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Hockey Stick Projections

Hockey Stick Projections hockey stick projections are unrealistic financial forecasts that show modest near-term growth followed by dramatic exponential growth in future years.

These projections typically resemble a hockey stick when graphed, with a flat initial period suddenly rising at a steep angle.

How Hockey Stick Projections Works

Hockey stick projections are a common but problematic approach to financial forecasting used by founders and entrepreneurs seeking investment or valuation. They typically show minimal growth in early years, followed by an implausibly steep growth curve in subsequent years.

These projections often stem from optimistic assumptions about market penetration, scalability, and potential magical inflection points that will transform the business. However, sophisticated investors and acquirers immediately recognize these as unrealistic and potentially misleading.

The danger of hockey stick projections lies in their ability to undermine management credibility, create mistrust during due diligence, and potentially derail potential transactions or investments.

Key Points

  • Ignore realistic operational constraints
  • Assume linear solutions to complex growth challenges
  • Typically show exponential growth without substantive evidence
  • Immediately raise red flags for experienced investors
  • Can damage management's reputation and deal prospects

Frequently Asked Questions

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Last Updated: January 10, 2024

Disclaimer: This content is for educational purposes. For guidance specific to your situation, consult with M&A professionals.