Think You’re Special? Get a Reality Check
Author: Gary Whitehill
There is a trait among entrepreneurs that people both love and hate at the same time – their optimism.
Let’s face it, taking the leap from security into the unknown must be backed by a healthy dose of optimism. If that wasn’t the case, most people wouldn’t do it, would they? No one would start a business if they weren’t completely convinced deep down in their gut that they were sure to succeed.
However, if you want to build a strategic plan, access funding through angel investment or venture capital, and deal with those first few tough years, you need to temper your enthusiasm with a healthy dose of reality.
The Best Case Scenario Trap
My sister is someone who loves making lists. She estimates all of her earnings for one month and the full year, and calculates the figure she expects to earn. The trouble is, in her ‘perfect’ model she works on the assumption of working with the maximum number of clients for every Monday through Friday of the month – a best case scenario. Then she makes an even bigger mistake – and one that many entrepreneurs make too – she bases her cash flow on her projections.
Of course, when life and business intrudes on reality, the ‘perfect’ model she created becomes increasingly less accurate, leaving her disappointed, frustrated and stressed.
It’s a mistake that many entrepreneurs make. They base all their projections on the very best possible scenarios, not taking into account the everyday hassles that make a ‘perfect’ model an impossible goal to achieve.
Being Overly Optimistic Pushes Funders Away
Of course, it’s not just your own cash flow and planning that being overly optimistic puts at risk – it also can scare off potential funders.
As an entrepreneur, you probably already know that if you are trying to woo investors, whether they’re venture capitalists or angel investors, you’re going to have to construct a business plan and slide deck. Overestimating earnings and underestimating costs is very likely to be one of the reasons why potential funders don’t take you seriously.
Faced with a business plan jam packed with overly optimistic figures, potential funders are likely to think that you are at best naive, and that’s not a trait any investor wants to see in an entrepreneur they are considering funding.
Learning to Temper Your Enthusiasm
- You know that your latest invention, XYZ Widget, is going to be the best thing since sliced bread?
- You are convinced of your die hard entrepreneurial spirit, and that your business is going to take off and break-even in record time?
The above are both very important mindsets to encompass – you’re going to need that enthusiasm as you build your business.
However, instead of basing your projections, calculations and plans on everything going right 100% of the time, why not just 50%? That way, you’re likely to plan better, spend less, and achieve your targets. Heck, you might even beat them. What could be a better motivator than beating your targets?
The smart entrepreneur lives by the old mantra: hope for the best, plan for the worst. Aim low and be realistic -“ you’ll most likely meet and exceed your goals. Aim too high -and you’re likely to fall short.
A Last Word on Reality – You Don’t Know Half as Much as You Think You Do
Unrealistic financial projections are one failing aspect in an entrepreneurs business plan. Another, which is exponentially more detrimental in both the short and long-term for an entrepreneur’s business -believing you know it all.
You may understand every aspect the business you’re planning to start inside and out – which you should in the first place. But even if you’ve worked in the field for decades, you’ve never tried to run a company at the same time, have you?
The business of business (and success as an entrepreneur) depends on much more than just being an expert in a particular field. You will need to learn new skills, acquire knowledge and face situations you’ve never imagined – all without the security blanket you once had in the corporate world. You will need to engage the sales process, plan your finances and keep a close eye on the nuts and bolts of your business as it begins to scale – undoubtedly a steep learning curve.
Whether you’re a new or current business owner, the humble approach would be to realize you do not know everything. In reality, embracing the fact that there’s always an opportunity for you to learn is a far better idea. Take advice from entrepreneurs who’ve been in business for years and are successful.
Listen when potential funders reject your ideas – there are always valuable lessons to be learned in their criticism. Pay attention when clients complain – they’re the back bone of your business.
While you don’t have to relinquish the passion and enthusiasm for your business, you must realize that while it’s an exciting world, entrepreneurship is also very tough – if it wasn’t, everyone would do it. Being realistic and keeping your feet solidly on the ground will help you deal with the daily grind, and allow you to take any potential disappointments in stride.
Once you learn to be realistic and take both big and small challenges in stride, you just might reach those lofty goals and faraway dreams after all. Even if you don’t though, you’re still more than likely as a result of your realistic outlook, to do pretty darn well.
Tags: best case entrepreneur advice entrepreneurship funding gary whitehill humble learn optimism pessimism pitching angel investors pitching venture capitalists reality of entrepreneurship start-up advice worst case never give up