Editor’s note: Investor and entrepreneur David Gardner is founder of Cofounders Capital in Cary and is a regular contributor to WRAL TechWire.

CARY – I should have known I was destined to spend my life as an entrepreneur.  As I child nothing thrilled me more than to watch movies about the adventures of early explores like Columbus and Magellan. In order to qualify as a real adventure there had to be elements of risk and the unknown.   The brave and cleaver pitted their wits against the unknown.

Starting a new venture is a lot like being Magellan or one of those early explorers sailing out into the unknown.   Several of those early explorers didn’t make it back. I don’t remember their names because history kind of forgot about them.  The successful ones that we do remember didn’t just jump into a boat and hope for the best.  Those explorers spent months, sometime years, planning and preparing for their journey.

How big of a ship will I need? How much food? How will I deal with storms? What will the winds and current be like?  And most important, what course is best?

The great explorers were good sailors, but so were the guys who drowned or starved. What made explorers successful was their ability to plan and navigate. Hope is never a strategy. Long before they stood majestically posed on the bow of their ship, they spent countless hours hunched over candles, thinking through every possibility and potential scenario they might encounter. Those early navigators made best-guest assumptions about riggings, food consumption, wind and current patterns, and modified those assumptions each day as new data was collected. They were great explorers first and foremost because they were great planners.

Startup Hats

Successful entrepreneurs don’t just jump in a boat and start rowing. Like the Boy Scout mantra says, they are always prepared.  In my book Startup Hats I spent an entire chapter discussing the navigator’s hat as one of the very first hats you have to put on as an entrepreneur.  If your plan is not sound, then you really won’t have a business at all. Planning or modeling a new venture as accurately as possible provides the insights needed to successfully surf the edge between growing your venture as fast as possible and not running out of money. It is the tool that will help you understand your costs and what resources you’ll need.   In addition to this it is also the tool that is going to give potential investors insights into how their money will be used to generate a return and the confidence they need to put up the seed capital you need.

Entrepreneurs model their ventures using spreadsheets and assumptions.   Key assumptions may include price points, sales cycle, cost of acquiring customers, staff utilization, raw material costs, etc.    When building and selling a product that has never been offered or perhaps even made yet, there are a lot of unknowns.   We encourage our entrepreneurs to build their model/forecast first and then develop a plan for testing the initial assumptions used.  This is not busy work.   I’ve said many times that entrepreneurs will never know their venture any better than they understand their spreadsheet model.

I also say that half the assumptions are wrong and I never know which half.   Like art, an initial model is a lie that tells the truth.   Overtime, as new data is collected and assumptions are tweeted the model will become a very accurate predictor of the future.  I call it the instrument panel by which we navigate in heavy fog.  Updating the model regularly is a critically important exercise for entrepreneurs because it keeps them focused on their key metrics and indicators of performance.     Your model is your business and like the early explores … it is all that stands between you and the abyss.

Recent David Gardner columns in WRAL TechWire:

David Gardner: Avoid this bad advice for startup founders

David Gardner: More bad advice startup founders should avoid

David Gardner: Triangle corporates should be involved with local entrepreneurs, innovation – or else