Learn how to do lean, strategic and tactical, planning across your entire startup.
There’s an old adage that you should work on the business and not in the business. Being a former coder (i.e. hands-on guy), I’m definitely guilty of working in the business, when I should have been strategically planning to scale my startup.
The irony of working in the business is that it slows down the startup’s growth, since you’re in the trenches, which just puts additional pressure on you because you’re not working on the business by hiring, delegating, establishing systems, and so on.
Over the years, I’ve trained myself to think more strategically first and have a tactical plan, before jumping into daily operations. It’s analogous to getting on a long road trip with a planned destination and navigation directions. On the flip side, I do catch myself over-planning at times and getting stuck in analysis paralysis — this is when I remind myself of the famous and highly effective Nike slogan: Just do it!
Let’s look at how you can take a balanced approach between planning and doing.
Before we jump into the remainder of this post, here are a couple of posts you may wish to read, to ensure you’ve done some preliminary work:
- 5 Steps To Validating Your Awesome Idea Before Launching A Startup – Covers market research, MVPs and working with customers.
- 7 Steps To Launching Your Startup On Solid Footing To Help It Soar – Covers definition of your mission, vision and brand.
Planning doesn’t need to be boring, old-fashioned Microsoft Office documents (ugh!); here are some better, modern alternatives:
- Google Slides (my current preference).
- Online presentation tools such as Prezi, Canva and Visme.
- Tasks management tools such as Asana, ClickUp and Trello.
- Whiteboard with notes, drawings and/or stickies (tip: save snapshots of whiteboard using photos) .
Given the dynamic, changing nature of startups, I highly recommend starting with the minimal planning possible, then iteratively and incrementally improving it over time, by incorporating ideas from you and other people in your startup’s ecosystem.
Minimal planning is a great way to launch MVPs (minimum viable product) in any area of a startup, not just in product development. For example, the MVP concept can be used in sales to test out verbal scripts or in marketing to test your hypothesis (e.g. user acquisition), as Anthony Kim, Founder & CEO, Education Elements, recommends in my interview with him.
Planning can also help make you look much bigger. At my former startup, Big Universe (acquired by a public company), we were a 100% remote startup with only a dozen people but we pretended like we were a $100mm company in everything we did, externally facing (e.g. our website, marketing material, customer communications, phone numbers with 4-digit extensions).
Also, because of our lean planning and systems, we were able to serve millions of paid students and teachers customers, in over 30 countries, with our small staff…all while, maintaining a very high customer satisfaction and retention rate.
Planning can generally be grouped into the following two broad levels, strategic and tactical:
- Strategic Planning: A multi-year business plan (e.g. for management, investors) and an annual strategic plan for communicating a vision to the company.
- Tactical Planning: Shorter-term plans for the various groups (e.g. product, distribution, financial, protections).
Depending on the stage of your startup, you can decide which are applicable to you.
Why Planning Is Important
According to a Statistic Brain study, incompetence (at 46%) is the most common reason why businesses fail. In my opinion, incompetence doesn’t mean the founders were incompetent but rather they didn’t find the right balance between planning and doing.
Let’s look at some of the other reasons startups fail and what sort of planning could help with those failure reasons:
- Problem: 42% failed due to no market need. Solution: Product and business planning.
- Problem: 29% ran out of cash. Solution: Financial planning.
- Problem: 23% not the right team. Solution: People planning.
- Problem: 14% poor marketing. Solution: Marketing planning.
It isn’t just about outright failing but also about operational challenges that can make things harder than they need to be. For example, access to talent (63%) was the critical issue affecting most startups in 2019. If you knew that going in, you might plan for it better.
This article from SmallBizGenius.net titled Startup Failure Rate and 80+ Other Startling Statistics About Startups, has some amazing stats on startups, such as the following stats which reflect the top challenges businesses face — most of these can at least be planned for, to reduce or eliminate the chances of your startup failing.
Let’s look at some real world business planning examples.
“By failing to prepare, you are preparing to fail.” – Benjamin Franklin
Business Plan/Investor Deck
One of the most basic planning tools is a business plan. A business plan serves as the highest level of planning — it’s the grand plan for the entire startup.
Some of the benefits of business planning include greater clarity and focus, increased chances of success and getting outside funding.
Traditional business plans come in the form of several page Microsoft Office (or Google Docs) formats. However, in the startup world, investor decks have been a popular alternative, since they can serve these purposes while increasing the probability of people actually reading the plan:
- Deck for investors
- Communication tool for entire startup (e.g. annual vision presentation)
- Focus for the management team and the entire startup
Investor decks (or traditional business plans), typically have following sections:
- Summary: company overview
- Vision: why you exist and how will you transform the marketplace (vision)
- Problem: what is the problem and why are you solving it
- Solution: product, tech, positioning, IP, unique value proposition
- Market: sector, size (e.g. TAM, SAM, SOM, competitors)
- Model: how will you make money
- Target: who will benefit, customer, profile, stats/demographics
- Distribution: marketing & sales, how customers will learn about your solution
- Competitors: what are others doing, their market share, your differentiators
- Team: founders, key players, bios
- Traction: MVP, early adopters
- Financials: projected, actuals, P&L, cash flow
- Ask: for fundraising purposes, how much you are trying to raise
This Wired article, Live Planning: The Key to Launching Sustainable Startups, further demonstrates the need for planning:
‘The Founder Institute is a business accelerator program for some of the world’s most promising high-tech entrepreneurs. The highly-selective program has launched over 800 companies since its inception in 2009, and an impressive 91 percent of these companies are still in business. The Founder Institute’s success is largely based on the program’s world-renowned mentoring approaches and emphasis on the “lean startup” method combined with effective business planning and tracking strategies.’
Tip: If you’re planning on pitching to investors, here’s a great Forbes article with a list of dos & don’ts.
Once you have a high level business plan, you’ll want to begin executing on it. A strategic plan helps bridge the business plan with execution plans.
Strategic plans are a high level strategy for the entire startup, typically for the current fiscal year. Think of strategic plans as a one-year roadmap for the startup to make incremental progress towards a multi-year vision outlined in your business plan.
A nice complement to strategic plans are OKRs (objective and key results) since they add real concrete results to objectives (i.e. the “tracking strategies” mentioned in The Founder Institute quote above).
Below is a sample of our short-term strategic plan. Given how early stage we’re in, we can’t plan beyond the first 6 months, so we’re using “high frequency” OKRs (i.e. monthly versus quarterly or annually).
Once an annual strategy is in place for the entire startup, you’ll likely want shorter-term (e.g. quarterly, monthly) tactical plans for each group.
Tactical planning can simply be a combination of a team’s quarterly OKRs (tied to the company’s annual OKRs) and tasks that can be managed in tools such as Trello and Asana. For example, if one of the annual company OKRs is to add 500 new customers or increase retention rate to 80%, then the product and engineering teams establish OKRs that address new features to attract potential customers or enhancements to retain existing customers.
To measure how you are doing against OKRs, you can define KPIs (key performance indicator) for the data you have access to. OKRs and KPIs work hand-in-hand since OKRs provide the key results expected and KPIs help pull that information together. Using the 80% retention example, a KPI could be the number of new and lost customers.
Let’s look at some individual tactical plans.
“If you are not embarrassed by the first version of your product, you’ve launched too late.” –Reid Hoffman, LinkedIn Co-Founder and Venture Capitalist
Most tech startups begin with some form of coding and/or prototyping — at least the ones founded by tech entrepreneurs. I’m a former coder turned accidental serial entrepreneur and I still tend to start building first.
Building first is great! However, the urge to keep building should be balanced with a bit of product planning because it’s important for startups to iteratively and incrementally build a product by working with customers, in a cadence.
A couple of common types of product planning include:
- Roadmap: goal statement (why), strategy (how), prioritized items (what; see visual example below)
- Backlog: prioritized list of new features, fixes and enhancements (Agile user stories)
One thing I want to emphasize: ensure you include working closely with customers, in your product plan.
The following excerpt from MassChallenge.org’s post titled, 7 Steps to Create a Technology Startup Business Plan, illustrates my point: “Many startups have failed quickly because the owners were so obsessed with their own product that they were effectively blind to the fact that nobody else cared about it.“
At my former startup, Big Universe, we made many mistakes but I believe one thing we got right is how we leveraged best practices of Lean Startup and Design Thinking, to build a product that customers actually wanted. See A Simple Product Development Workflow For Your Entire Startup to learn about connecting the dots from your company vision to daily operations.
“Your most unhappy customers are your greatest source of learning.” – Bill Gates, Microsoft Founder and former CEO
A product will not sell itself, hence the need for a distribution plan that outlines how you will acquire customers and provide them your solution.
A distribution plan is usually split into two segments: marketing and sales. Marketing is the act of promoting your startup (online, offline), whereas sales is how your customers purchase your solution (e.g. online, sales reps).
Here’s a sample marketing plan for our company:
Here are some facets of sales that you can plan for:
- Projections: sale revenues by month
- Hires: inside/outside/channel sales
- Systems: CRM, processes (see below), standard operating procedures (SOPs), tools
- Metrics: activity and conversion rates (e.g. number of calls, conversations, demos, conversion rates between sales stages — see below)
- Collateral: marketing materials (e.g. website, brochure, case studies)
- Training: onboarding, coaching and mentoring for sales reps
“Projections are just bullshit. They’re just guesses.” -Jason Fried, Founder, 37Signals
Financial planning is one of the most important types of planning, since it can literally prevent your startup from failing (read Manage Finances Like Your Startup Depends On It to learn more finance management).
Your financial planning could include:
- Projections: Revenues & expenses (see P&L example below), cash flow, line of credit, milestones, etc. Depending on how much historical data your startup has, projections can be “BS” as quoted above but regardless, it’s an important tool to understand the potential income and planned expenses.
- Fundraising: How much you plan to raise/borrow, list of investors/lenders you’ll reach out, networking connections, deck, pitch, etc.
“Always treat your employees exactly as you want them to treat your best customers.” –Stephen R. Covey, Author
Organizational planning can include:
- People: culture, hiring, rewards, organization chart, team building, employee handbook, emergencies
- Workplace: physical offices, remote, equipment, tools, supplies
Employees are your startup’s most important asset, so handle this aspect with care, by focusing on your startup culture, which can include your mission, vision, values, communications, hiring, onboarding, rewards, and exit interviews.
According to a PC Magazine article titled 10 Must-Have Elements of a Tech Startup Business Plan, “Shaping positive company culture and a supportive work environment from the start can make or break a startup. Founders and entrepreneurs must take an active role in creating good culture and continue to foster it as the company grows.”
In my interview with Jeff Grass, Chairman & CEO of HUNGRY and successful serial entrepreneur, Grass mentions he’s much more deliberate now about establishing culture early on, in his startups, having learned from past mistakes.
Of course, you’ll also want to consider what your workplace looks like. Will it be a physical environment, 100% remote work or a hybrid (i.e some remote)? Many startups begin as a 100% remote company and some stay that way; with the 2020 COVID-19 pandemic, 100% remote seems like the ideal choice for startups.
Lastly, as your startup grows, don’t underestimate the value of organization charts, since they establish and communicate people’s roles and responsibilities.
“Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant.” – Michael Gerber, author, The E-Myth Revisited
In my opinion, proper systems planning is one of the most crucial things any company can do.
If done right, systems can help startups operate like a well-oiled machine by establishing consistent processes, tools and policies (i.e. vacation coverage).
The following are some aspects of systems planning:
- Physical: offices, computers, phones, supplies.
- Tools: email, calendar, documents, collaboration, task management, CRM, shared folders, templates.
- Processes: SOPs/checklists; see sample checklist below; more sample templates can be found in our How to Startup a Startup deck.
“In the end, you have to protect yourself at all times.” Floyd Mayweather, Jr.
In any kind of organization, many things can go wrong since you’re dealing with people (internal and external), processes and technology.
While you can’t foresee all the problems that might come at you, here are some basic protections you should consider having plans in place for:
- Technology: redundancy, single point of failure, alerts, breach
- Legal: incorporation, NDA, contracts, employment agreements
- Insurances: general liability, professional liability (E&O), workers compensation, umbrella, data breach
- Disaster: recovery plan for natural or man-made disasters
You might also want to plan for pivoting, if your business model isn’t working (see Ease Your Pivot Using Lean Startup, Design Thinking, MVPs, and OKRs).
Like everything in life, running a startup is a balancing act between too much and too little. If you just code and don’t do big picture planning, then you’re flying blind. If you do too much planning, then you aren’t building stuff.
My recommendation is to apply the MVP concept to everything in a startup. Always think “What’s the minimal thing that can work?” to test out a concept, while staying true to your standards.
By building systems that run the business, with or without your presence, you can enjoy your startup journey a bit more. As Nelson Mendala once said: “Remember to celebrate milestones as you prepare for the road ahead.”