For the longest time I have been saying that Entrepreneurs must be willing to invest in their business. This is accomplished using a lot of patience and with a deep understanding that this is a long-term play. Most of the time, even seasoned executives will not accept a project if they can’t see a payoff or an NPV calculation in the near future.
The problem is what psychologists call Anchoring (Yes, Erick Dane, I was not asleep in your class). What anchoring basically tells you is that you can’t seem to get over the fact that once you set a fair value or a realistic expectation on an event, it is very difficult to accept any other value for it. So for example, we are so used to seeing a Coke worth 50 cents, that when we see the price in the vending machines go to $1.00 we think we are being ripped-off, as well as if we see a 25-cent Coke can we think it is a deal. Think Netflix at $9 vs $13 and they had to return to the old pricing. Well, the same thing happens to seasoned investors when you tell them a project will be taking 1 year before it starts paying off, they think you are crazy.
So the problem is that they are seasoned executives and they are not thinking as Entrepreneurs. If they were, they would realize that they are dealing with people with ample vision and dreamers. Dreams do not have constraints and vision is limited only to those that dare not dream. I have investments in Hispanic Trade that are almost as old as the company and they are still work in progresses, with a large chunk of expenses already dedicated to them, and they are still not giving us income. I expect them to be there a while more.
So, think like an Entrepreneur and you will not be a slave to the Cash Flow statement, think like an Executive and the Balance Sheet will be your Bible. Think like both and you will be successful, eventually.
Keep Calm and Stay Humble…