The Plan — Entering Growth
Automile is now entering “growth stage” and it’s time to grow our 2016 ARR of $3.1M by 2.5–3x in 2017. I recently shared an article, Time to Scale, that contained the core message to the Automile team and it’s now time to share how we created the plan. Every startup needs a plan for each stage of the company and the founder(s) has to adapt.
Don’t underestimate — it may be harder than you think
I am always telling my team members it’s hard and we have to work together to reach the goals. There are no “shortcuts” and just because we have money in the bank doesn’t mean we should get comfortable. Scaling the company by 3x is not as simple as just recruiting more team members and sitting back and hoping it grows. It’s about efficiency, creating demand, control, trusting leaders and building a broader management team while at the same time making sure we are laser-focused on our goals and metrics. And of course, in the process, avoiding being a control freak.
BUT THINK BIG! (now is the time to really think BIG)
Automate the h*ll out of everything
The growth stage is when the company will start to grow out of your “control” as a founder (the control you feel when you have 2–30 people) and you have to settle with the fact that you don’t have enough time to talk to everyone or later, even remember all team members’ names. When this happens it’s important that the vision and goals are deeply penetrated in the culture. You have to be over-communicative, repeat over and over again and discuss the numbers over and over again.
I am a myself a true believer this is the last opportunity you will able to make sure you automate the h*ll out of everything and build a culture that continues to live after that. Efficiency is going to be so important in the future when the company starts to either go public or get acquired. I have seen many companies forgetting this important element and eventually they get slower over time and it starts to hurt.
First step — it’s complicated and should be complicated to get you to think about everything…
Many founders may think the CFO will do all the plans, budget and forecasts while you can work on other things. A CFO will participate, build models and own a certain part of it. But you as the founder have to work with the team to align on investors expectations and what’s needed to get to the next goal, call it the input.
And an IoT-company like Automile is more complex than a generic software-only SaaS business and there is much more to track and manage. Below are the tabs in our budget sheet to give you an indication how we think about planning (the titles are self explanatory).
A budget and financial model has to include more than just costs. It has to predict pricing for products, whether it is increasing or decreasing over time. It has to carefully manage stock volumes needed to cover estimated sales and there has to be detailed planning of headcount under each department.
It is also critical to do planning workshops with key members of your team and talk about metrics. Then from the outcomes of these workshops, you create the real, vetted operational model with your CFO.
You start by talking about what the team now is doing, how much more they can do and how it could grow. Everybody has to believe in the numbers and it’s very rare that a number you pick and point to someone will ever be reached if that person doesn’t believe in it. I’d rather be conservative and do what we promised than just blowing up numbers that nobody knows how to achieve.
The model should output key dashboards and charts that provide you the highlights of it. Our Point Nine investors Rodrigo Martinez and Christoph Janz have a great financial template with these charts. Here are a few charts that we use which are slightly modified versions to fit our business.
You need to earn money someday, it’s “not just a venture business” where losses should be ignored. I grew up working hard for companies that had to make real profits. I want to build a company that I am proud of and that generates healthy profits for the investors and potential future IPO and stock holders.
My vision has never been to create a company that generates revenue combined with infinite losses or super-low margins. My vision is to create one of the most profitable SaaS companies while delivering the best-in-the-space product that saves money for our customers. I want to be building a company that offers solutions that customers will gladly pay for because they see tremendous value in no time. And I know we are on the right path every time I hear a customer share how delighted they are to partner with us.
That’s why you need to think about efficiency and gross margins — early. And the price planning will help you to determine based on your prediction of the future how you need to think about your costs.
Once this budget is settled, and you believe in it and all your team members that participated have “signed it”, then it’s time to get it aligned with the investors and move to step 2, simplifying the budget.
Simplifying — you need to get everyone to be able to track and understand
This is important, after creating that mega big sheet (an import exercise to think about everything) I showed you in the step above you have to simplify it again in a workshop. There is no way you can follow-up and discuss metrics with the team if you have to go into each cell in the budget. Just imagine referencing a large sheet in every meeting, is that a great thing to do? No.
So simplifying means you take the result (output) and build a model that is simpler to share. You may also build “an accelerated shadow model” that increases the numbers and discuss what’s needed for doing a +10–15% plan. The simplified model should predict average selling price, average customer size (initially) etc.
The donut — just can’t get simpler
A monthly goal in a simple format for everyone in the company to understand. This is Automile’s donut for a single month that everyone can find on our dashboard.
Quota per sales team member
Make quotas easily readable (I removed the names below, but each bar is a person). This is how Automile visualizes it.
At Automile, we try to make sure each management person can track their results vs. budget in a simple real-time chart. Below represents how my co-founder is performing for his European “division”. The yellow shows the variance and this is a schoolbook example of how it should look like.
Breaking it down per sales member
It is important to visualize how much sales team members are collecting in trial vs. paid revenue. At Automile this is how we visualize it, per month and one-line graph per sales rep (this for trial).
Trial accounts, lost and won
Sometimes it confusing because net new customers’ definition is won customers the actual month but lost customers that was lost in the actual month. At Automile we visualize both and their sources.
Many times you get questions about custom reports. At Automile (we are still just over 2 years old), the engineering team has created a small query report generator and they can supply easily modifiable queries for the management team to create their own custom reports. I am aware PowerBI, QlikView, Tableau and others have much better ways to handle this but we needed something simpler and faster — and that was tightly integrated into our core databases.
With all this information it doesn’t mean we, Automile, have everything in place. Just as with all the other pieces in a growing startup, you have to iterate and become better over time. But if you as the founder(s) are leading the way, things will get easier over time and the foundations you have built during the growth phase will help you accelerate in the future stages of the company.