Abstract

The article argues that demanding consistent financial forecasts from early-stage, pre-product startups is futile and counterproductive. This practice, often driven by Wall Street's expectations, can distract management from crucial tasks like innovation, product development, and sales. True innovation often leads to unpredictable revenue streams, and forcing consistency can turn innovative companies into financial ones, stifling growth.

If you can forecast revenues, you are not innovating enough

"Wall Street has played a part in this disaster by demanding corporate profits to be consistent quarter after quarter – and punishing the inconsistent companies. This concept transformed innovative companies like General Electric (GE) into financial ones to smooth normal cycles. Few businesses that are growing and innovate can deliver consistent profits. Consistent profits are a sign of a matured company being milked by bean counters with too few new products coming to market."

Steven Hansen, http://seekingalpha.com/article/116410-misunderstanding-the-great-recession

I have often criticized VCs for the very same reason: they ask early stage, pre-product start-ups for accurate financial forecasts that are irrelevant due to the lack of data to ensure accuracy. In addition to proving futile, these exercises can distract management from the important job of doing the things that make a difference, such as innovating, designing and building products and services, and selling them.

Up to Entrepreneurship.

Cite This Work

Bäcker, Alex: If you can forecast revenues, you are not innovating enough. alexbacker.com/w/if-you-can-forecast-revenues-you-are-not-innovating-enough. Originally published at http://alexbacker.pbworks.com/If-you-can-forecast-revenues%2C-you-are-not-innovating-enough.