We asked John Osher to share his list of 17 startup mistakes with us. He graciously agreed. Below are the mistakes relating to Financial Planning:
Focusing too much on sales volume and company size rather than profit:
"Too much of your management is often based on volume and size. So many entrepreneurs want to say 'I have a company that's this big, with this many people, this many square feet of space, and this much sales.' It's too much [emphasis] on how fast and big you can build a business rather than how much profit it can make. Bankers and investors don't like this. Entrepreneurs are so into creating and building, but they also have to learn to become good businesspeople."
Underestimating financial requirements and timing:
"They set their financial requirements based on Mistake 1, and they go ahead and make a commitment to this much office space and this many computers, and hire a vice president of sales, and so on. Before they know it, based on sales projections that were wrong to start with, they have created costs that require those projections to be met. So they run out of money."
Making cost projections that are too low:
"Their cost projections are always too low. Part of the reason is that they project much higher sales. There are also unknown reasons that always come out that usually make costs higher than planned. So on top of everything, their margins are now lower."
Read part three of the John Osher’s Startup Mistakes: Startup Mistakes in Management.
Gary Schoeniger Founder and CEO The Entrepreneurial Learning Initiative