WORD OF THE DAY: TWO

During meetings in recent days I have been reminded how important the word "two" is to entrepreneurs and their investors. It can become one of your most valuable tools for checking on reality and managing your limited resources.

At the root of the emotions that motivate entrepreneurs and their investors is over-optimism. It is the kind of mental energy that urges them to take enormous risks and be confident of the best outcome. Inherent in such drive is the danger of becoming unrealistic. Thus a check-in technique is wise, highly recommended.

Here is a compendium of what I think constitutes "The Rule of 2":

• It will take you twice as long (as you planned). The hiring will be much slower. The first product will take much longer to finish. The first orders will be later than you hoped. The venture capital will take much longer to get into the bank.
• It will cost you twice as much. The expenses will double, for salaries, cost of marketing and selling, charges for services and outsourcing, and the percentage you have to give VCs for their money.
• It will perform at half of your expectations. Your gadget, gizmo, service, thing will operate with half of your dreamed features. It will run at half the speed you hoped for. It will consume twice the energy in its original specification.
• Sales will be half your forecast. The glee at shipping to the first customer will be quickly sobered by the slowness of follow-on orders.

And so on it will go. I think you now can better understand what this word is all about to entrepreneurs.

So what? How can you use this word to your benefit? Here are some suggestions I give to startups I coach:

• Delight in your dreams while expecting reality to be much slower than your fondest hopes.
• Recruit with twice the time and energy and innovation that you planned on.
• Conserve cash aggressively so you can survive while working to attract investors' cash.
• Adjust your delivery schedules weekly (to build the product/service, get the money, etc.).
• Review reality versus your plans and add the lessons learned to your next updated schedules.
• Get used to managing disappointment (avoid making promises to your board of directors).

BOTTOM LINE: The world of entrepreneurs is inherently overly optimistic. When you accept that you can remain realistic. Realism keeps you from making errors that can be fatal to a new enterprise. As you adjust weekly you will begin to settle down to a growth rate that is manageable. That predictability boosts morale of employees and investors. It makes your emotions move from dark to bright. Respecting the Rule of Two can add a powerful element to your unfair competitive advantage. Let your competitors live in their worlds of unrealism while you march ahead and take the lead in the real world. That is how you become a gorilla dominating a new market segment. I wish you the optimist best!

Comments

[John]

This comment is CLASSIC! I'll add it to my collection. TX Piyush.

Guess I had better be especially stimulating with my students and workshop audiences!!!!!!!

[Piyush Gupta]

Very neatly and elegantly put. Another rule I came across once is 'Rule of two feets', which says that if you do not find comfortable in a seminar or workshop, please move yourself by two feets to get out of room than to create an unexpected scene.

[George Johnson]

My dad used to tell me the same thing except that it would cost 3 times as much.

Thanx for the remeinder.