Goal Setting for Founders
Running a marathon can be as hard as building a profitable business. Surprisingly, over 90% of registered marathon participants finish the race, while most of businesses fail. Perhaps, the difference is in clarity of goal. Marathon runners are set to achieve a clear, objective, and measurable result. They know the date of race, they know their current numbers, and they have a three-month training schedule.
You can make building a sustainable business to be very much like marathon preparation. Set a clear goal and parameters you want to track, write your plan, and go.
Action steps
- Set your time-to-sustainability expectations.
- Define your SMART goals for launch and revenue.
SMART Goals
If you can not compare are you ahead of plan or lag behind, the goals become useless. That’s why every goal should follow the SMART principles:
- Specific. Everyone should see the same goal in your description.
- Measurable. Numbers or facts.
- Achievable. You should feel like it is almost easy. Things are always take longer and more effort than you expect. If you current goal is borderline possible, then the deadline and numbers will be almost certainly missed.
- Relevant. There are key business drivers (e.g. number of paying customers) and vanity metrics (e.g. press mentions). Focus on important things.
- Timed. Concrete calendar dates only.
Example. Register a company by August 1, 2013. Launch a product by August 15. Get 50 paying customers by September 30, 2013 and $20 000 revenue for September, 2013.
Time-to-sustainability
At the start, the survival of your company is the key challenge. As you become more successful, other issues take priority: optimizing business, growth, new business directions, new management, etc. The moment survival becomes secondary, the company enters sustainability stage or sustainable growth. Most typically, sustainability means that your monthly revenue exceeding your monthly expenses. Other option is to have a venture funded, fast growing (revenue!) business and invest in growth ahead of earnings.
What is your expected time-to-sustainability? Is it synchronized with your runway? When you are planning to reach sustainability in one year and have cash only for one months, something is wrong in your plan. In this case, consider redefining your business opportunity.
Match your skills and resources to opportunity difficulty.
Fast start. Ideas with time-to-sustainability of two months or less. Fast start strategy is great for newcomers. Yes, things can take longer than expected. But you are still likely to have enough resources and motivation to reach the sustainability. Celebrate and think how you can grow from the point of sustainability!
Regular start. Three to seven months is about average. In fair number of cases these projects run out of resources. What is your plan B if thing go wrong in the first six months? Regular starting speed is good when you work on something fairly advanced and there is a strong proof of demand on day one.
Slow start. Idea takes more than eight months to sustainability. This strategy is for teams with domain expertise and serious initial funding.
Goal types
Resources. Many teams at the start feel underresourced. They set to raising capital and complete the team as their first goal. There is a different perspective to that. It is not the lack of resources, but a wrong opportunity choice. Pick an opportunity that you can conquer with your current skills and cash. After the first small win it is much easier to grow team and capital.
Launch. Setting a specific date when your first product or service is available. Actually, it is much better to focus on first value delivered. In other words, when for the first time some customer will send you a fan email, write a rave review or just get happy moment because of you. Just putting a product out does not count.
Focus on creating the first moment of customer happiness, not the launch itself.
Audience goals. Goals like “get X registered users” imply that you need a certain number of not-paying customers before you can make money. Do you really need a critical audience before starting a business side of the project? Do you have enough money to build an audience first (delays! challenges!) and then to build a business around your free users? Raising external money based on free audience traction is highly unlikely.
First revenue. Interestingly, first revenue can way before the launch. Actually, this should be the case for majority of projects.
Startup should act like concert promoters: sell the tickets first, organize the concert later
Revenue target. Reach a certain monthly revenue level at a certain date. Typically, a young company is approaching sustainability, when its monthly revenue is around 5-10 average monthly salaries. In US this means making 25-50K$ in monthly revenue.
Moment of truth. This is pre-defined moment, when you proved a high level of demand for your product or eliminated some major risk.
Examples of moments of truth: landed a huge client, got an endorsement from highly authoritative influencer (8.0 for unknown band at Pitchfork.com), reached a top position in consumer-driving ranking (App Store), get a distribution deal with a large channel (your product is in Macy’s!).
Keep in mind that (1) getting to moment of truth can take 2-3 times longer than you expect, and (2) it does not equal sustainability. You need enough capital to go from moment of truth to breakeven. After your big validation milestone external funding becomes much easier, but typical fundraising process takes 2-3 months. Moments of truth are hard to plan, but not setting the fixed date to remove your key risk is a sure plan to fail.
Planning tools
Tools are far less important than setting the goal and choosing your time-to-sustainability. To keep your plans up to date, you can use task mangers (Trello, Asana), wikis (PBWorks), bug trackers, Google docs, and calendar software.
It is a good idea to share your planning documents with all your team, advisors and investors. You can update your plans whenever there is a new information, Formal planning review can happen weekly or once in every few weeks.
This article is a part of Earlydays, an open guide for first-time entrepreneurs.
Written by Yury Lifshits — yury@yury.name — @yurylifshits
