This is number 10 on my list of top 10 startup mistakes. I used the list last week at the Growth 2.0 conference in Miami, so I want to share it here.
Once upon a time, I sat down for lunch with a venture capitalist friend of mine.
To the standard rhetorical how are you question, he answered,
“If I see another hockey stick forecast this week, I’m going to throw something at somebody.”
I asked what that meant, and he answered:
That means that sales are going along flat and boring, with nothing happening . . . but things are going to shoot up as soon as I get your money.
It’s not just the hockey stick forecasts, either. It’s all those unrealistically optimistic forecasts with no real basis. For example, the forecasts that assume some new venture can get a small but significant percentage of a very large market. No, you can’t get half a percent of the $50 billion widget market.
And with an unrealistic forecast, you naturally have an unrealistic expectation of capital needs, cash flow break-even, and a lot of other numbers.
And, speaking of hockey stick sales forecasts, they’re actually great when they’re real and believable. Back them up with early sales results, letters from buyers, demographics, conversion rates, and other real data. Then they work.
But anybody can type spectacular numbers into a spreadsheet. The real trick is to meet those numbers in real life.
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