If you could predict the financial development of any publicly listed company, you would be a stock market millionaire.
Why would it be easier to make a three year forecast for a startup that does not yet have products or customers?
The difference between ambitions and reality can create conflicts between you as an entrepreneur and your financial partners.
In addition, you may have to explain why changes in business conditions make it smart to diverge from the original plan.
The plan is simply far too optimistic and lacks necessary skepticism and risk assessment.
The other major problem is that these external business plans are useless as a tool for managing the company.Often none of these planning activities are coordinated with each other.This method not only produces poor planning documents, but leads to a loss in the planning process itself.Instead of guessing what might happen three years from now, the focus should be on the next few months.We suggest making a plan for the next three months, and then add a new month at each months end. Working in this way makes it a lot easier to make adjustments based on what we learn during the project.“Plans are nothing; planning is everything” claimed Dwight D.Eisenhower during the planning of the D-Day invasion.An even bigger problem is that many entrepreneurs follow these plans uncritically, without asking questions like: Has the market changed?Did the product turn out the way we thought it would?The justification for longer plan periods is often that bankers and investors want a forecast that shows when they will get their money back.Unfortunately, these forecasts are often based on failing preconditions.