Planning Fallacy

The planning fallacy is defined by Wikipedia as the tendency to underestimate task completion times.

Projects take twice as much time and cost as planned.

First-time founders don’t have previous experience and cannot rely upon past projects when making plans.

Some founders recall selected cases in the past that went well and plan optimistically.

To overcome the planning fallacy, consider the following:

Break the project down into its component parts to make the analysis easier.

Analyze previous projects to determine how long it will take and use that information to build the timeline for the current project.

Have others review the plan to see if there are any tasks that have overly optimistic timelines.

Build accountability into the project timelines to make sure that the team stays on track.

Perform scenario analysis on what could go wrong and how to manage it.

Avoid ego, peer pressure, and other factors that drive optimism into the planning.

 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.