As a rule, we entrepreneurs are optimists. We start businesses not because we have a high tolerance for risk, but because we believe in our idea, product, or service. We also believe in our ability to make the venture successful. This optimism, however, is often not supported by the facts and can lead us to make our next mistake.

 

 

 

 

 

Unrealistic financial projects with a hockey-stick-shaped growth curve, can set up a business for failure when owners spend too much too soon without enough cash reserves to help the business through the startup phase.

 

 

As you develop financial projections, consider two scenarios: a best case and a worst case. Can you handle the volume and capacity demands of the best-case scenario? Is the idea still viable in a worst-case scenario?