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Part Two: John Osher's Startup Mistakes with Financial Planning

Anonymous on March 03, 2010 Source: e360 Blog

This is the second part in a four part series.Gary Schoeniger discusses his interview with one of America's most successful entrepreneurs John Osher and the mistakes that startups make.  Below is Part Two: Mistakes in Financial Planning.  Part One discussed the mistakes in Market Research and Strategy.

 In a recent interview, I asked John to share his list of 17 startup mistakes with us. He graciously agreed. Below are the mistakes relating to Financial Planning:

Focusing too much on sales volume and company size rather than profit:

"Too much of your management is often based on volume and size. So many entrepreneurs want to say 'I have a company that's this big, with this many people, this many square feet of space, and this much sales.' It's too much [emphasis] on how fast and big you can build a business rather than how much profit it can make. Bankers and investors don't like this. Entrepreneurs are so into creating and building, but they also have to learn to become good businesspeople."

Underestimating financial requirements and timing:

"They set their financial requirements based on Mistake 1, and they go ahead and make a commitment to this much office space and this many computers, and hire a vice president of sales, and so on. Before they know it, based on sales projections that were wrong to start with, they have created costs that require those projections to be met. So they run out of money."

Making cost projections that are too low:

"Their cost projections are always too low. Part of the reason is that they project much higher sales. There are also unknown reasons that always come out that usually make costs higher than planned. So on top of everything, their margins are now lower."

Part Three of the John Osher’s Startup Mistakes will be posted Wednesday March 10th and will focus on Startup Mistakes in Management.

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