Sell Me This Pen

"I don’t sell pens. Margins are too low, competition is too high and demand trajectory is on yearly decline. I’ll have to sell hundreds of thousands a quarter to make a living. It makes no sense."

One night while finishing a glass of Grand Marnier, Joe was hit with a brilliant business idea. Joe called a buddy, who happened to be working on his second glass of single malt Scotch, and pitched his idea. Joe's friend loved his idea and thought together they can make tons of money. Next day, Joe and his buddy registered an LLC, pulled money out of their savings and 401Ks, quit their jobs and started the business. What can go wrong?!

Many entrepreneurs start businesses without understanding their numbers. Excitement and ego take over, and bullshit projections slip into financial forecasts and balance sheets. It is essential that you understand how much your customers are willing to pay for your products and services. You must also have a good handle on volume projections and costs. Often times, startup founders or even seasoned business leaders don't plug in the right numbers.

Business is unpredictable. Your costs are alway greater than your projections, your margins lower than expected and sales cycles take longer than you think. Take the blinders off and know your numbers before committing to a business. Never forget that you are in business to make money. If you struggle to figure out real financial projections that show steady growth margins, you should grab a drink and start working on the next big idea.

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