In a recent Wired article, Palo Alto Software CEO, Sabrina Parsons, asks “what causes some startups to succeed while others to fail?”. Intrigued by the Founder Institute’s graduate success rate, Parsons touts the Institute’s focus on lean methodologies as the key to success. By encouraging this “fail fast” strategy in the Institute’s four-month program, new startup founders also engage in “live planning” to ensure success in the long run.
Below, a portion of Live Planning: The Key to Launching Sustainable Startups has been republished;
"If you believe popular consensus, the answer to solving economic problems lies in Silicon Valley. According to a Kauffman Foundation study, startups are responsible for most of this country’s net growth. Yet, another study from the Harvard Business School found that three out of four startups will still fail. Startups need to grow sustainably to have any significant economic impact.
What causes some startups to succeed while others fail? One well-known startup accelerator’s focus on business planning strategies is leading to tremendous success and may provide the antidote to failing startups.
The Founder Institute is a business accelerator program for some of the world’s most promising high-tech entrepreneurs. The highly-selective program has launched over 800 companies since its inception in 2009, and an impressive 91 percent of these companies are still in business. The Founder Institute’s success is largely based on the program’s world-renowned mentoring approaches and emphasis on the “lean startup” method combined with effective business planning and tracking strategies.
For high-tech startups like those launched through the Founder Institute program, the lean startup methodology is one way to determine marketability of a product. This methodology encourages a ”fail fast” strategy that allows entrepreneurs to quickly pivot and alter their product to meet market demand before heading down the wrong path.
While this approach is a great way for entrepreneurs to quickly determine the real problem their product solves, market experimentation can’t replace business planning all together. Once a startup’s business model has been validated using strategies like those encouraged by the lean startup method, it’s important that entrepreneurs engage in “live planning” to ensure success in the long run.
Live planning is a two-step process that includes both planning and performance tracking. With live planning, an entrepreneur creates an expense budget and a sales forecast, high-level strategic goals, and ties those goals to milestones with implementation dates. The entrepreneur then uses the financial forecast and the milestones and tracks their progress against actual results, which gives a company the ability to quickly understand missed assumptions, and pivot accurately and in the right direction. Live planning not only teaches entrepreneurs to think ahead, but also helps clarify quickly whether they are on the right path towards profitability and positive cash flow.
The key to live planning is in measuring actual performance against the plan, once core “product/market fit” assumptions have been validated. Instead of traditional business planning where the plan is often not revised, live planning constantly evolves the plan based on actual results and real-time performance tracking."
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