FINANCIAL ANALYSIS

The Curse of Microsoft Excel

You may have a pretty spreadsheet, but that doesn't mean you've thought out your finances or your business

Courtesy Company

Microsoft Excel

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Microsoft Excel is a curse. With its deceptive simplicity and ease of use, it has taught generations of MBAs and entrepreneurs that creating the financial underpinnings for a serious business is basically just another form of word processing. It has insulated these aspiring business-builders from the difficult and time-consuming tasks of building a real case for a real business from the bottom up.

Then these would-be entrepreneurs, and their backers, seize upon these plans as if they were the Gospel expressed in rows, columns, and pivot tables. They use them for support--rather than for analysis and guidance-;in exactly the same way that a late night drunk relies on a lamppost. Welcome to the world of made-up metrics.

The Spreadsheet Is not Your Friend

Credible plans are grounded in prior documented experience. We used to call this process “precision guesswork,” but at least we had a process and we knew where our numbers came from. Now the precision is vanishing. It’s too easy to simply insert aggressive new growth numbers (without any decent explanation) and then use Excel to replicate, grow and run the numbers forward until they reach the sky. The worst are the market-sizing numbers. “Our market is everyone on this planet with two eyes.” Not helpful.

Even good facts are just facts. They’re not props for arguments or support for conclusions. For that, you need to identify and quantify the conditions, trends, needs, and other market circumstances that help buttress your business idea. It’s these larger drivers--not cute anecdotes and fake facts--that will provide the framework for decision-making.

Building a business is about pushing your vision forward and adapting it to thrive in constantly-changing circumstances. But if your fundamental idea isn’t grounded in actual reality, it’s way too easy to get lost in the shuffle. These are serious problems. The triumph of the form of the materials over their real substance (slick spreadsheets) and misplaced reliance on irrelevant metrics (fake facts) can lead you to believe that you have your arms around your business when--in fact--you’re swinging a big hammer, but you’re trying to nail Jello to a tree. 

Last updated: Jan 22, 2013

HOWARD TULLMAN | Columnist

Howard Tullman is the CEO of 1871 in Chicago where, at the moment, 260 digital startups are building their businesses every day. He is also the general managing partner of G2T3V, LLC and Chicago High Tech Investors – both early-stage venture funds; a member of Mayor Emanuel’s ChicagoNEXT Innovation Council; and Governor Quinn’s Illinois Innovation Council. He is an adviser to many technology businesses and an adjunct professor at the Kellogg Graduate School of Management. @tullman

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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