It seems like there is some magic required for the start-up of any company. The big problem comes when that magic starts to turn to reality and entrepreneurs need to start delivering on dreams, plans and promises.
An entrepreneur must make promises to customers about how a customers problem will be solved. Promises need to be made to employees about pay, rewarding work, culture and a plethora of very human issues. Finally, an entrepreneur must make promises to investors about sales, profits, growth and returns.
Well, when it comes to customers most entrepreneurs know that it doesn’t pay to promise to invent a car that will go 250 km/hour on a thimbleful of gas (except maybe for Tesla). Microsoft doesn’t promise that Windows 7 will improve your sex life (although I would not put that claim past them). Only the investment banking industry claims that you can start at $50,000 per year and you’ll be making $1 million in three years (and since this seems to be the case perhaps I should have gone into investment banking).
Why, then, do so many entrepreneurs claim that they will be bigger than Google in five years? Why do they produce revenue forecasts just by plugging numbers into Excel? You know, first month $1,000 revenue and by the end of the first year $1,000,000 revenue per month with no back-up as to how this number is arrived at? Why do revenue forecasts always look like entrepreneurs have gone to the same hockey stick manufacturer as every other entrepreneur?
If creating a company is like performing magic, then entrepreneurs must stop fooling themselves with their own conjuring tricks for revenue. Bad revenue forecasts can kill a company as quickly as bad products and bad employee morale. Revenue forecasts are every bit as complex as product development and it’s a complex process to describe in a blog. All this to say that if you’re serious about not over-promising, you’d be well advised to attend our next Best Practices session, Beyond the Hockey Stick—The Art of Realistic Forecasting, December 8th at noon at MaRS.
Need more reasons to come? Find out why this entrepreneur will be there:
Charles Plant has been the CEO or CFO of several successful software companies. He’s also been a management consultant, an investment banker, an auditor and an advisor at MaRS. See more…