Friday, May 21, 2010

Some Common Mistakes in Planning for Your Startup

In working with startups and early-stage companies — both as a consultant and as an employee — I've been fortunate to have been around some extremely bright, ambitious folks. But no amount of ambition — or even school smarts — can offset insufficient (or just plain bad) planning. In my experience, the top three obstacles to planning for a successful company or product launch are:
  1. Not formalizing your planning process. This entails documenting both your planning and your conclusions, and — more importantly — being prepared to revisit your findings frequently, as new information becomes available. Lots of folks start with great intentions and flawed research. The ones who succeed are the ones who can accept the fact that their research (or conclusions) were flawed, and can take corrective steps.
  2. Not doing a sufficiently deep dive into the competitive landscape. It amazes me how folks can invest so much ego into their company or product as to be blinded to the realities of the marketplace. Sure, you may think your product is the greatest thing since sliced bread, but if your target market doesn't agree, you've got a big problem. Know your competitors, and not just their weaknesses. You have to understand their strengths, because that is what has made them viable contenders. And who knows, maybe the market doesn't even care about their weaknesses! Be thorough and objective about your company or offering, as it relates the the needs of the market and your competitors!
  3. Not having a sufficient understanding of your runway and your cashflows. You need to have sufficient working capital to build traction and to foster organic growth. You need to have realistic, conservative expectations on both your revenue and your ROI, and you need a solid backup plan (or several) to put into play when your initial strategy fails to deliver the anticipated results.
Don't put tons of effort into writing a business plan, only to throw it into a drawer and forget about it. Your business plan should be a flexible, iterative document, one that will enable your to address all foreseen (and unforeseen) contingencies. And it should be revisited on at least a monthly basis.

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