David Cowan at Who Has Time for This? has a post today titled “The Best Startup Advice I Have” on the difficulty of modelling accurate sales forecasts. He writes about the Sales Learning Curve theory developed by Stanford Business Professor Mark Leslie:

Leslie’s approach springs from the observation that factories would never presume to produce widgets in volume until they have brought the cost per widget down to a profitable level through a commonly recognized manufacturing learning curve. Only once you start manufacturing something can you identify hurdles and opportunities, ultimately learning how to reduce cost, improve quality, and raise yields.

Likewise, technology companies shouldn’t expect to sell their 1.0 product without undergoing a learning curve around the needed feature set, the competitive response, the right type of channel and sales rep, optimal pricing, etc. And yet, nearly every business plan I have seen shifts gears directly from Development to Sales, staffed by a growing number of experienced sales reps charged to sell their regular quota of product.

The consequence of skipping the Sales Learning Curve in a business plan is all too common: the company fails to meet the plan, sales reps are fired, eventually the VP Sales is fired, and the company has to raise a highly dilutive down round of capital to stay in business.

Common sense, but easily forgotten. More links and materials in David’s post.