I’ve been noticing an issue more and more lately with many of the startups and small businesses that I mentor. This is a much bigger problem than most people realize and it isn’t something that seems to be addressed (or at least not well) in incubators and accelerators.
The problem is communication and collaboration – two parts of the same topic. To have good communication you also need systems and processes to help collaboration.
If your startup is just you, then this isn’t too much of an issue (though honestly the “solutions” will still be helpful) but as soon as there are two or more co-founders, or a 2nd employee, this issue rears it’s ugly head.
When I speak with a co-founder and hear something like “yeah, Joe is working on the marketing. I’m not really sure what the plan is there but he can give an update on it” – that’s almost always a concern. Sure, not everyone needs to know 100% of what everyone else is doing, but startups are small and there is no reason that information shouldn’t be shared across the entire team. In fact, to be nimble and efficient, which is a large part of being successful, you need to keep the entire team updated and included in the happenings. If one person is doing product development and another marketing, and those two people aren’t working closely together to stay in sync, this is almost certainly a recipe for disaster.
There are a number of systems and processes that need to be put in place to facilitate efficiency and scale on these points, but today let’s just hit the general big-picture topic of living documents.
All we’re talking about here are documents that are continuously being updated. These can literally be document files like spreadsheets, slide decks, etc. which are stored somewhere central and accessible; or they can be online tools. It doesn’t really matter. What’s important is that the correct people have access, and that they’re continuously updated. By the way, “correct people” in a startup is certainly the co-founders and often with a small team it means including many, if not all, of the team members.
Business Plans. I admit I’m not a huge fan of formal business plans because I’ve seen too many people spend a ton of time on a fancy business plan and then never execute properly on it. That said, you do need to document information with the vision and some notes on the venture – this actually is very important. Write some notes while you are forming the idea, update and write some notes while the idea is being clarified, update and write some notes as you collect and digest data that help detail the strategies and tactics that you’ll need to succeed.
This doesn’t need to be fancy – it can literally just be some random notes at first. But over time you should keep updating it (hence the “living document”) based on things you’ve learned and small adjustments and pivots that you need to make.
Product Development Plans. Whether you are working on a software solution or a hardware product, there is going to be a period of time required to put together the initial minimum viable product, and you’re certainly going to have (or start developing) a list of future features. Document what the requirements are for each phase (your developers/producers will be much more effective this way!) and what the expected timeline is (the developers/producers need to gauge this – not a finance and sales-minded person).
Having product development plan also helps put together the financial and marketing/sales plans. Until you know how long it will take to make the product, and how much it will cost, it’s hard to know how your cash flow is going to be impacted. Until you know when the MVP will be ready, what it will do, and the schedule for new features/releases, it’s hard to start marketing the solution.
Financial Plans. Yes, financial plans for startups is largely vaporware until you actually have paying customers, a track record to develop churn metrics, and some general history of expenses, etc. But certainly you shouldn’t be going into this totally blind. It amazes (and scares) me how many startups haven’t taken the time to do some basic financial plans. I strongly recommend a one year financial plan broken down monthly (even weekly in some cases) and another three year plan broken down annually.
Get a grip on what your expected expenses will be and what your expected revenues will be. And then after each period, update that plan. Seriously. With my last startup we were running weekly projections for a while to maximize efficiency and improve our ability to pivot quickly as needed. After each week ended we’d add a column to the spreadsheet that showed actual income and actual expenses (per category) and how far we were off. We’d then add some notes as to why we were off. Are customers paying later than we expected? Is the new customer sales process taking longer than we expected? Are marketing costs creeping higher than we had planned? Did we realize that we needed XYZ that wasn’t previously in the plan? Make these notes and learn from them.
BTW, make sure you understand basic financial concepts like Profit, Loss, Cash Flow, and EBITDA.
Marketing and Sales Plans. Speaking of marketing and sales, you need to write down these plans. Don’t have someone “just do it”. Plan it out; implement it; measure it; adjust it and fine-tune it for optimization.
If you plan to spend $X on Facebook ads per week over the next four weeks, certainly you have some hopes and expectations of results (right??). Write those down. “Planning to spend $X on FB promoted posts with the goal of getting Y people to our landing page and then Z people to convert.” Then after each week review the results (and write them down!). If the results are better or worse than expected, hypothesize why that might be and make some notes. Then continually shift and adjust the plans to test the theories and optimize the processes.
Beware vanity metrics when you’re working on these plans though. Your goal isn’t more Twitter followers or more Facebook likes. Your goal is paying customers. Sure, those might be part of your customer acquisition funnel, but they aren’t the real goal. Be sure your understand your funnel, plan for the funnel, and track progress through the customer acquisition funnel.
Really, it’s all about milestones. You’re putting the financial projections down as milestones/targets/goals and then after each time period you are doing checkpoint reviews. The revenue on the financial projections are highly dependent on the marketing/sales success; the expenses on the projections are also largely impacted by the marketing/sales (it’s common for startups to invest quite a bit into initial customer acquisition). Both the financial and marketing/sales processes are highly correlated with the product development cycle too.
By the way, putting this data together also documents your momentum. That should be good for the team to help keep the motivated, and also very good to show investors or your coach/mentor. Success in a startup is largely dependent on momentum.
So you need to document these things (among others) and keep them updated. Anytime something changes or you have data that validates or invalidates previous assumptions, update the plans. You also need to make this information available to all key members (co-founders at a minimum). Put them on a cloud storage platform, or a shared drive, or worse case send a mass email with the updated documents to keep the key players in the loop.
However you handle it, do please handle it. Far too many startups and small businesses aren’t documenting these things, or only very limited people have the information, and it can make for inefficiency at best or failure at worst.
Now, go conquer the world!
PS: If you have a startup or small business and would like some help, feel free to get in touch with me about a possible mentor/coaching relationship.