Remember that cash is king.
Know the difference between cash and revenue. Revenue means that you expect to get paid a certain amount of money at some point for services rendered and goods provided. Revenue is not useful for paying your lease, buying office supplies, or compensating your employees. Only cash can do those things.
Remember that you usually estimate a certain percentage in your Accounts Receivable for money that you’re never going to get paid. That’s why revenue is not equal to cash.
Until the cash comes in the door, forget about revenue.
Assumptions are ok. You aren’t going to know whether or not you’re going to close as many deals as you hope, or be able to charge as much as you’d like. The numbers you show are based on assumptions that certain things will go a certain way. Write the assumptions down. Make note of them. You need some kind of starting point, even if you turn out to be completely wrong.
The best source of information about whether or not your idea is going to work–who will buy it, how often, and how much they’ll spend–is your customer. Tell them about your idea. Ask them if they’d buy it. Talk to your competitors. Ask them how they’re doing. People love to talk about themselves.
Nobody is going to steal your idea.
There is no secret cabal of executives sitting in a boiler room with a million bucks in capital, just praying to overhear your ridiculous, risky, untested idea so they can pull it out from under you.
Ideas are a dime a dozen. A thousand people have had the same idea. You have to be the one guy who takes the idea that everybody else has thought of, runs with it, executes it better than anybody else, does better sales and marketing, puts a unique spin on it.
A plumbing service is not a unique idea. Computer solitaire is not a unique idea. A car with four wheels and an internal combustion engine is not a unique idea. Yet there are dozens, hundreds, thousands of companies who compete in each of these spaces, thousands more who support them. You can be one of them, if you think you can do it better.
You have a limited number of hours in a day, and you cannot pursue every idea you have. You need a way to figure out if a sudden flash of genius in the shower is going to turn into a million-dollar business. Learn to do back-of-the-envelope feasibility.
Let’s do one based on our hot dog stand. If a year lease costs you $6000 a year, and cooking equipment costs $2000, and your supplies are $1000 a month, will you be able to generate at least $20K in revenue to break even? How many hours will you have to stay open? How much will you charge, and how many customers will you have to have? What about hiring employees?
The bottom line is this: if you can’t even fathom how you could sell $20K in hot dogs every year, you know that this isn’t a business that’s even feasible. And supposing that you manage to sell $40K in hot dogs a year, is the pain and risk and difficulty of running the business worth a salary that is, at most, $20K?
You have to kill your ideas, and kill them quickly. You need to evaluate an idea, decide that it doesn’t meet your objectives, and move on. You can’t hem and haw about how if you could just get some venture funding, or the market was more receptive, or you could somehow convince people to pay $20 for a hot dog, that you could make the business work.
Kill it. Move on. Find a winner of an idea. And when you find one that looks good both in your head and on paper, you’re ready to commit.