May 7th, 2012 → 3:13 pm @ Norman
The entrepreneur brought me his plan a few months ago. I agreed it looked achievable, and was ready to go… a nice web-based business. I suggested that he generate some sales before the investors committed their money.
Six weeks later he was back to report the first $30,000 or so in sales…. A good start!
The entrepreneur signed our papers, committing him to the deal. Before the investors would sign, I analysed the actual costs against budget. The costs were much higher. The entrepreneur explained that the model he had originally proposed wouldn’t work, and he had modified it. The modified model had a gross margin of 22%… not enough to build a profitable business. (more…)