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Let's start by defining an operating plan since many founders are unclear on this topic. Your operating plan is a timeline based on figures and milestones that spans the period of time you can reliably forecast. In this situation, we are aiming to develop a plan, as realistic as you can make it. This is not your hopes-and-dreams hockey stick growth chart; you do need one, both for the pitch process and your own planning needs. In order for a potential investor to easily draw a line from where you are today to where you will be in a few months to where you will be in many years, your operating strategy should "click" into the hockey stick/five-year financial model.
Naturally, you must strike a balance between this and what the investor expects to see. If your start up's prospects for the following six months are dim, you may want to reconsider how you operate your company in terms of ambition and growth.
The implication of this is that your operating plan needs to account for the period of time you can foresee with some degree of reliability. If your start up's operating strategy includes the next five years, we can assure you that it will be wildly inaccurate. If you can accurately foresee the future, you should work as a stock trader rather than as the start up's founder.
In a word, the operating plan provides an answer to the question, "If I invest $1 million into your company, what does it get me?" for the investor. Do you have enough traction or proof-of-concept for your company to secure your next round of investment once you have successfully completed your operating plan? Consider your fundraising efforts as a transition between your current set of goals and the next stage of your company's development. In other words, make sure you raise quickly enough and spend slowly enough to get where you need to go. We often say, "Make sure you are building a bridge, not a pier."
It's important to note that, confusingly, in this context, "operation plan" is frequently used to refer to two different things. The first is your working operating plan, which is the financial and KPI dashboard you utilise as the founder of your company. The alternative option is to include an abbreviated operations plan in your pitch deck. The latter is the subject of this essay.
WHAT IS INCLUDED IN YOUR OPERATIONAL PLAN
The important milestones in your operating plan, such product launches and fundraising events, should be included. The most significant non-financial key performance metrics must to be included as well (KPIs). This will consist of your employee count, user growth, and other comparable indicators.
Include the top-level financial figures that support the questioned milestones in addition to the milestones and KPIs. This refers to operational costs, with your biggest costs broken out separately. If you're managing a physical commodities business, this would normally be your employee costs and your inventory cashflow. Be sure to spell out any significant non-staff R&D spending as well. Include whatever income your company is bringing in on your operational plan as well. The majority of investors would like to see the following items on your plan, but keep in mind that this is general guidance and that your firm may not require all of them or that it may require metrics or facts that are unique to your business, market, or industry.
Who are you employing, when are you hiring them, and how much will it cost? Add the strategy for your option pool. How much equity should you set aside for potential future hires?
Connect your hiring strategy to your objectives. Are you undermining your own efforts if your marketing staff expands by five times but your marketing budget only doubles?
What is the estimated revenue for the project, and how is it reflected in the plan?
What are the additional direct costs associated with delivering your product, such as server charges, platform subscriptions, etc.?
When will you be in need of funding again?
Be sure to mention any key milestones, such as product launches, significant version releases, and other events involving the product.
Key performance indicators and objectives that you want to meet along the route. Over-performing could suggest that you need to hire more people or expand more quickly than you had intended. Both can serve as early warning systems.
You should pay close attention to your options pool in particular because your investors can try to utilise it as a negotiating technique. Keeping your option pool as small as possible prevents VCs from being diluted by your team, but if you reserve too little for future hiring, you can find it difficult to find the kind of employees you need to succeed.
You should pay close attention to your options pool in particular because your investors can try to utilise it as a negotiating technique. Keeping your option pool as small as possible prevents VCs from being diluted by your team, but if you reserve too little for future hiring, you can find it difficult to find the kind of employees you need to succeed.
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