When I meet with a client planning a business, the first question I ask is “what are your goals?” So simple, but it’s amazing how many people get started before they think through their goals. Setting goals gives you a sense for whether all the hard work could payoff in a way that makes it worthwhile to you. Goals also frame the way you’ll approach raising capital (e.g. if you are looking to build a modest sized business, rule out venture capital). And of course, without goals, it’s tough to measure your performance.
Here are my goals:
- Keep startup costs below $25,000 for the first 3 months of operations, and again for the second 3 months (if I get there). I’m bootstrapping this. In part to practice what I preach – stay lean, move fast, and take a phased approach to maximize flexibility and reduce risk. I’m also bootstrapping out of necessity. I have a new baby at home, got burned by Madoff, and have most of my assets tied up in illiquid investments. Not ideal, but it sure does light a fire under my behind. I won’t rule out raising capital in some way or another down the road, but first I want to get some traction and understand the dynamics of the business.
- Generate revenue within 3 months, and reach break-even within 6 months. This goes hand in hand with bootstrapping. I don’t want to empty my savings account into this venture.
- Build a business that can generate over $1MM in revenue / yr, profitably, within 3 years. I’d like the company to throw off enough cash so I can support my family and save for the future (btw I live in NYC so that’s a lot).
- Maximize the chances of success. I’ve tried swinging for the $100MM fences, and it’s a rush. But right now I’d rather have a 90% chance of building a business with modest revenue and profits, than a 2% chance of hitting it big.
- Create assets I could potentially sell down the road. That means I need an exit strategy – a sense for what this could be worth, to whom, and when.
- Work with a small team of people I like and relate to, within a flat organization. I don’t want to spend my time managing a big team. I’d rather have a few key lieutenants or partners.
Did I leave anything out? Screw anything up? What do you think?
I like your phased approach, I’m personally a big advocate. Also, it’s not surprising to see people starting a business without having set appropriate goals. I feel many confuse the concept of being agile and lean. There’s a tendency to get rid of the business plan, although the BP may not be the best tool, it sure helps to get you started in the first place.
I wish you the best with your business venture.
Smart idea, too, to create a model that throws off a predictable (if more modest) cash flow. Once you have the model that works, you can always scale larger. Too often, enterpreneurs go for the immediate, gargantuan hit (winning the lottery, anyone?) without having a solid foundation. I realize you’re focusing on the financial goals, but what about number of clients served? Impact in the community? Outreach through strategic partners? Do any of these factor into the plan?
Kudos to you for eating your own dog food. And kudos for making yourself accountable by going public with your goals. The most difficult challenge for all of those of entrepreneurial mind is focus.
I might add “referenceable customers” in bullet 2, as everything else will be dependent on it.
wow, very thorough, straight forward..smooth sailings!
Good Advice,
If you don’t your bound to get overwhelmed.