Not meeting your Sales Projections can be Fatal

A techie acquaintance participated in all team conference call with the CEO of an online marketplace, who started the meeting by stating that the sales targets have not been met. My acquaintance asked me what was the meaning behind that statement?  I asked, in return, how often has the failure to meet revenue targets happened? If that were the first occurrence, then it is a serious problem, but rectifiable. If this is the second occurrence, then the investors become seriously concerned.  By the third occurrence, the investors will begin to demand “heads”.

By addressing this issue, the CEO is beginning to ask team about solutions to the problem.  Is the advertising budget big enough to attract more customers?  Is there something wrong with the product(s)? Is there a distribution gap? And so on.  Another perspective would be whether the projections were too sanguine?  And that might be a dilemma.  Understating the potential sales might discourage investors.  The opposite — a far, too high targeted projection — will disappoint them.

Then, let us look at the perspective of the investors. I recall the impact on Wall Street for not meeting revenue targets some years ago.  A Fortune magazine article once interviewed Morgan Stanley as to why, after being the underwriter for a telecom company for bonds, Morgan did not lead the IPO.  Morgan answered that the company “… missed their numbers after the deal.”  In other words, Morgan felt that any investment in that company would be a disaster.  That prudence proved correct when a couple of years later, that same company lost the investors over $2 billion and filed for bankruptcy.  So meeting sales projections are important.

After a while, the company runs out of excuses. The marketing team gave rosy but unrealistic projections. Or the company has no experience in the space.  Who knows? But consistent failures in meeting projections to Wall Street or any other type of investors can be fatal.

This comment leads back to an earlier blog – companies must meet their milestones – in this case, projections.  Whether it be Wall Street or a VC, they all behave the same. They need to be comforted that the company they invested in meets their business plan projections.


About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP,, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy.; For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
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