The law of large numbers — and how it can change everything for entrepreneurs
Today let’s talk about a simple, universal recipe for success — the law of large numbers.
Growing up in Europe, this was an important idea that we often talked about in university and business. While this law doesn’t offer overnight success, it is the secret to guaranteed success.
Ultimately, it is all about trying, and trying again. Let’s look at some examples of how it works.
Imagine an insurance agent. He earns a commission and is only paid when a client signs a contract. It’s December, which is a good month for sales, but he’s worried about January. No one buys anything next month so he’s got to make all of his sales before Christmas or he’s in trouble. He could panic every day and worry, or he could take a calculated approach.
What is the solution? The law of large numbers.
The trick is knowing the conversion rate. Let’s say that, on average, he needs to have five meetings to make one sale. If he has 15 meetings, he’ll make three sales. If needs six sales to get through the month, he needs to schedule 30 meetings.
He doesn’t need to wish and dream. He simply needs to keep preparing and showing up at these meetings and showing his very best ideas.
I know the law of numbers works because it has worked for me many times. Back in 2013, I started talking to a guy sitting next to me on a plane. I told him about my business idea. He told me he wasn’t interested.
He introduced me to his friend and that guy wasn’t interested either. They both told a few more people and nobody was interested. Sad story? Nope.
Finally, my story was told to a 7th person and he loved it. He became the best partner I’ve ever had.
Sure, my idea failed many times. However, within three months, I found the person who loved my business and was ready to go all in.
So, what does this have to do with you?
A startup in search of partners and investors has the same basic mission as a salesman and can use the law of large numbers the same way.
Sure, it’s hard to work out the conversion here since it’s not a direct sale but there is another metric: feedback. Success in startups is all about hearing from investors.
Let’s say you’ve presented a business idea to 10 potential investors. Three of them want to meet again. With a second meeting, your chances of getting funding are much higher. The more repeat meetings, the faster you will find an investor.
In startups, the law of large numbers is a recipe that always works. For each entrepreneur, the math is different but it’s always there.
Best of all, if you are passionate about your idea, it will get better with each meeting. The more you practise for those meetings, the better your ideas will become. You are never wasting your time. And, of course, venture capital market investors will sense your dedication.
Out of 10 startups, one will see profits. That sounds like a low number but it’s important to remember that getting quick cash isn’t everything. You might find that an investor doesn’t want to buy your idea BUT does want a partnership. This investor sees your potential and dedication and wants to get involved. This is a major success.
How the Idea Factory Uses the Power of Large Numbers
At the Idea Factory, entrepreneurs pitch their ideas daily. They send over their ideas and wait at tens of thousands of people around the globe to scrutinise them. It’s a lot of pressure.
While we’ve seen some inspiring success stories, it can be a long and difficult path. People often come to me after their pitch has failed. They’re feeling hopeless and totally unsure of the idea they once loved.
And I always tell them the same thing: Make a new pitch. If you’re confident in your idea, your pitch wasn’t convincing enough. A pitch can and should be improved along the way. Record a new pitch video and try again.
Are people still telling you the idea won’t work? Listen up! Try a new idea. No one says you are stuck with one idea for your whole life. Keep improving and presenting it until it works. Remember, it’s a number’s game. A certain number of pitches win and yours will win if you keep making it better every time.
Believe in your success. Be persistent and one day it will definitely happen.
Got 5 minutes? Put your idea in front of the world in the Idea Factory. With nearly 70,000 investors, experts, and entrepreneurs in our community, this is your place to grab onto the power of large numbers. Jump over to the Idea Factory and submit your idea for free in less time than it takes to finish a cup of coffee.