Excerpt isn’t working or am I missing something?

No it’s not. The length limit is for excerpt, which should be called manually. To get the excerpt in your loop, you should use:

<p><?php the_excerpt(); ?></p>

Instead of:

<p><?php the_content(); ?></p>

If you thought of this because of the option in the reading section of settings:

Excerpt for feeds

Then you have to notice, this is for RSS feeds, which can be accessed at:

www.example.com/feed