The document discusses the importance of planning for startups. It states that while ideas are important, precise planning is critical for a startup's success. Specifically, it emphasizes that startups need a detailed financial and operational plan to map out their initial journey and navigate uncertainty. Such plans are necessary for calculating burn rates and correlating them to growth opportunities, determining fundraising needs, assessing risks, and ensuring the company is earning revenue and managing cash flow as it expands its operations and competes in the market. Overall, the document stresses that a strong plan and focused team are vital for startups to become valuable organizations.
2. Startup companies are not only driven by an idea. There are other factors which
play a critical role in the destiny of the company.
The company needs a focused top team which needs to do precise planning to get
to the first hurdle in the journey of success. i.e.: Raising funds
The most basic ingredient required is a detailed financial and operational plan.
This plan will serve as a navigational map for the company's initial journey which
will be challenged by uncertainty and roadblocks.
Why are financial or operational plans required?
3. 1.Burn rate vs. growth
A startup with a financial plan can exactly calculate the extent of burn and correlate
that with the opportunities of growth that it offers.
It could be the increase in the number of active users (or clients) or gross
merchandise value or total number of users or total value of goods sold all of these
metrics are financially determined in numbers.
Any investor who is scrutinizing the company should be able to see where the
company is placed financially and what its future potential for success is
4. 2.Many rounds of raising finance
A financial plan will also allow a startup to determine the number of rounds of
finance that it will require.
It will set targets for fund raising and chart out a growth path. It will also detail out
the issuance of fresh shares and share capital expansion of a company which will
finally enable more investors to come into the company.
5. 3.Risk assessment
Even early investors are cautious of risk. If they are not cautious and willing to take risks,
they would want to know how much they are risking by investing in a startup.
A startup should invest enough resources into assessing the risks that it is taking
including IPR risk, market risk, technology risk and operational risk.
A startup with an operational plan that clearly defines risk and is taking enough
measures to minimize it has the potential to become a large organization in the future.
6. 4.Revenues OR profits OR cash
The success of a startup is not only about fund raising. It is also about the funds
that is earning through its business.
The ability of a startup to have liquid cash and be able to pay off its investors is
the one that can manage its working capital cycles by forging deals with
suppliers and service providers.
An operationally strong startup always has a strong plan and a focused team to
ensure that it is earning as much as it is investing in its own future.
7. 5.Strategy & competition
Many startups have aggressive expansion plans by entering new markets. However,
they should be supported by a dedicated team in place to ensure that this process
runs smoothly.
It should also measure the extent and strength of competition to make sure that
the company is able to fight competition and emerge successful.
A detailed operational plan will ensure that these growth measures are successfully
implemented as per targets. The targets also need to be reviewed constantly to
measure the growth that a startup is experiencing.
It can also fine tune the strategy and business model of a company and ensure that
it becomes valuable to the investor and itself.