When meeting with entrepreneurs they often have a slide that shows their amazing projected growth. Most of the time it shows projected revenue amount for the current year (e.g. $200,000) and then goes out four years with a projected revenue amount in the 4th year that’s 100x this year (e.g. $20,000,000). Now, that might be doable, and entrepreneurs are an optimistic bunch, but they always have a corresponding profits bar to go along with the revenue bar and it typically shows losses in the first year (from the funding cash they’ll burn) and then massive profits in year four (e.g. $10,000,000 in profits on $20,000,000 in revenue).
What’s always missing: massive losses and the funding rounds necessary to hit those growth numbers.
Starting a startup is cheap. Scaling a startup is expensive. Entrepreneurs would do well to provide projections that show they’ve thought through the costs of scaling their business.
What else? What are some more thoughts on startup projections not recognizing the costs to scale?
David Cummings on Startups 