Platt Perspective on Business and Technology

Planning for and building the right business model 101 – 24: goals and benchmarks and effective development and communication of them 4

Posted in startups, strategy and planning by Timothy Platt on October 2, 2016

This is my 24th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-23.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I focused in Part 23 on a set of meta-business decision making issues: “meta-” because I focused more on how they would be reached and on managing that “how” better, than I did on what decisions would be made. And I ended that posting with a brief discussion of a generically universal issue and decisions related to it that any startup: any pre-profitability business needs to address as central to any decisions made or actions taken, as it begins to build and take shape.

I turn here to consider goals and benchmarks, and with an emphasis on benchmarks and tracking business performance through them. And I will build this posting’s narrative from the fundamentals on up:

• True startup stage (pre-revenue) businesses, and true early stage businesses (with revenue starting to come in but at an on-average sub-break-even level for that), of necessity focus on two at least potentially conflicting goals.
• They have to make the decisions and carry out actions and that lead from them, and expend from their available funds in doing so, to build their new enterprise. And they simultaneously have to control their expenses so as to keep within the limits of their available liquidity as they do all of that. Prudent action has to mesh with the boldness needed to both build this new business and build it in a way that can make it competitively successful.
• Available funds and resources are crucial here, in determining both what is possible and prudent. So I explicitly note the difference here between at least in-principle monetizable assets, which might include essentially anything of value that is held by the business and its founders, and directly and immediately available liquid assets, and particularly where they can realistically be made available to the new business venture per se. It is easy to over-estimate the monetizable assets available by counting resources that could not readily become available if needed, and that would not prudently be rendered liquid for short-term or immediate expense purposes.
• And within that fundamental principles framework, I consider business-specific goals and actions, and the benchmarks that would be developed and measured in tracking business performance. The basic good business practice rules here are fairly simple and straightforward in general abstract terms; they can and all too often do become more complicated and uncertain when applied in practice, when balanced decisions have to be made between competing needs and goals. But let’s begin with the general principles.
• What precisely do you want to build as a business, and what would set your business venture apart from its competition that would appeal to the consumers of your intended target markets?
• Now what are the essential development decisions and steps that you would have to achieve in order to accomplish this, transiting from earliest startup pre-planning, through initial organization and building, and through to when you first start to bring in enough revenue to reach a revenue/expenses break- even point and pass that to become profitable? I perhaps somewhat arbitrarily end this development phase when your new enterprise starts to become significantly stably profitable, even if with only modest monthly profits, meaning it has entered an early growth stage according to the terminology that I employ here in this blog.
• Every process and action that you include in your to-do punch list here should be clearly defined as to goals expected and timelines for progress and completion. This is vitally important and a failure to be clear on this point can kill even a potentially great startup by hemorrhaging out so much of your available cash assets as to be unsustainable. Actions and processes that you simply carry out, and without clear timetables, successful performance criteria, or clearly defined performance goals quickly come to drain resources without offering clear value in return.
• And this brings me to those benchmarks; good benchmarks apply to time-limited tasks and actions that would be completed and moved on from. And they apply even more importantly to ongoing actions and processes that can drift out of effectiveness or relevance with time and as the business grows and evolves – but simply be continued as ongoing expenses. I have seen even large and otherwise effectively successful established businesses bleed out large amounts of revenue and potential profits through wasted spending and on an ongoing monthly basis, by continuing to pay for resources such as unneeded and unutilized software licenses – and simply because they “always” have and paying them has become an autopilot activity. This is even worse for startups and early stage businesses with their lack of long-term reserves and their more fragile finances, but it happens there too.
• Define what your business does in terms of how it would be achieved and why, goals that would be reached, and performance benchmarks that would have to be met and on an ongoing basis to validate all of this. And build these parameters into those actions and processes, and into how they are carried out so ongoing testing and validation are core elements of successfully carrying them out.

I stated at the end of Part 23 that I would follow this posting’s discussion with at least “some more business-specific and business model-specific examples.” I will turn to that, taking this posting’s narrative out of the abstract in my next installment to this series. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

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