>> A large problem was Sherman did not understand some basic business principles. "I would bring the financial statements to Jody who would glance at them so cursorily and wave me away with 'no one can understand this without extensive analysis,' Prentiss writes. "Critically, he did not understand margin. At the end of December when things were getting truly desperate, he said to me, 'Phil, just bring me a forecast that shows how much we need to sell to break even.' He did not understand, after three years of negative margin, that increased sales resulted in increased losses. He had built his house by raising money and when times got tough he went with what he knew."
If the above it's true, it's really scary. You should not be in any business, let alone commerce, if you don't get this basic stuff. Building a business is about making money - coaxing it right out of the unit economics - not raising money.
I doubt he didn't get it, he just wasn't interested and thought he could make it work just by watching sales. He wanted a target that made sense to him. Obviously a flawed approach in the field he was in, ultimately.
Exactly. If he really understood what negative margin meant, he would never have asked for "a forecast that shows how much we need to sell to break even."
If the above it's true, it's really scary. You should not be in any business, let alone commerce, if you don't get this basic stuff. Building a business is about making money - coaxing it right out of the unit economics - not raising money.