Starting a Business Is Hard. Staying In Business Is Much Harder.
Manufacturing is somewhere between 100 and 1,000 times harder than making a prototype.
Take one and a half minutes and watch this clip from a recent interview Joe Rogan had with Elon Musk.
This excerpt is from a discussion about the newly-released Cybertruck and why it’s taken so long for the truck to reach production after the prototype has been around for so long. The reason? Making prototypes is hard, but manufacturing is much, much harder.
Elon Musk: The hard part by far is manufacturing, not designing the car. And there's just not really a movie about that, but there should be.
The movies will always be about the sort of inventor who invented the car and then the job is done, or invented the object - now the job is done.
This is not true. That's the easy part. The hard part is manufacturing, by far.
Joe Rogan: Why is it so much harder than making an individual model?
Elon Musk: Well, in order to make it affordable, you have to make it at volume. So you've got to make everything at a higher rate consistently.
If you tour the production line, you'd have a sense for it. You've got to have all of the casting machines, all of the stamping machines, as the case may be, the glass machines, the wheels, the tires, everything required from the motor, the battery cells, all of the constituents to the battery cells, all of the silicon that goes into the chips… manufacturing is somewhere between a hundred and a thousand times harder than making a prototype.
Joe Rogan: Whoa.
Elon Musk: I really cannot emphasize enough how hard production is relative to design.
I'm not saying that design is trivial ‘cause you have to have taste and you have to know what to make. If you don't have taste and judgment, then your prototype will be bad. But it is trivial really to churn out prototypes and it is extremely difficult to build a factory.
There are 10,000 things that have to go right—at least—for production to work. So if you have 9,999 things that are working and one that isn't, that sets the production rate.
Did you hear that?
“Manufacturing is somewhere between a hundred and a thousand times harder than making a prototype.”
Boom.
Anybody who has started a business already knows this, but there are still many people who don’t understand it.
For a few years, I’ve volunteered as a mentor and in a few other capacities for startup organizations, and, on occasion, I’m a judge during “Pitch Night” competitions.
There are two main things I’ve noticed a lot of people in the startup world fail to recognize.
The first thing startups fail at is knowing the difference between an idea and a business.
Sometimes, I hear people pitch ideas that sound great on paper but are, quite frankly, excruciatingly difficult to pull off.
Rideshare apps are the perfect example of this. Hailing a car in just a few seconds, getting a ride to your desired destination, and paying for it—all on your phone—is a very good idea. Probably one of the best ideas so far in the 21st century. If you pitched that idea to a room full of investors, you would likely generate a lot of interest.
But there’s a huge difference between a good idea and its execution.
Can you imagine anything more difficult than figuring out how to put all the thousands of little steps into place with a rideshare app like Uber or Lyft?
What a complete nightmare it must have been, with legal challenges, GPS integration, payment integration, chargebacks, safety measures, fraud detection, liability issues, booking systems, insurance, local laws, state laws, federal laws, customer support, etc.
It’s one of the most difficult business models I can possibly imagine. Yet, somehow, the people who started these companies figured out how to make it work. That is much harder than people even know: it’s almost miraculous that rideshare services even exist.
The second thing most startups fail at is knowing the difference between making a prototype and having a real product.
Okay, fine, let’s say you’ve got a great idea for a product, and you even found a way to get through the design phase. You’ve somehow figured out funding to get your idea off the ground, you’ve done your patent research, and you found a manufacturing facility that can make a limited run of a few (or a few dozen) prototypes to prove your concept.
Hooray, good for you!
I legitimately mean that: good for you — you have accomplished something extraordinarily difficult.
But you haven’t completed anything; you’ve only just begun something.
Building a prototype is not the last step; it’s the first step. The first real step, anyway.
As I said before, ideas are the easy part, so I don’t even count them as real steps in the process because until you have something you can see, touch, and feel, you’ve basically got nothing.
But let’s say you have your prototype: you have now proven the concept that you can make ONE of your products. Not just one version but one single item.
Now, the hard part begins.
Now you have to figure out how to do it all over again, do it sustainably, do it cost-effectively, and do it profitably.
Now begins the hard work of building a business, which is building your own factory, in a sense.
I’ve seen this many times over the years in the web development world with aspiring freelancers who make the mistake of thinking: “Hey, my mom’s friend who runs a yoga studio asked me to build her a website. Yay! I’m in business!”
They think they’re in business. But a lone yoga studio website is just a prototype — if you can even land the job in the first place.
That is not the hard part. Building the website (the prototype) was never the hard part.
The hard part is:
creating a legal entity
getting a bank account
coming up with a pricing strategy
making the sale
doing the work
invoicing the client
managing the project
balancing the books
paying taxes
providing customer service
having a long-term plan for hosting
providing maintenance and updates
troubleshooting problems when things go wrong
answering tech support emails at 11:45 pm
…and doing many of the steps listed above all over again by landing another client, then another, and another.
On and on it goes… rinse, repeat.
This is the hard part of being in business.
Doing one small project once is great. It can be exciting… fun even. Maybe it’s a nice distraction that results in a bit of pocket change over a weekend or two.
However, creating a company with a sustainable process is like building an assembly line in a car factory; that is the hard part. That magic word—“work”—is what allows you to say, “I work for myself.”
Starting a company that can crank out your product consistently, where:
You can count on it still being here in a year or two,
You can rely on it for your income,
You can prove to the bank that you're not a joker but are good enough to qualify for a loan using only your profits....
Now, that is “building a factory.”
And, as Musk says, that is somewhere between 100 and 1,000 times harder than making a prototype.