Revenue Forecasting, Continued

Pelle at Stake Ventures posted a comment at my site and has a post at his site about my recent post on revenue forecasting.
Here is part of what he posted at his site:

The article makes the classic mistake of thinking all start-ups follow the same industrial kind of model with VC’s and business plans etc. I think it is not at all relevant to web based start-ups. Where this is probably relevant are the kind of start-ups where you do need a huge upfront investment.
As all internet start-ups and sooner or later realize these revenue forecasts that you do are nothing more than a waste of time.

Here is my response:

First, you have assumed that I am talking about business plans for the outside world. In that case, you and Guy [Kawasaki] are probably right, as investors and bankers are probably not going to believe your numbers anyway. A VC friend likes to tell folks that he has one person on his staff whose only job is to rip apart the numbers in a plan that they like and reconstruct them with their own assumptions.
However, I am talking much more about planning for the entrepreneur than a plan for the investor.
By spending the time to develop forecasts that tie into the marketing plan, at the very minimum you have now identify the key assumptions that are tied to the big unknowns that create uncertainty in your forecasts.
You now know what you need to track carefully as your business grows. The assumptions become not only what you use to forecast, but become the barometers you use to assess where your new business is really going and why.
This way your forecasts, just like your plan, becomes a fluid and evolves as you learn, as your business grows, and as things change. You imply that I view a forecast as some sort of a contract. Nothing could be further from the truth. I want you to adjust your forecast with each month of experience, with each mistake you make, and with every brilliant decision you make along the way.
When you look at your plan and see how different your business actually looks after you’ve operated a year than it did in the original plan does not mean you should never plan. It means that your plan and your forecasts are a starting point based on the knowledge you have now and that you have learned and used that learning to get better.
When we fail to forecast we are simply setting ourselves up for a game of blind man’s bluff. That is too expensive a game and too risky for me.

I like Pelle’s site and plan to visit it more often. Great post and a fun discussion!