Last Updated on March 9, 2021 by Filip Poutintsev
The philosophical battle between short-term and long-term business is popular among business couches. Many favour long-term business, because in heir opinion it’s stable, brings more money in the long-term, and you don’t have to start all over after a few years. While those arguments make sense, and most businessmen try to build a long-lasting business, I have always chosen short-term business projects, which had much better ROI than any long-term business can have.
This made me think about what are the benefits of short-term businesses and why some choose them, when public opinion is against them. Most successful entrepreneurs only preach on behalf of long-term businesses.
“The three-month rule”
Back in the days when I was actively doing business to make money, I had a “three-month rule”. According to that rule, if a business project was still not making a profit after three months, I would drop it and start something else.
Three months is a very short time in the business world to make a profit. Most companies don’t make any profit in their first year, and some don’t make any profit even after several years. A lot of start-ups are so unprofitable that the only source of money for them are investors. For them making a profit within their first three months would be impossible.
But to everyone’s surprise, my business ventures that turned out to be successful were already making a profit after the first month. Not many business people can boast of such great results.
This rule was not only applicable for short-term projects, as it turned out that after a couple of months of doing something, a clear picture had formed already about whether it would work or not. Doing something that clearly was not going to work is a waste of time and money, and the sooner an entrepreneur would figure this out, the more successful he would become.
Merchant vs Entrepreneur
Before going deeper into the discussion of short-term vs long-term business, let’s first discuss about the people who do business. There are two types of businessmen: the merchant and the entrepreneur.
Merchant
Merchant is the type of business person who only does long-term business. He never innovates and only sells products and services that never change or evolve. This type of person has non-existing chances of becoming rich and successful. A typical merchant is a shopkeeper, craftsman or another self-employed person.
Entrepreneur
An entrepreneur is an opportunist type of business person who looks for new industries and field where money can be made. An entrepreneur does not care if the business is long-term or short-term. He only cares about making money. What eventually determines whether the business will turn into long-term or stay short-term is how the industry will evolve. If the industry dies out or chance so much that high profit is no longer possible, then the business will most likely be short-term. But if the industry stays alive and develops in the correct direction, then there’s a chance for a good long-term business.
What is Short-Term Business?
Short-term business is generally something that is available only for a short period of time due to changes in the business world. Most short-term business opportunities go entirely unnoticed by the majority of industry professionals. That is the most common reason they never talk about short-term business; it’s because they have never seen that in their life.
Usually, going to a short-term business requires a tremendous amount of attentiveness to spot the opportunity. You have to be very well organized and fast to be able to rip the reward before the opportunity goes away. This is the reason why big corporations are never in short-term business – they are too slow to turn the wheels, so by the time they are ready, the window of opportunity will be long gone.
Usually, short-term business is very niche-specific, and almost always, the window of opportunity closes the day it becomes mainstream. The short-term business is all about being faster than the whole industry because too much competition is what kills the opportunity. The short-term business is all about making money fast before others start doing the same.
So why short-term business is not popularized?
Well, simply because the majority of the big corporation celebrity businessmen are not aware of them, and those who do it tend to keep a low profile so that others will not discover the great business opportunity and steal a market share from them. Quite often, the short-term business is also in the grey area of the law. Laws always lag behind. After something is invented, it takes several years until the government finds out about it and either prohibits or starts to regulate it. Bragging about doing something in the past that is currently illegal is not what many businessmen want to do because the social response and judgement may be quite aggressive.
