I talk to small business owners and CEOs a lot. I used to talk to them when I was a marketing consultant and now as a fellow business owner. If you do the same, you’ll find that business owners like to talk about the future a lot – their hopes, their goals, their dreams. In short, what they expect the future will bring fo them, their business and their shareholders.
As a marketing consultant, this was good data for planning. What did the company’s management believe the company could do in sales, operations, customer service? How were we going to execute on that belief? (Honestly, marketing is more about the operational execution and communication of a company’s goals than anything else.)
When I became a business owner, we talked a lot about potential sales and where we thought we could sell our product most effectively. We had these big dreams that we layered into spreadsheets. Sure we could hit a couple of million dollars in revenue within the first three years. I mean, is it worth it if you can’t?
Here’s the thing – everyone tells you to put together financial projections. To do that, you talk about expectations. Business owners that are just starting out are asked to estimate sales in a market they have just entered with a product that was just created. They have some anecdotal feedback to rely on and not much more.
That’s why 99.99% of small business financial projections are creative bullshit.
The truth is – you don’t know. The past isn’t a good indicator because the market is constantly shifting and you’re growing. Things happen, opportunities come up, costs rise or fall. All of this affects your bottom line.
My advice is simple – set your expectations low. It will take longer than you thought, more hard work than you imagined, and cost more than you projected. Yes, I know this sounds like heresy and I am raining on the young and tender vision fo your business. But, this is one of the cases where you have to be cruel to be kind.
Here’s the kind part – it’s ok. Veterans of small businesses will expect nothing to go as planned. And by keeping your expectations low, you know what’s going to happen? You’re going to be conservative with your spend, cautious with your investments, and you’ll learn to carefully nurture this thing you have started without overextending yourself or the business. And that makes for a healthy business indeed.