As a startup founder and leader, I take planning very seriously, maybe obsessively. But I'm also aware of that old saying about how no plan survives first contact with the enemy, a saying made more famous by Mike Tyson with his modern take: "Everybody has plans until they get hit the first time."
Nothing could be more true.
But here's a problem I see a lot across the few dozen startups I've advised over the past couple of decades. That conventional wisdom manifests itself in one of two ways:
Leadership, assuming that their growth plans are at best delicate and at worst fictional, forecasts outrageous goals, but really believes they'll achieve only a fraction of those goals. Regardless, they wind up selling unattainable nonsense to the team and discover that when you ask someone to do the impossible, they usually wind up achieving less than they would have otherwise.
Leadership develops a wide array of backup plans, resulting in multiple sets of scenario-driven forecasts. Then a completely unforeseen scenario happens, dooming all their modeling as panic sets in.
You've probably been through either or both of those failures. You might agree that they are not fun. One truism I hear over and over again from experienced founders and CEOs is that you can take months planning for the next fiscal year, start executing that plan diligently on January 1, and already be off-plan by January 15.
I call this the January Phenomenon. For some reason, January is usually an awful month businesswise. Sure, it's full of newness and hope, but it plays out more like every businessperson on the planet had too much sugar over the holidays and now they're all screaming and running into walls.
Carrying that truism out along the timeline, usually by March you'll be way off your plan and you won't know why. January, or for that matter the first 30 days of any new plan, is a blur, and the next 30 days are usually spent trying to figure out what on earth happened during the first 30 days. These cycles compound, and sooner or later it's time to just ditch what's left of a shredded, useless plan.
Or is it?
Here are the lessons I've picked up and packed into all my planning cycles to make sure my plan survives getting punched in the mouth.
1. "High run-rate companies hit their damn budgets."
Another truism, expressed exactly in the above way by the president of our company as we embarked on the next phase of a high-growth cycle, is that successful growth companies that want to achieve high run rates do so by hitting their numbers every month. And those numbers are bottom-line numbers, not top line. Expense-driven growth is just another way to describe cash burn.
You can grow or you can make money, but not both. The only way to sustain growth is to lower costs, cut expenses, and stick to the budget. You can't control the market, you can't control the customer, but you can most certainly control spending.
2. Luck is finding opportunity and executing on it.
Successful growth-stage companies don't create perfect plans. No one does. But successful execution doesn't strictly mean efficient execution on the existing plan. It means when you fall behind on one of the primary drivers of that plan, you should look to get ahead somewhere else.
Every growth plan has several pillars that serve as the foundation: The first pillar is more important than the second, which is more important than the third, and so on. When a lower-priority pillar overproduces, don't take that for granted. Instead, exploit that opportunity to be able to offset imminent weaknesses in other pillars, especially the primary pillar.
3. Growth is about asking tough questions.
Anyone can set a goal based on hopes and dreams. I still want to be a rock star someday. Instead, there are two important questions to ask when trying to forecast how fast your company is going to grow:
- How fast could we grow? This is critical, because it sets a smart upper bound. Anyone can imagine all the tailwinds coming together in one cycle of stratospheric growth, but take a look around you. What can you realistically achieve with the resources you have on hand? How fast could you sanely expand with maximum effort?
- How fast should you grow? This is a very important and overlooked point: Growth, at a certain rate, always results in failure. Stretch too far, and you'll break. Sustainable growth is about minimizing failure and reducing failure points along the way.
4. Sustained growth is never linear.
My CEO recently said: The way you get into trouble forecasting is taking a thing that was really small and grew really fast and projecting that out to ridiculous levels.
Sustainable growth never happens in a straight line up and to the right. At some point, the growth line changes direction, resulting in a sawtooth graph line over time. Respect the sawtooth.
When you build these lessons into your planning, you'll come out with a plan that can survive. Sustainable targets, a multiprong approach, reasonable expectations, and sensible reactions will keep you from panic-driven behavior when your plan meets the enemy.