December 7, 2016 | 4-minute read (616 words)
Getting started is one challenge. More challenging though is having vision. Being able to do so in those early stages is what makes the difference between being the next startup success story, rather than a shuttered up also-ran.
In building a plan for going forth, you want to adhere to some key rules, measurements and targets as a skeleton to build on. The backbone of this skeleton is going to be your financial analysis of cash flow. You want to maintain adequate cash reserves to go the distance and grow. And like any healthy body make sure to build in flexibility and joints.
The first aspect to put it into focus is how far out to plan, and how often to check in with the plan.
With the initial year you want to be checking in monthly to see how your results line up with your understanding of product and mix. There will be lots of changes day to day; being able to benchmark monthly will give you the understanding of where the tires are hitting the road and moving you forward.
To start off, tune into cash burn and know your acceptable rate. This first year is the test case to any investor of how well you handle resources. Just as important, if not more so, than assembling a top team investors want to see you have financial projection accuracy. Demonstrating forecast competency is not only useful in attracting investors but also in preventing over dilution due to unnecessarily raising more capital than needed.
You want this time to be be spent setting milestones and determining what amount of capital will be needed to accomplish them. Make these milestones as clear, simple and achievable as possible without unneeded dependencies in order to occur. This will be the time most likely to give feedback on any needed pivots or unforeseen market conditions.
Years Two and Three
For years two and three checking where you are at with where you thought you would be is best done quarterly. You should already have by beginning of year two a plan that's demonstrated itself as a solid roadmap. At this point your priorities are lined up and it's more about vigilance as well as checking the competition. Checking in quarter by quarter keeps you on point without any unnecessary second guessing or micromanaging.
In our experience, 3 years is both lengthy enough to forecast and show potential to investors, as well as short enough to keep it practical and grounded. You might find people pressing for 4 or 5 year plans but that far of a window is more speculative than worth putting the energy towards. Stay focused on realistic goal setting. Being able to identify your major assumptions and back them up is worth more than imaginary longevity.
Above all, remember that this plan is not set in stone, it is only the map. Your actual accomplishments and ability to navigate obstacles will shape the plan, not vice versa. Many events anticipated and otherwise will necessitate updating and reformatting the plan. Whether it is a new round of funding, key hirings or any necessary pivots.
In tackling putting all this together it is always useful to have help from those who have done it before. At EGFS we deliver solid financial planning with consistency and quality. We can help make sure the objectives that matter most to you are defined with a strong executable plan. Plus as an industry leader in financial consulting we can connect you to our network in preparation for all the big changes your plans may bring.
To find out more about how we can help schedule an initial consultation.