success', it was indeed an a very rapid path to success . . . after a decade or two of slogging it out in the trenches of obscurity. There are a lot of moving parts, a lot to learn, and timing/luck are also factors. Until they all hit at the same time, it looks like a flop. It takes time to find, learn, or assemble all the key bits. Sorry your dad's impatience was so persistent. Sense of urgency is important, but impatience is deadly. Thanks for sharing such a clear example.
hgomersall 4y ago
So far, my experience has been that business as a start-up is basically about surviving long enough to make a profit. Of course, some ideas are just bad, but I'm convinced loads of start-ups that failed could have been made to work given sufficient time. This doesn't work so well if you take a pile of capital, but if you go for organic growth it is more plausible to survive hand to mouth for a while.
- bruce511 4y ago
  >> Of course, some ideas are just bad, but I'm convinced loads of start-ups that failed could have been made to work given sufficient time. Are some businesses under capitalised? Sure. Could "loads" be saved with more capital? Well yes, for some definition of "loads". But annedotally I'd suggest that "most" are just bad ideas. Or perhaps more accurately "incomplete ideas". To be a success business you need; A) a product B) a market for the product (ie people who would actually dip in their pockets) C) that you can reach via marketing D) that can afford the product. The vast majority of business ideas have A, a few do B but its very rare that they consider C or D. As techies we're all about A - build it and they will come. But a successful business needs all 4 - miss one out and you fail.
  - hgomersall 4y ago
    Incomplete is probably a better assessment. Survival until they make it is probably really about survival until they learn everything they need to know and develop the sales channels etc to be able to make it.

birdyrooster 4y ago

Interesting to think that the company which he divested from may have made it because of his exit.

petemc_ 4y ago
Unless you have some information you're not sharing, this is a pretty horrible thing to say.
- anonymous_sorry 4y ago
  Is it horrible to suppose that someone might not be well-suited to the task of driving a business from nothing to a national concern? Because I personally suspect that of most people, including myself, and don't think of myself as particularly mean-spirited. Also, the offspring of the man in question identifies an aspect of his temperament that led to things turning out the way they did.
- tnel77 4y ago
  I don’t feel like it’s horrible. If one of your founding members is focused on getting rich quick while the rest are trying to invest in the company long-term, then his departure very well could have helped the company ultimately succeed.

rrrrrrrrrrrryan 4y ago

One of my finance professors mentioned that ~70% of business fail in their first two years, and ~90% of those failures are purely due to a lack of working capital, not due to any fundamental flaw in the business plan. If they kept doing the same thing and just had more money and time, things would have eventually worked out. People start businesses for emotional reasons, not logical ones, and vastly, vastly underestimate the amount of money they'll need to get the thing off the ground. Entrepreneurial people are inherently optimistic, (and they have to be), but he said their estimates were typically off by ~5x. If you think you need a million dollars of runway, you probably need 5 million. If you think it'll take a year to achieve profitability, it'll probably take 5 years.

yunohn 4y ago
> due to a lack of working capital, not due to any fundamental flaw in the business plan. If they kept doing the same thing and just had more money and time, things would have eventually worked out. Ironically, that’s what VC funding aims to provide - capital to extend runway and improve scale quickly. Whereas the reality is VCs support negative unit economics and absurd customer acquisition costs.
moonchrome 4y ago
> One of my finance professors mentioned that ~70% of business fail in their first two years, and ~90% of those failures are purely due to a lack of working capital, not due to any fundamental flaw in the business plan. Having seen my share of failed businesses - I'm very skeptical of these numbers.
- dtgriscom 4y ago
  ... skeptical in which direction?
- mindwok 4y ago
  Also skeptical. How would you determine if a business would have succeeded if it had working capital to continue?
  - chii 4y ago
    If the theoretical unit economics works out, _and_ that the market size allowed for the scale that those unit economics required?
  - rrrrrrrrrrrryan 4y ago
    Imagine you're starting a restaurant. When you start a business, your costs basically fall into 3 categories: initial costs (like furniture and stove-tops), fixed costs (like rent and bare-minimum employee wages), and variable costs (like raw input ingredients and additional labor to handle additional business). As long as your revenue is growing each month, and you're making money on each individual sale (as determined by your variable costs), you'll eventually achieve profitability. When I say most new businesses have no fundamental flaw in their business plan, I mean that most businesses make money on each sale (e.g. they're not selling burgers for less than the cost of ingredients and the labor to prepare it), which is not that surprising. What is perhaps surprising is that the business is also usually growing each month and they're on a path to eventual profitability, yet they run out of money and fail anyway. When starting a business, you're not convincing investors and debtors that your business model is sound (most are), but rather, that your business model is more sound than most other businesses that they can invest in.

toss1 4y ago

Yup, just about every time I've read of an 'overnight success', it was indeed an a very rapid path to success . . . after a decade or two of slogging it out in the trenches of obscurity. There are a lot of moving parts, a lot to learn, and timing/luck are also factors. Until they all hit at the same time, it looks like a flop. It takes time to find, learn, or assemble all the key bits. Sorry your dad's impatience was so persistent. Sense of urgency is important, but impatience is deadly. Thanks for sharing such a clear example.

hgomersall 4y ago

So far, my experience has been that business as a start-up is basically about surviving long enough to make a profit. Of course, some ideas are just bad, but I'm convinced loads of start-ups that failed could have been made to work given sufficient time. This doesn't work so well if you take a pile of capital, but if you go for organic growth it is more plausible to survive hand to mouth for a while.

bruce511 4y ago
>> Of course, some ideas are just bad, but I'm convinced loads of start-ups that failed could have been made to work given sufficient time. Are some businesses under capitalised? Sure. Could "loads" be saved with more capital? Well yes, for some definition of "loads". But annedotally I'd suggest that "most" are just bad ideas. Or perhaps more accurately "incomplete ideas". To be a success business you need; A) a product B) a market for the product (ie people who would actually dip in their pockets) C) that you can reach via marketing D) that can afford the product. The vast majority of business ideas have A, a few do B but its very rare that they consider C or D. As techies we're all about A - build it and they will come. But a successful business needs all 4 - miss one out and you fail.
- hgomersall 4y ago
  Incomplete is probably a better assessment. Survival until they make it is probably really about survival until they learn everything they need to know and develop the sales channels etc to be able to make it.