I. Businessman. (Part 9)
“I will make a million by the end of this year. This excel sheet says so.”
Most businessmen start off based on some growth & profitability projections.
Very often, an inexperienced businessman or new entrepreneur lives in a dream world, which promises unimaginable profits, based on excel calculations.
It all seems achievable and the question they ask themselves is ” Why did I not start sooner? Its all here in black and white. It looks so easy.”
A year later they are left scratching their heads wondering what hit them.
This is why.
Learning No: 11
Life by Excel = Death by Excel
Business projections are usually worked out in spreadsheets, interlinking multiple fields and cost / profit heads.
Life by Excel is very easy. If the numbers don’t add up, you can easily make small changes in one field to get the figures to match your dreams.
For instance, achieving an additional 1% margin on your business doesn’t sound very tough, when you’re projecting an average of 20% profitability on every job you do. You just tweak one field and achieve the numbers.
Try achieving that in real life and you will realize how tough it actually is.
I have seen many a plan backfire, many businesses and projects fail because of this reason.
As humans, we are optimistic by nature. We are so sold on our plans, that we overlook minor perceived problems. As a result, while making excel based business projections, we end up underestimating challenges and overestimating our ability.
Reality is however, very different, with the problems being much bigger than we anticipate and our abilities are being way lower than we think.
That is our biggest downfall.
Be honest in your projections and plans. Let them be grounded, researched and backed by realistic thought (bordering on pessimism) rather than being ‘Gung Ho’ about something that looks good on paper, but is impossible to achieve.
Otherwise, the enthusiasm that you start with will soon disappear and you will realize, a little too late, that you’ve lost money on chasing a losing proposition.
I have come to swear by this…
When you plan, plan for rock bottom…
because any improvement is a 100% more than you expected.
TO BE CONTINUED…
(This is part 9 of a series of blogs on my learnings as an entrepreneur )
Read Part 10 here