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How to Build a Three-Year Startup Plan…The Right Way

February 23, 2017

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 into focus is how far out to plan, and how often to check in with the plan.

Year One

With the initial year you want to check in monthly to see how your results line up with your understanding of product and mix. There will be many 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 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 with where you thought you would be is best done quarterly. By the beginning of year two, you should already have a plan that’s demonstrated itself as a solid roadmap. At this point, your priorities are lined up and it’s more about vigilance and checking the competition. Checking in quarter by quarter will keep you on point without any unnecessary second guessing or micromanaging.

Reality Check

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 hires or any necessary pivots.

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