Page 128 - 6 Secrets to Startup Success

Your Math Story 107

into a profitable business, so your key question becomes: Can we ac-
tually make money at this, and how? Your sights now shift to the goal of
breaking even, the point at which your venture can fund itself. Here
is where the development of a clear, compelling math story is invalu-
able. The math story, to be outlined in the next section, answers ques-
tions such as: What is our business model, our competitive advantage,
and our strategy? What is our path to breakeven (including pro
forma profit and loss projections)? What are projected cash flows, and
how will we manage our burn rate? What control mechanisms do we
need in place to manage forward? How much capital will we need to
reach profitability?

Whether or not you need a written business plan at this stage de-
pends on your financing and communication needs. If you are seeking
investors or lenders, you need a high-quality written plan, but be sure
to learn what format your target investors require and what aspects
of the plan they are most interested in. Even if you are not seeking
funding, you may benefit from the discipline and rigor required to de-
velop a business plan and find that it helps you communicate with
stakeholders of all kinds. On the other hand, if you are working with
only a handful of key team members, you can address the above ques-
tions and regularly review your key financial metrics without pulling
together a formal plan. A decent-sized whiteboard and simplified fi-
nancial snapshots will do just fine.

BEYOND BREAKEVEN/GROWTH – Once a business is self-funding,
everything changes again. If you want to continue to grow, the oper-
ative questions are: Is this business scalable? How can we create significant
value over time? Here, you will benefit from a disciplined planning ap-
proach that is widely communicated and regularly updated. Once
you have found a robust market, scaling your business is all about ex-
ecuting. Identifying and coordinating resources, finding ways to grow
efficiently, maintaining a hawk-like focus on key growth drivers, and
understanding and mitigating risk factors are all critical to scaling a
young business. In the growth phase, a well-managed planning
process can be the difference between a healthy, thriving venture and
one that overreaches, stalls, or flames out.

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