If you decided to build a house the first thing you would do is hire an architect to design the house. From the blueprints provided by the architect you would know what the house will look like, how it will be built and what materials you will need even before work begins. The blueprints of the house is your goal, and then your process of building the house is focused on achieving that goal.
That sounds obvious, right? Would you build a house without blueprints? Probably not. Surprisingly, many people spend significantly longer (and more money) building companies but do not set a goal before they start. When starting a company, it is common for founders to plan for the next few days, weeks or months and postpone any further planning until later. They never sit down and think about what their business would look like years into the future and if that business is worth all the effort. In some cases they have an amorphous vision or strong feeling of what the goal will look like, in other cases they simply focus on the first few steps with faith they can figure out the rest later.
The problem with not having a goal when you get started is that you don’t know what success will look like. Yes, you can still build a house without a plan but you can’t be sure it will be a house where you want to live. You won’t know how much the house will cost to build or how long it might take. Having a goal gives you the confidence that all the hard work will lead to something you think is worthwhile.
When starting a new company, take some time to lay out your goal. The elements of a good goal plan would include:
- Number of customers. How many customers would you have if you were a success? Are there 100, 1K, 1M or 10M people who would use your product? You want to be sure that even in your most aggressive models there are enough customers to build a profitable business.
- Total revenue. How much money would you be making? Could you make $1M, $10M or $1B per year if you were wildly successful? The last thing you want is to build a huge company that cannot make enough money to support itself.
- Cost of operations. How many employees do you need? How much does it cost to provide your product? You need to understand how much it will cost to operate your business to understand how much investment you will need and how profitable you can be.
The simplest goal assumes everything goes perfectly and all of your assumptions are true. In that perfect world, is your company as big as you want it to be? Could you raise investment if you need it? Would anyone want to buy the company from you? By answering those questions now you can save yourself some hard decisions later.
These goals should be easily measurable as well, providing a head start in setting up key indicators for your business. If you know that success looks like X customers, Y revenue and Z costs you can track your daily, weekly and monthly progress against that goal to tell how close or far away you might be getting. You won’t hold yourself to the goals you set, as those goals will change, but it does help you know the direction you are going.
I have been told that this flies in the face of the Lean Startup movement that is so popular today. I disagree, the Lean approach is designed to quickly answer if your assumptions are correct. Before even launching into a lean effort to verify your assumptions you should spend a little time deciding if it is worthwhile. Otherwise, you are pursuing a random walk which is not a good way to find an optimal outcome.
Your goals will change as you build your company, they always do. However, by setting out a goal when you got started you will know that the hard work you put in is driving in a direction that makes you feel that effort is well spent. There is nothing worse than working very hard and regretting the destination that you reach in the end.