Sep 242010
 
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One common mistake that entrepreneurs make when planning for their business, is assuming that they will be able to perform better (usually in a whole variety of operational aspects) than their competitors.  This is a pet peeve of many investors I know and it has come to be one of mine as well.  The bottom line is that if you are going to project operational and financial results based on assumptions that you will greatly outperform your competitors, you must have a rational justification for your assumptions – not just that you’re “better” than them.  How will you as an early stage company, for example, outperform GE in your throughput on the widgets you manufacture?  Crazy you say that someone would make such an assumption – maybe yes, maybe no – but you’d be surprised how often I’ve seen this assumption (or similar) in the business plans, Private Placement Memorandums and financial models I’ve reviewed..

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