How to bootstrap a bakery business (Part 6)
CONTINUED FROM PREVIOUS POST
In retrospect, the change in plan for the bake shop also proved an excellent example of the dangers in what start-up expert Guy Kawasaki describes as forecasting from the top.
In his pivotal post on "The Art of Bootstrapping", Kawasaki explains:
Most entrepreneurs do a top-down forecast: "There are 150 million cars in America. It sure seems reasonable that we can get a mere 1% of car owners to install our satellite radio systems. That's 1.5 million systems in the first year."
The problem is, as Kawasaki explains, that forecasting in the other direction results in a completely different number irreconcilable with the first estimate.
He writes:
The bottom-up forecast goes like this: "We can open up ten installation facilities in the first year. On an average day, they can install ten systems. So our first year sales will be 10 facilities x 10 systems x 240 days = 24,000 satellite radio systems. 24,000 is a long way from the conservative 1.5 million systems in the top-down approach. Guess which number is more likely to happen.
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