Must Reading: Chinese Math

BusinessPundit.com has just posted an item that should be mandatory reading for any start-up.

Its topic: Chinese math.

An excerpt:

The name stems from the idea that there are a billion people in China, so if you sell a $1 widget to just 1% of them that is $10 million in revenue. The assumption that is incorrectly applied here is that 1% is easy to get because it is a small number.

I fell victim to this myself a few years ago. Market demographics told us we had over 5,000 potential clients within a few square miles. Surely we could get 10% a year, and surely we would snag some from outside this small area. It turns out that surely I was doing some Chinese math because we didn't get 500 clients anytime soon.