How to lose £Trillions – Entrepreneurs – don’t be afraid!

The IMF has provided entrepreneurs with a wonderful example of how to get it wrong.

The number of times IMF economic forecasts have been trashed is very surprising. In fact, for a bit of fun – have a look at this google search – IMF Forecast Wrong .

You will see that the IMF failed to forecast the economic meltdown in 2008 and then equally, failed to estimate the cost of bailing out the banks getting it wrong by Trillions of £ or $ on each occasion.

Famously, their forecast for central and Eastern Europe in 2008 were so bad (and damaging) that the head of the IMF personnally apologised to the Austrian government (as Austria was criticised for heavy investment in central and eastern europe).

Okay – that’s enough fun – what does this tell us, the entrepreneurs?

Firstly, macro economic thinking is deeply flawed. This doesn’t stop it being a major business, of course and lots of big salaries and some profits somewhere?

Secondly, most forecasts – including entrepreneurs’ business forecasts – are wrong. Yes, just plain and simple, wrong!

All data driven forecasts (in the IMFs case – economic modelling and the Entrepreneur’s case – the spreadsheet) are wrong because they can only use the past to predict the future.

So, what should the entrepreneur do?

If you speak to a VC fund and ask them how they choose their investments, they will tell you that they back smart ideas, great people and a powerful emerging trends.

The notion of a smart idea and great people is well documented, but the idea of backing a powerful trend is interesting.

What the VCs are saying is that a business that will receive funding is going to be riding on the back of a long term demographic or consumer behvaviour trend.

Why?

Well, the VCs already know that the business forecasts they are presented with are rubbish. They already accept that many of their investments will fail (and their forecasts will turn out to be as valid as the IMFs).

Therefore, the VCs need to ensure that when one of their investments takes off – that it takes off big time. It needs to have the potential to become huge. And for that, the business needs to tap into a new trend in consumer or business behaviour.

So, the message that the IMF teaches us is this – don’t make your forecasts too complicated – they will almost certainly turn out to be wrong.

Instead, focus on establishing and proving an emerging trend – a growing desire to buy convenience food – the emergence of freelancing and entrepreneurial activity – the shift to mobile communication and impact on social media – the success of TV talent shows – the green energy shift – Government outsouring – consumer trends to value etc…

So, make the trend spotting your key focus and how your business taps that trend – and use the spreadsheet to manage your cash.

That is because the spreadsheet will keep you in business (stop you running out of money) but the trend forecasting is what will help you raise money – and potentially – have a huge success on your hands.

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by Editor

Leader. Speaker. Trainer. Helping snr execs and entrepreneurs achieve their business and funding goals.

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