Anyone who has ever been around entrepreneurs and early-stage companies knows that early-stage business projections (revenue, cash flow, profit) are overly optimistic. Experienced investors always cut them down before analyzing the company. And experienced investors also know that a top-down set of projections (such as, “We’ll get .5% of a $10 billion market and that’s how we’ll become a $50 million company.”) are virtually worthless.
But I’ve just identified another type of problem–I need to come up with a clever name for it– that for now I’ll call RED (Revenue-Expense Disagreement). RED is when the expense line doesn’t match up to the (usually overblown) revenue projections.
To read the full, original article click on this link: Get the RED Out | Belief Without Evidence
