Oct 04 2007
Key Tools for Managing An Early Stage Business
Later stage companies grow in a fairly predictable manner and their future focus areas and activities are also predictable. For instance, the management team at John Deere can probably look out at least a year and make very accurate projections about their likely growth, product mix, key management challenges and deliverables, etc. In contrast, a year in the life of a start-up will be filled with unexpected changes in people, plans, focus areas, etc. Given that start-ups usually have limited cash, it is extremely important to understand what matters in the big picture and, therefore, how to make decisions as time unfolds so that the company is constantly tracking towards a good outcome. When we begin working with a start-up company, we always deploy two tools early on: a DashBoard and a ScoreCard.
In an earlier blog entry I talked about the fact that entrepreneurs shouldn’t write a business plan. There are lots of reasons for this, but one of them is that the plan will be outdated almost literally as you write it. While it is true that you need to have focus - you also need to have flexibility. If you ask most successful entrepreneurs about their businesses, they’ll probably tell you that it went through dramatic changes over the first few years until it struck upon the business model that worked best. Often this model wasn’t even part of the original consideration when forming the business. So, instead of a business plan we recommend that entrepreneurs focus on more near term “accretion points”. Try to target a series of actions and results such that all reasonable people would acknowledge that your company is worth much more than it was previously. Then, get those actions, activities and target results into an action plan and track it. We track such plans in what we call a “Dashboard”.
Currently, at Momentum, we use Google Docs spreadsheets. Each person on the team makes a set of activity / result commitments - usually over a period of several weeks to several months. The combination of everyone’s activities should add up to a resulting “accretion point”. We use Google Docs so that everyone can edit and comment on each other’s tabs and so that the team can meet in person or virtually at least once a week to go through the document “live” and make sure that everything is tracking toward common goals.
Someone once told me that, “if you are not keeping score, you are just practicing”. We also use Google Docs spreadsheets to create a “Scorecard” of things we want to measure from week to week. Often, in the beginning of a start-up it is difficult to measure tangible results such as revenue growth — however, it is a good idea to get in the habit of formalizing goals and figuring out some way to track them. If your goal is to form an Advisory Board then track how many introductions you’ve had and how many people have “signed up”. If you have an e-commerce site up, you definitely want to be tracking a whole set of metrics around visitation and conversion, etc. In general, you should try to select a balanced set of metrics to be sure that you are accomplishing key things in all the appropriate areas for your type of business and stage of business (sales, business development, fundraising, operations, etc). The simple act of creating a metric and measuring progress each week brings incredible discipline and focus to a team.
The great thing about these tools is that they are dynamic. You can change them as frequently as you learn new things and shift direction with your business. The important thing is that, as a team, you agree that the approach you are taking is the highest and best use of your resources and that you agree to measure your activities (Dashboard) and results (Scorecard) as you go along.
