Coming up with goals and plans for growing a startup can seem like trying to predict the future, without any or much historical data to use as a basis.
So what often seems to be most tempting is to ‘borrow’ other people’s goals, say from investors you’re trying to pitch or that main competitor, and make them fit with your business.
Probably unsurprisingly this often goes wrong, because you can only hit the targets based on your unique set of resources and motivations. Startups regularly run out of cash, or lose their investors’ trust or their best team members because they’re falling short of unrealistic goals. But with a simple framework and enough time spent analysing your business, it’s very doable to set much more relevant goals. They should be based around the most important milestones that will get you towards your long-term vision.
Common mistakes when making growth plans
Here are some of the most common mistakes we see startups make when setting their goals:
- They work towards what they think their investors are looking for. Just because an investor is looking for a certain kind of traction or speed doesn’t mean your particular business and resources can hit that. Choose your targets first, then find investors that want to work with ventures that care about building lasting businesses.
- They use competitor benchmarks. Only because another business is in a similar industry doesn’t mean they have a similar set of resources, experiences, connections, and motivations. But these are what will define how you can grow. Benchmarks from companies with similar characteristics are more useful.
- They focus too much on vanity metrics that might get picked up by the media, investors or other potential partners, such as the number of fans, winning prizes or getting certain coverage. All that counts ultimately is to make the right progress towards profitable growth and solid unit economics, the rest is usually not a reliable measure.
- They’re not entirely clear on the motivations behind setting certain goals. Being driven by a deeper purpose and mission is what makes founders and teams build hugely successful companies. But targets need to be set based on the business fundamentals first.
While some companies aren’t ambitious enough in setting their targets, in order to get great people and investment, that’s very rare with startups which usually aim higher than is realistic, at least in the short term. For anyone close to the Silicon Valley & Venture Capital way of building businesses - which seems to have become the norm - it’s a reasonable argument to say that if growth isn’t fast enough, the startup might as well fail so everyone can move on to a better opportunity. That’s fine, however there’s a risk that badly set targets cause the stalling growth, and the company could be doing great if it only focused on the right type of progress.
This is where thinking in terms of milestones comes in very handy. Milestones define the different stages of development your business moves through over time, so they are very real, tangible outcomes. They could be stages of product development, key hires or partners, sponsorship or funding, or learnings. I’ll give you some concrete examples below.
Defining the next 2-3 milestones ahead will be the basis of setting targets. Your business actually needs to hit these goals in order to survive and continue developing. So they’ll provide a much more meaningful set of targets for you and your team, compared to picking abstract numerical targets based on valuations or customer numbers.
Simply going through this process of defining milestones makes you understand your business better. Reflecting and analysing the business’ unique strengths and resources, and the commercial reality of the industry is what enables you to keep growing.
Milestones are usually around 3-6 months apart, although this can vary between industries - the shorter the product development cycles, the quicker the company development.
Examples for milestones
Here are some examples for different companies:
Company A - Lifestyle app
- Milestone: Working product live and tested
- Milestone: Sign up 500 satisfied customers organically, referral rate larger than churn
- Milestone: Established a profitable, scalable way to acquire customers
- Milestone: …
Company B - Fintech startup
- Milestone: Receive grant or initial funding to build the product
- Milestone: Build significant waitlist to prove demand to investors, get regulator approval
- Milestone: Prove ability to scale customer growth profitably
- Milestone: Get enough customers to cover fixed costs of the business
- Milestone: …
Short-term targets for the first milestone
Once you’ve defined these, pick the right set of short-term targets, just to get to the first milestone. This should be enough as a starting point for your detailed target setting, and would usually cover somewhere from 3-12 months. These targets should include obvious metrics such as customer numbers and retention, but also the ‘leading metrics’ that will help you improve those (profitability of growth marketing, customer satisfaction rates, referral rates, % of organic growth).
Most crucially, targets need to be set based on your unique ability to acquire and retain customers. This needs to be based on what’s actually possible for your business, given its resources, knowledge and team. It helps to hear insights from other companies with similar characteristics (rather than in the same industry) and sense check your goals, but ultimately they need to be centred around your business rather than what others expect.
Making meaningful, motivating plans for growth is more of an art than a science. But with the right approach and a willingness to really dive into the specifics of the business, you’ll massively increase your chances of success. Thinking in terms of milestones for the business can make goals so much more relevant, tangible and motivating for everyone in the team. With those set out, it’s much easier to come up with short-term targets for the day-to-day operations.