mikortnale: The Startup Forecasting Dilemma

Mark MacLeod.

The dilemma of predicting startups.

When you 're going to get investment, you need three things: the presentation, executive summary and forecast of financial performance. The figures need to predict, even for start-up companies that have not yet receiving income. Over the years I have prepared a set of forecasts for many companies, the early stages of development.

Even given the fact that the projected figures will likely not be achieved, I think this is a useful exercise. properly executed. forecasts provide management and investors a clear view of all the mechanisms and leverage their business, as well as critical points, goals and deadlines for the costs of operation, for which sufficient funds.

But the only thing I can say about these early predictions, is that I can not rely on them. Hard to predict what will happen in 3 months, and even more so after 3 years (the standard period for which you need to build forecasts). At exactly how much you can say what will be your earnings in 3 years?.

In addition to the difficulty of forecasting, there is a strong temptation to provide investors with high rates of. Show is not that likely, but the fact that it is possible (and often, and more). Investors provoke a. More than once I witnessed a situation where investors are asked to review the entrepreneur forecasts upward. Investors are then assumed that the digging will do half of the performance of the prediction on steroids, and used this assumption for the decision.

Despite the objective difficulties of forecasting and pressure to the inflation figures, investors continue to be upset when the predictions do not come true. This also applies to current investors, who invested their money based on inflated projections, and investors the following stages (especially if they are familiar with your original projections, and can compare the current state of your affairs in order, which you mentioned ).

If you have received a first round of venture capitalists and access them again, they will have your previous forecasts, with which they sduyut dust, to see what you said before.

Why are these educated and experienced investors are fooling themselves? . Sometimes a product or service takes off, and you get a result that exceeds all expectations. Most often, the time the project takes longer than planned. The path to success rather tortuous.

So where 's the answer? . But I am sure that entrepreneurs sound convincing when told how difficult it is to achieve performance of the optimistic forecast.

If you have thought through how you will display the product or service to market, as it will promote and distribute, then you can make more accurate forecasts can reasonably argue about the cost of attracting clients, channels, partners, staff, etc. Dr.. All this is much more like an investor, t. to. even if the overall goals are quite ambitious entrepreneur knows how to achieve them. Hope - it is not a strategy. We need a clear sense of purpose and tactics.

And if you need to protect its credibility, figuring why not achieved its goals, do not link to external factors, and take time out to figure out what happened. Maybe you were late with the release of the product? . Show that you understand what really happened. This will enable negotiations to continue and lead to a new set of wildly optimistic targets.

Translated for the blog dennydov. blogspot. com.