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A Strategic Plan for Startups - 5 Reasons Why You Need One

by Tom Wright, on Oct 21, 2014 11:19:01 PM

I've heard it argued that the last thing you need is a strategic plan for startups. The rationale goes something like this:

"Strategic plans are mid to long term roadmaps..."

"Startups above all else need to be agile and able to pivot their business overnight if need be..."

"...Therefore, a strategic plan risks blinkering the startup into a path / direction that it cannot even begin to have accurately mapped out."

It's actually not terrible logic, and I wholeheartedly agree that agility and humility (or the ability to make rapid changes when things are not going well) are core to the survivability of any startup in the first 2/3 years at least.

But...it's logic that is based on one fundamentally incorrect assumption, which is the precedence of priority of a good strategic plan.  Let me explain...

Agility, humility, speed and all those other great startup values should be fundamental components of your strategic plan - NOT the other way around.  A good startup strategic plan should look something like this:

Cascade-model-image
This isn't an article about strategic plans per se, but the main point is that your values should be second only to your vision statement in priority of precedence - so agility, humility, etc should be a fundamental part of your plan.

OK, but why exactly does your startup need a strategic plan...?

There are literally so many reasons why strategic planning is a good thing for startups - any we miss here, please add them in the comments below - but here's just a few of the biggies...

1) You won't get a cent of funding without one.

Bang. For a lot of startups, we might as well stop the article right here. Without exception, every single investor apart from perhaps your mother (though even then...), will ask you for your startup's strategic plan. Or, at the very least a component of it. They might ask you for your vision for the company, or your sales targets, or they might just come out and say 'show me your strategic plan'.

A strategic plan that's sitting in your head, or that you scrawl onto a whiteboard just isn't going to cut it. Would you give someone a million dollars of your money without asking them anything about what it was for, or how they were going to use it?...

2) It will help keep you focused on creating and selling a product that cuts through and succeeds.

This is really the essence of startup strategic planning. As a startup, you will undoubtedly have forces pulling you in a thousand directions at once. Whether it's chasing an investment, trying to close a lynch-pin customer, hiring a new person, etc etc. Every single one of these events has the ability to pull you so far in a particular direction, that you lose sight of your key points of differentiation.

Let's consider a hypothetical scenario:

Your product is an awesome, innovative cloud-based system for helping small business owners get real-time feedback from their customers.

You're chasing a key distribution partner - they love your product, but at the last minute they ask if you can tweak things a bit, so the product also helps small businesses to invoice their customers...

Hmm....technically you could do it, and you really want to sign this partner.  But should you???

The answer is in your startup's strategic plan.

If your vision statement is to 'Generate unprecedented information for small businesses about their customers' - then does this modification fit into that??  If not - you probably don't want to go there - as your scarce resources are going to be immediately consumed by something which is not core to your plan.

Without a plan to refer to - this decision is much harder to make.  So many businesses have been derailed by jumping at opportunities that look good in the short term, but are simply too far away from their core raison d'etre!

3) It will motivate every single hire you make.

If it doesn't - then you hired the wrong person. Why?  Because startups more than any other business, need to hire people that are truly passionate about what the company is striving towards.

Trust us - free coffee, & pizza nights will only go so far when it comes to motivating people to work through the night to get that system release done, or that video finished.

The only way you will get the passion and output from your people that all founders crave, is if you have a clearly articulated vision and strategy that you essentially bench-mark every new hire against. You could try giving them a huge $alary and bonus too I suppose...pretty sure startups can do that, right?? ;)

4)  You'll learn something!

I have never ever been through the process of startup strategic planning that hasn't resulted in at least one medium-sized revelation about the product, people or opportunity.  You may think you've got it all worked out - but there is simply no substitute for the process of committing to paper (or ideally using a cloud-based system!).

I was recently working on launching a strategic plan with a software startup, who realized as part of the process, that there was literally no way their current customer service capacity could keep pace with the level of growth they were forecasting. Luckily the planning process surfaced the issue soon enough for them to do something about it - rather than run-the-gauntlet of thousands of disgruntled customers queuing up on their live-chat support system.

5) Strategic planning is actually.......fun??!

Actually, it isn't always fun. In fact, creating a strategic plan for the credit card division of the bank you work for (again), can actually be kind of tedious. But when it's your baby - your dreams and ideas - it can be one of the most exciting and rewarding processes you'll go through - especially if you involve other people such as co-founders, employees or even customers.

The critical thing to ensure, is that you're following some kind of reasonably well established process and have a clear series of bite-sized steps. Trust me - you do not need anything complex here - at least not yet. Anything that gives you an output similar to the graphic above will work - be it a cloud based strategy system, an excel template, or even if you're working with a consultant.

In Summary

This article really just scratches the surface of why you need to embark on this journey and create a strategic plan for your startup.  If you only take away one thing, I would like it to be this:

The reality is, you already have a strategic plan - even if it's only in your head. So go the extra mile, write it up (it can be as fast as just a couple of hours work with the right system to support you), and start enjoying some of the benefits outlined above - plus a hundred more we haven't even delved into here.

Why else should a startup create a strategic plan? Let us know your top tips in the comments or via our social media channel.

Topics:Creating Your Strategy

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