The importance of dividing by 12 (and why you should always seek advice from others.)

Thoughts By 6 years ago

I’ve just spent the morning crunching some numbers for a financial projection for a new top secret project we are involved in. Beauty!!! Our gross  profit after year one was set to be over $700,000!!!! Needless to say, I was quite chuffed with this.

I gleefully sent the document over to one of the other shareholders, who has years of experience in financial projections. He quickly discovered my numbers were off. Way off. I had somehow neglected to divide by 12 at some point, and grossly over-estimated our revenue. So much so that we were actually looking at a $220,000 loss after year 1. My bad.

The real lesson here is not so much getting it right the first time. I don’t think I could ever do that. But, having an experienced set of eyes looking over your work never hurts, and can instantly save you much time and effort wasted by miscalculations or wrong assumptions. As much as I enjoy working independently, I value using the experience of those around me to confirm, or better yet challege the work I have done, as long as I can learn from it. This financial forecasting error has been highly valuable, as it’s highlighted some weakness in my general maths skills. Right, time to brush up on how to use a calculator properly.