Ep. #550 - Business Plan Tips
In this episode of Startup Hustle, Matt and Matt are back for Part 9 of “How to Start a Tech Company.” The Matts talk about business plans, defining what a good business plan consists of, and why it is so important.
Covered In This Episode
Everybody should have a plan, especially when starting a startup. But how do you make one? And how do you make potential stakeholders interested enough to read your plan?
The Matts are back, and in Part 9 of the “How to Start a Tech Company” podcast series, they’re handing out some golden business planning tips. They discuss what a business plan is, why you should make one, and how to make it a compelling read. For example, the Matts emphasized that you don’t need to write a 100-page plan to impress investors. They also provide practical advice, like being able to adjust your plans when necessary.
Get more business plan tips in this Startup Hustle episode.
Or dive into the complete “How to Start a Tech Company” series.
- What is a business plan? (1:50)
- One-pager business plan (5:00)
- Why it’s important to have a business plan? (10:41)
- Tech company vs. Tech services company (14:50)
- How do you know if your product is working? (21:17)
- What’s a unicorn growth plan? (25:03)
- What is the jockey’s plan? (29:24)
- How do you validate your idea? (35:48)
- Boring businesses make money (40:37)
- Pay attention to your business plan (45:18)
- How much of your original business plan was accurate? (46:37)
- Everybody should have a business plan (48:39)
- Key Takeaways (50:15)
- Wrapping up (51:04)
A confused mind almost always says no, yeah, that’s, that’s just psychology. So you got to keep it simple. Now, when it comes to the business plan itself, there are areas of it that, you know, there, there are some priority areas. And when you look at the plan, remember, look, a good business solves a problem. So you have a problem, and you have a solution? What kind of action are you going to take? And what is your desired or expected outcome?Matt DeCoursey
Static is not a good place to be, just like people don’t want to deviate from the plan. I’ll go stick and stay the course. Now sometimes you gotta make adjustments to the top, to, you know, whatever course you’ve plotted, I mean it because there’s a storm in the way. All right, let’s sail around it. So all right, keep focus.Matt DeCoursey
The biggest mistake that all entrepreneurs make, and this is especially bad with tech companies, is you get software developers that sit in their basement and just write code, but they never actually go talk to a potential customer to figure out what it is they want to do.Matt Watson
Everybody should have a business plan. They should know who their customer is, the go-to-market strategy, the product, what is the long-term vision, like they want to sell X to Y. And the most important thing is staying on that plan. Or deciding that you’re going to change the plan but not doing both. And just having a plan. One step at a time.Matt Watson
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 0:00
And we’re back. Back for another episode of Startup Hustle. Matt DeCoursey here with Matt Watson. Hoping to have another conversation; I’m hoping helps your business grow. Hi, Matt.
Matt Watson 0:11
Hey, what’s going on?
Matt DeCoursey 0:14
Trying to get a plan together?
Matt Watson 0:16
Well, this is episode nine of 52. So far, that plane is going well, everywhere. It is an awesome new episode about being a startup.
Matt DeCoursey 0:26
Yeah. And speaking of starting a startup, we started a TV show that is also a startup. So if you’re really into all things, startup, come check out Startup Hustle TV. It’s also a good time to let you know that today’s episode of Startup Hustle is brought to you by full scale.io helping you build a software team quickly. And affordably. That’s what we do. That’s my day job. Matt.
Matt Watson 0:50
Can you believe that a sec. has been using Full Scale for three years.
Matt DeCoursey 0:55
Yeah, I was talking to another one of our clients last night about that same thing. I was like, do you know you’re coming up on your 333 year birthday? He’s like, wow, has it been that long? And I was like, yeah, man, we’re getting old.
Matt Watson 1:06
And we had some critical team members that have been working for us for three years now stuck by so they’re, they’re they’re veterans at this point?
Matt DeCoursey 1:12
Yeah. Got a lot of flight hours under their wings. So you know, part of that, you know, part of that whole thing. Now it is part of the business plan that you and I created when we started Full Scale. And then was also a big pivot from the original business plan that we became partners and and around that, essentially turned into Full Scale. Yep. But wait, things don’t always go as planned.
Matt Watson 1:42
Nope. Sometimes you keep turning over rocks and you find, you find something under a rock that leads you to a different path.
Matt DeCoursey 1:50
It’s kind of like the gold, the gold mining shows that I like to watch. If you watch enough dirt, you’ll find you might find enough gold. But one thing on those shows as well. That’s pretty certain this things usually don’t go according to plan because the wash plant blows up or the backhoe breaks down, or the excavator gets stuck in mud. And that sounds a lot like running a business. And also, one of the things that makes it really hard to write a business plan. Now for those of you that are listening, if you’ve been a regular listener for a while, you know that now and I are not massive business plan people. Is that fair to say, Matt?
Matt Watson 2:28
I think the shorter the better, right? I mean, I think it’s good to have a plan. I mean, I think it’s really good to know who your customer is, and what your product is. And your go-to-market strategy. Like all those things are really important. I just don’t think it needs to be 100-page novel.
Matt DeCoursey 2:45
Well, the reason for that is because you don’t know what you don’t know. And you don’t know what’s going to happen. So your business plan should be centered around. It’s almost kind of talking now, what can or could occur, which is very helpful and your planning process, because if you’ve addressed it and thought about it and had a little bit of time to discuss it and keep revisiting it, that can be important. I’m out I actually have the definition of a business plan. Would you like me to tell you what that is? So jump and build wings? No, that is not a plan. Oh, no. It’s your your version of it. Hope hope is not a strategy. Is that? Yeah. So a business plan is a written document that describes in detail how a business usually a startup defines its objectives and how it is to go about achieving its results. It lays out a written roadmap for the business and with everything from marketing, financial and operational standpoint. So we’re going to talk about some tips that go with that. Now, I think a lot of people, as you mentioned, create this really comprehensive business plan. And they get so immersed and sucked into it. It can take some focus away from some of the other things that the business needs to do. Where do you draw the line, Matt? Like what’s we’re all on?
Matt Watson 4:03
It’s one of the things we talked about a lot, right? You always talk about the guy who’s cleaning the restaurant and never opens the door because he’s polishing the floors, right? Like, you can spend forever refining the business plan. Or you can make something like half-ass and figure out somebody wants to buy it and figure out why not and then improve it. At some point in time. You gotta go sell something. So
Matt DeCoursey 4:26
yeah, and I think a lot of people get in the weeds, and I’ve been guilty of this before with a business plan because they think that your earliest stage investors are going to want to see that 60 page business plan right away. And I’ve really over time have learned that it’s the opposite. That’s the opposite of the truth. A business plan can come in a lot of different shapes and forms, and there are pieces and parts of it that are best to put under your arm and take out to the initial pitch meetings. So do you consider a one pager to be part of a business plan? Or is that a completely different thing?
Matt Watson 5:06
I mean, I think that should be part of the like summary of it. Whereas if
Matt DeCoursey 5:13
you have an executive summary, yeah, that’s the big brother of the one pager. And I want to talk about those two, because I think that both of those are birthed from your your general plan. So a one pager look, if you can’t describe the problem solution and benefits of what you’re doing, and what you’re solving on the front of one piece of paper, you’ve probably overcomplicated it doesn’t mean you have to, like lay out the world’s greatest strategy. But the one-pager is a component of your business plan. That’s what an investor wants to see. Upfront.
Matt Watson 5:48
I mean, as an investor, I just want to know, like, you have a product, you know, who you’re gonna sell it to, you know, that people want to buy it. And I have confident in that confidence in that and I have confidence in you all the rest of it is a bunch of shit I don’t want to hear about
Matt DeCoursey 6:02
well, and then then the next step up from that, which is I still believe an ancillary part of a business plan is an executive summary, which is the 60 page business plan condensed down to, I’d say, three to six pages Max, that’s, that’s really the highlight reel. Those are the two things I think if you’re a real engineer, and we’re talking about how to start a tech company, I would if going back, if I was starting another company, which I have no plans to do anytime soon, because of this kind of stuff is is draining, it’s it really is draining, but I spend time on the one-pager and the executive summary. And then then certain parts of the business plan, I think are crucial for a greater understanding. And we’ll get into that, like if you had to redo a business plan. If you had 100% of your effort, where would you divide that up?
Matt Watson 6:57
I mean, I think the executive summary is a is good. I think that kind of three to 510 pages or whatever. And, you know, Short and Sweet on the different points, I think is good. And then how do you distill that down to one page is even better? I think as an investor, nobody’s going to read more than five to 10 pages of stuff anyways, there’s just no way. Yeah. And
Matt DeCoursey 7:15
there’s, well, there’s, there’s reasons for that. And I think it’s important to understand because once again, and this is these are tips for a business plan, because that is what a lot of people want to get other people’s attention with. But a lot of times the people that you’re serving this plan to like, Hey, look at this, do you want to be a part of this? Well, first off, they’re in and around organizations or situations where they get a lot of business plans, and they just don’t have time. Like, no, I mean, we that there? Isn’t that browsers? They are Yeah, they just don’t care. They’re just waiting for you there. I
Matt Watson 7:48
mean, if I was looking at the business plan for Full Scale, and it was 100 pages about Filipino law and HR standards, and how we hire people and pay them and like, I would get lost so fast, and like all that like is to end of the week, like, okay, yeah, we’re gonna make money. Yes. Like, at some point, it’s just too much detail. I don’t understand the industry. I can’t relate to what you’re even trying to tell me.
Matt DeCoursey 8:11
Well, a confused mind almost always says no, yeah, that’s, that’s just psychology. So you got to keep it simple. Now, when it comes to the to the business plan itself, though, there are areas of it that you know, there, there are some priority areas. And I think when you look at the plan, remember, look, a good business solves a problem. So you have a problem, you have a solution? What kind of action are you going to take? And what is your what is your desired or expected outcome? Like, that’s like an end? Look, it’s going to flex different ways. But we’re going to keep this tech-centric, because this isn’t a series about how to start a tech company. So what’s the problem you solve? Who’s Why is it valuable? Who are your competitors? What how are you going to solve the problem? And you know, what’s your path to revenue? Those are, those are the simple areas. And you know, I don’t think I think people get stuck in wanting to write like, 42 pages about features.
Matt Watson 9:11
Yeah, exactly as to into the weeds. And the most important thing in any business plan for a tech startup is just knowing who your target market is, right? Are you trying to sell to a million people that are going to pay you 10 bucks a month? Or do you want to sell it to 10 people that are going to pay you a million dollars a month? Because those are completely different business strategies? And if your answer is both, you just are clueless you have no idea what you’re doing.
Matt DeCoursey 9:36
Yeah, and that’s defining where you’re at now, you know, within your now that we’re into the the list of tips, you need to get clear on your selling points, like make those crystal clear, like those shouldn’t be muddied. They shouldn’t be hazy. Like, this is what we do. This is who we do it for, and this is what how they’re going to pay us and the settling
Matt Watson 9:57
point, and why we’re 10 times better than the competitor competitor. Like it better be I was actually,
Matt DeCoursey 10:04
I was actually recording an episode with with a four with a founder that had four successful exits and a current company that had 65 million in funding. And he was talking about exactly that. He said, If your solutions only, only 30 to 50%, better than the competition, you’re gonna lose. Because it’s kind of like you’re always saying, like, what’s the big benefit of switching over and doing something different, he was saying you need to be two to three times better, faster, cheaper. Yeah, on wedge people from other solutions they’re already into,
Matt Watson 10:41
especially if you’re talking about a big brand that owns a specific industry, right? Like, it’s just really difficult to replace them because they’ve got the name. And it’s just that it’s so much more difficult. Now, if you’re in an industry where there’s a lot of players, and nobody really owns the market, and you know, there’s not a dominant company, then you might, you might be able to okay, but if there’s a really dominant player, and everybody buys them, because of the safe choice, and everybody knows, that’s the product to use, it’s gonna be really hard to supplant them unless you are significantly better.
Matt DeCoursey 11:15
So, with your plan, it’s also important to understand who your potential audience is, is this a plan because a plan that I’m going to give to my employees internally is going to be different. And then the plan that I gave to a potential investor that I turned down a million dollars, from which you can see my reaction to that in episode one, or episode zero of Startup Hustle TV, you want to see what it’s like to not get a million bucks, watch that show, because but, but that was a different plan. There’s so knowing your audience and who you’re delivering it to. So a business plan can take different forms, like there’s an actionable strategy that occurs within your business, and then there’s a business plan. Those are those are those can be different.
Matt Watson 12:00
Another example of this would be the business plan I’m going to take the VC is probably going to have a shooting for the moon and being like a trillion dollar company, the business plan I take to the bank might be more conservative.
Matt DeCoursey 12:13
Right. Right. Right. And and you know, that’s, I mean, you got to know your audience. Yep. And, I mean, that’s important. So, Matt, do you want to explain unit economics? Or would you like me to attempt to do that?
Matt Watson 12:28
Well, I’m. So by the way, artists, how about we talked about economics for Stackify, which is a tech company. And what if we talk about it for say, Full Scale, which is a different kind of tech company, and how the unit economics work.
Matt DeCoursey 12:45
Now, I want before we get into that, I want to say that someone who’s a personal mentor and master and maybe even hero of our Sandy Kemper is huge. Like, if you talk to Sandy for five minutes about your business, he’s going to say, you need to you need to be on top of what are your What are your unit economics look like? You know, and like then, and that’s like, kind of like, if you talk to me, I’m like, What’s your path to revenue? You’re gonna get very far into that conversation before he’s gonna bring that up. And that’s, that’s important. So go ahead.
Matt Watson 13:15
Well, so when I think a unit economics, the big thing I really want to know, is scale, right? How does this business scale? What does it cost to acquire a customer? How long are they a customer? You know, what is the churn and lifetime value of the customer? Right? Like, all of those things are really important. But then you get into your margins and cost of goods sold, right? Like, are you selling a product that you make an 80% profit on, or you like a grocery store, and you’re like, we make a 5% profit. Like, those are totally different types of businesses, right. And most tech businesses, if they’re SAS based subscription, usually are 70 70%, or more gross profit. And the really good ones can be 9090 plus 70, to 80 is is more normal. At sacrifi. We’ve, you know, it used to be we were we were like 60% A couple years ago, and now we’re probably more like 80%. So you know, how much you spend on hosting and all that kind of stuff gets into that. But the big thing there too, is customer acquisition costs. That’s always the big one is how much does it cost to acquire a customer and especially if you’re gonna go to a VC or an investor and raise money usually the reason you’re raising money is to scale and grow sales, right? Like we want to go sign up a bunch of customers so you need to have an idea of like, hey, I can go hire a couple salespeople. And what will I you know, get from that? How much will I invest what’s the outcome? Or if it’s marketing like okay, we know we can market and you know, do marketing and advertising in these ways and this is how much it cost to acquire a customer understanding those Levers is really important to investors.
Matt DeCoursey 14:50
Yeah, and so the the difference so we were gonna compare Stackify and by the way, so GigaBook would have a similar similar model, software organism major tech companies. Yeah, they’re well know that well, no, because it’ll be the same or similar. So Full Scale, which is a tech services company. So here’s, here’s the difference. Like, we have one foot in the tech space and one foot in the service space. And it’s not a true software company. So when we talk when we use the word scalable, it’s completely different because stacker Fie, or Giga book or a pure tech driven company. The reason that they trade for such big multiples and such big money pours in is because you can scale them, well, most of the time can scale them without needing to have a gazillion more people, software, you have to work. Yes, it shows up every day. 24/7. So at Full Scale, where we deal with, with a high aptitude high experienced developers, people ask me about our hiring strategy. I say, well, it’s exactly inexact, because I can’t, I can’t I can’t make the right candidates show up and pass our our gauntlet of a hiring Persea. And so now, but on the flip side of that, though, a company like Full Scale as inherently, it can be inherently easier to have a cashflow positive business. Yep. As opposed to software companies, which are dreadfully unprofitable for years, and sometimes a decade or more, but then they can Springboard forward a lot of the ways. So there’s a little bit of a give and take. And other things too, that like, for example, at Full Scale, some of them you talk about So customer acquisition cost, who fucking knows, man, like I can take a gas out of it. But we get customers from so many different things. Maybe this podcast, maybe Startup Hustle, TV, maybe people we know, like, the Full Scale website. And it comes from a lot of different angles and places. And it’s also not very predictable. So when you’re creating your financial model and your unit economics, like with stacker phi, you have some idea you’re like, Okay, if we spent $40,000, this month on XY and Z, we expect to be within this range this to this many trials, this to this many conversions. And it’s fairly predictable, with companies like Full Scale, especially service base like that, can that can sway wildly, like we because we don’t know. And some of it too, is also different because, like software, it can be really hands off like Full Scale, we’d say no, to as many potential clients as we say yes to. So there’s a different a completely different thing there. So when it comes to the economics, though, knowing how much you got to basically, what do you got to do to pay your bills? Like, what does that look like? And then where does that make profit? So? Yeah. Anyway, fancy, fancy-schmancy stuff there, Matt. So Alright, so now you get, once you get an idea about what some of this stuff looks like, and look for the earliest stages of business, you don’t know, you don’t know what your real customer acquisition cost is, you don’t know what your churn rate is, you don’t know what the lifetime value of a client is, like you just mentioned the beginning the show stack, if it has been a client of Full Scale for three years now. Yep. That means your lot every month that you pay your bill, that and thank you for paying your bill every month, by the way, but every month that you do that the lifetime value of your account grows,
Matt Watson 18:32
the customer acquisition costs can be higher. And we don’t
Matt DeCoursey 18:35
churn a whole lot of clients, Rosa every month that number changes. But that said, that also means that enhance worth even that much more when more and more of and stick around and the longer they stay. So once you get an idea of and that’s another thing, too. So you look at like what’s the average paying subscriber at sacrifice spend? Roughly?
Matt Watson 18:57
It’s about three to $4,000 a year.
Matt DeCoursey 19:03
So to 300 bucks a month. Yeah. As opposed to Full Scale, the average client spends $13,000 a month. Yep.
Matt Watson 19:11
Which can become totally different business models, sales plans, customer acquisition, like I can’t afford a lot of money to acquire a customer you can’t.
Matt DeCoursey 19:21
Right, right. And at the same time, I have to build a relationship with the a lot of those customers and clients because we’re giving them advice, consulting, working with them having a few interviews, talk to different people were well at Giga book man I’ve ever since we invented our Smart Start onboarding. Like we don’t spend any time on that. It’s a live chat at best, and that that, but that’s scalable. That’s scalable, because if your business plan revolves on too much human intervention with your tech company, you’re not scalable yet you haven’t figured it out because what will happen is if your users go up by 1000, and you have to hire five more people just to deal with that, well, you’re still not gonna make any money because you’re just going to spend that hiring five more people. So where’s that breakpoint? Where is the where’s the point that you can either I refer to this as as cash counting, because in some businesses, you see they’ve refined a product. Well, let’s look at link tree. Right we use link to the a super simple link directory that you that we put in our social media ads that say, where do you want to listen to the podcast? Where do you want to find us? That’s a that’s a product that doesn’t need to evolve a whole lot. So you might see a ramp up to build something like that. And then they get into a maintenance mode. That’s putting the cash cow out in the pasture. Yep, you know, and that’s and that’s, that’s what can be attractive as you might not need many people at all, but you’re gonna have a very difficult time determining that upfront, unless you can get some kind of business intelligence about what is good in and around your industry. Yep. Oh, by the way, let’s let’s break a couple hearts. Because you know, it wouldn’t be a real episode Startup Hustle if we didn’t shatter at least one dream when you’re for your tech company, so Matt, like realistically, a free trials and SAS environments? How many do you? What do you think a good conversion rate as?
Matt Watson 21:17
Well. So it’s, it’s all over the board, of course, right? From what we see about a third of the people that sign up for a free trial, were will ever actually use the product, the other two thirds, they never even use it, they just sign up for a trial, okay. And then about a third of the ones that that actually use it, we’ll buy it. So our end result of that is roughly kind of about 10%. It kind of ranges, I’d say eight to 12. And depending on your product, you know, it’s gonna vary wildly. But yeah, it’s only eight to 12%
Matt DeCoursey 21:47
GigaBook will be in an eight to 12 range for the same reasons. And that’s so that’s the thing is, and this is where you can get yourself sideways in a hurry, trying to start your tech company is thinking that 40% of people are going to convert, because honestly, in the beginning, in the beginning, if you even get a whole number, like 1% might be good. I bet that’s a numbers game. You were like, wow, we’re up to 1%. Because your shit is not good. Or great. Right away? Yeah, the way it goes. Yep. So all right. So once you get some idea around that, you can begin to break some of this stuff down, and to actionable goals. And I think that if your business plan doesn’t have actionable items in it, it’s just paper.
Matt Watson 22:34
It’s like, you got to have some milestones, right? Like, our goal is v1 and then v2. And then in v3, we’re going to create this whole new feature and thing and go into a different industry or market or whatever, like, you know, you just got you got to set out some milestones and, and the key thing to investors, a lot of times they they expect you to have a big vision, right? Like they expect you to see forward about this is what we’re going to be doing five years from now we’re gonna build all these products, we’re gonna grow, we’re gonna go into this industry what you know, like, most investors want to invest in people to have a big vision for an industry or the product or what they’re going to do.
Matt DeCoursey 23:09
Because they need big returns to support their own model, they’re writing 10 checks, hoping that one of them actually goes big. And if they write 10 checks for a bunch of people with little dreams and little visions, and little goals, then they will probably have a little return if they even have one. So that’s that kind of, you know, aiming for substance, you know, like, does, like, does your plan have substance? Do you have a marketable product? Do you have a systematic plan for increasing revenue, and maybe, and maybe a mitigation strategy or a plan B for what can and will or could occur if the goals and milestones aren’t met?
Matt Watson 23:51
Well, and that’s the hard part. When you’re early stage, it’s a little bit of a game of chicken, right? It’s like, okay, we got $50,000 We got to use this money to get to the first milestone. And once we reach the first milestone, we think we’ll be able to raise another 50,000 or whatever. But if you screw up along the way, you don’t get to that first milestone. You’re just dead. You’re done. It’s like, yeah, it’s a little bit of a game of chicken because you’re like, I’ve got to hurry up and spend all this money so I can get to that that first goal. Like I got to build the MVP, I got to spend some amount of money on marketing I got to prove these unit economics, and then the investor agreed they give us more money if we approved all this stuff. You spend all the money you hire people and then you’re like, oh shit, we didn’t hit our numbers. What do we do now?
Matt DeCoursey 24:36
And and that’s and that’s why they’re having a reasonable plan but still being, you know, having a high upside. I think if your plan shows you hockey sticking after six months, that’s not super believable. And we were talking in previous episodes about not only a gag a book but also a stack of fire taking 10 years to collect the dollar
Matt Watson 25:02
there. So I think there are two things there, I would want to tell everybody I mentioned a, realistically the like unicorn type growth is to do what they call a triple, triple-double, double. So triple revenue one year, then triple again, then double revenue, then double revenue again, that is like unicorn status. If you can do that, and you have hit the hockey stick and you’re growing like crazy. And that’s probably not your first year, by the way, right? There could be a couple years of like, r&d, building some product, and it’s got all sorts of problems. And then you finally get it working. You’ve got product market fit, you got your go to market strategy, you finally figured out how to attract customers, then you start that that triple, triple double double, right? It doesn’t start like the first year either, like there are gonna be a long way before you get there even. But then the other thing to think about is even once you become a successful company, growing 40 to 60%, year over year is super successful. Those people that think they’ve got to grow like triple revenue every year for like in perpetuity. There’s no that doesn’t happen.
Matt DeCoursey 26:06
And that’s gonna change. By the way, when I hear you say triple, triple-double, double, I just think about me hope and Yep. Said no one. All right. So but yeah, but reasonable goals and expectations. Like Like I said, it’s I mean, triple, triple double double think about that. Because if you do the math on that it gets it gets pretty dirty in a hurry like these. Oh, yeah. And the big numbers. And, and but there’s a reason it’s not triple, triple, quadruple, quadruple, the bigger your revenue gets, the harder it is to build upon it. And I have numbers and percentages that look flashy, like Yeah, after that, you know. So after
Matt Watson 26:46
we sold VinSolutions, to auto trader, I went to their board meeting, which was one of the coolest things I ever got to do with a couple of billionaires in a room. That was cool. And their company charter was to grow 14% a year. Yep. I mean, at some point in time, you get to be so big, like, say Apple or Microsoft, or Amazon or somebody or they’re not like we’re gonna triple this year, like, no,
Matt DeCoursey 27:07
yeah. And that’s the thing too, and some and sometimes like, and we’ve even talked about this at Full Scale, like, there even becomes an inflection point in some businesses where just growing for the sake of growing isn’t always a great plan. Relations. Yeah, I mean, there’s just a lot of different different, you know, now thinking big is important, as we mentioned. Now, look, when it comes to this plan that you’ve created, get some feedback. Talk to someone about it, ask people, you know, to look at it, you know, email Watson, and ask him to look at it because he loves long detailed business plans. That’s what you don’t read books. Before bed. You read business plans, right?
Matt Watson 27:54
Yes, yep. That’s what I do.
Matt DeCoursey 27:55
That’s a lie. I don’t think that’s true. But you know, and, you know, when it comes to the feedback, I think it’s important to listen for a few things one, like, Does the person that read it even get it? Like, does this make sense? Like, because if you if everyone that reads your plans confused as shit by it, then it’s not a great plan. And then also just like listen to see if everyone asks the exact same questions. Well, then there might be something worth addressing. That’s that echo noise talking about you hear it, and that’s what needs to be addressed. And then, you know, kind of for the final point on the on the tips less before we talk about some things to avoid, is you look in your invest as sophisticated savvy investor knows this as well. But your plans are wrong, it’s going to need to change. I’m more concerned about your ability to adapt to survive and advance than I am about the crystal ball that you don’t have.
Matt Watson 28:55
Yeah, I mean, most of the time, you’re betting on the jockey, right? Like I want to bet on a jockey that understands market conditions, and can understand they need to pivot and move and figure out how to adapt and overcome, right? I mean, if you think that you got it all figured out, you know exactly what you’re gonna do, you can pretty much guarantee that’s not going to work.
Matt DeCoursey 29:16
I think we need to get an actual professional horse race gambler on here and ask if they actually bet on the jockey or the horse. I mean, at because I know in our world, it’s the jockey.
Matt Watson 29:29
I mean, I can tell you VinSolutions that what the business started out doing was nothing like what it became like eight years later, like the product changed. I mean, it built upon like a really simple idea, but the direction it went, went a different direction, and became 100 100 times more complicated, right? And stack fie was the same thing. We started with a simple idea. And now what everybody wants is something it’s kind of started on that but went a different direction.
Matt DeCoursey 29:55
Yeah, well, and we were just we were joking about this. You and I became business partners in Yeah, I got a bug. And we our original plan was to help stack a phi build a development team, we put a small markup on it, and Giga Buck wasn’t going to have a burn rate. It was a beautiful, it was a beautiful little plan. It was a, it was a self sufficient little nugget that was gonna play well. And then we got two months into that. And because of this podcast, and people we know, and just a massive shortage of Java developers in North America, we had a bunch of people, our friends, it was literally,
Matt Watson 30:26
France. You’re wrong. It was like two weeks later, and one of my friends had a developer working at Full Scale before I did.
Matt DeCoursey 30:34
Well, yes, that was. Yes, it was. It wasn’t two weeks, but it was close, because we had people asking right away, but at first we you and I, we were like, do we because we have that we have that part, we actually I in the business plan that I wrote in the financial projections, which by the way, I think are the most important part of the plan to give you an idea, a real tangible view. So when it comes to that financial part of the business plan, I usually write three or four of them. I do like good, bad and ugly, you know, like, and so you just get an idea, like, and it’s good to do those and triplicate, or in some places will do even more, because like they’ll move that timeline like Okay, in this one, we get revenue in month three, and this one, we don’t get revenue till month 12. Like what is life look like? And those tables change really dramatically for a lot of things, both good and bad. So understand where you’re going to be if things go, well understand where you’re going to be if they don’t go well at all, because that’s how you determine what you actually need from an investor and where they need it. And no investor wants to come sit down at the table and immediately be the short stack investors don’t typically write checks to companies that are immediately resource-strapped even after taking in capital.
Matt Watson 31:51
Now they expect you to take that money and invest it. So if you’re already burning cash, that doesn’t help grow unless you’re growing really well. And yeah, you know, but
Matt DeCoursey 32:03
so when we talked about expecting to change, expect the plan to change. You know, we were trying to build a team at Giga buck, we were trying to grow that product, we were going to staff stack, FYI. And then we had like anywhere from 12 to 18 months down the road. I just remember his general line items, future client teams. Yeah. And we thought about building it. But we didn’t know what we didn’t know at that point. Now we ended up Sit because the demand was so high, we ended up accelerating that part of the business a full year, we took beta client one, beta client two, and there was about three or four months into the whole thing that we were like shit, this is what we should be focusing on with the software that Ganga Brookside can kind of work. It can be in parallel. But we loved the fact that that business had the meaningful scale had the ability to pile up revenue so quickly, service that we were great. We were so fascinated with that, because we had been in and around a world where we’d gone two or three years before you could even really have something that you were proud of selling not sell, but proud of selling. And then at one point, so at the end of year one, we had 100 employees. And I remember even asking you I said Matt, have you ever been involved in a business that grew this quick? And you’re like, No, no. And you know, but But that wasn’t all gravy and roses wasn’t known it?
Matt Watson 33:24
No, it had his own set of problems. And actually, that leads to another big change in the plan is, you know, at Full Scale, we thought we were going to partially be in the real estate business. Like when you’re hiring that many employees you got to get Office base all the time and all this stuff like we’re gonna end up owning like a building somewhere a skyscraper somewhere, right?
Matt DeCoursey 33:44
And now, everybody went we went for Yeah, we went for we have a whole floor of a building that we’ve paid for for over a year now and never even used. Yeah, one 1000 US dollars a month. And now we don’t even need it. Because we’ll be fractional, like our employees will come one day a week after COVID. And that’s what they can just have some FaceTime, and then they’ll work
Matt Watson 34:07
for American remote, totally change the plan and the financials. Right?
Matt DeCoursey 34:12
It changed the whole business model. And, you know, now you know that’s, yeah, get ready to adapt and change. All right. Yep. So let’s talk about some don’ts. All right. Look, when we say that we’re not big planners, and it’s not our favorite thing to do. I’ve we’re not saying to skip planning, don’t skip the planning phase, you need to plan, just know that your plan is going to require adjustment.
Matt Watson 34:36
And the plan doesn’t necessarily have to be all in writing. Right? Like, I mean, you have a plan like this, we’re gonna build this is who the customer is, we’re gonna attract customers, like we know these things. We talked about them every day. It doesn’t necessarily have to be all in writing, either. Unless you’re gonna go present it to an investor or something you’re gonna have to do in writing.
Matt DeCoursey 34:52
Yeah, then it does but it doesn’t have to be overly complex or remark or like overly sophisticated. You And then much like we talked, we’re just talking about don’t make don’t just because you wrote the plan, it shouldn’t be static. Like I just we just told a story about literally starting a business that we didn’t plan under the wings of we it was four months later, we actually did make it its own entity, which then later acquired Gigaba. Yep. So you know, you never know. But static is not a good place to be just like I think people don’t want to deviate from the plan. I’ll go stick stay the course. Now sometimes you gotta make adjustments to the top, to the you know, whatever course you’re, you’ve plotted, I mean it because there’s a storm in the way. All right, let’s sail around it. So all right, don’t lose focus on your cash.
Matt Watson 35:48
Cash is king. Got to know how much have you got to understand your burn rate? How many months you got to run out of cash?
Matt DeCoursey 35:58
It’s all critical. How do you how do you validate your idea?
Matt Watson 36:02
You got to talk to people. And the biggest mistake that all entrepreneurs make, and this is especially bad with tech companies, is you get software developers that that sit in their basement, just write code, but they never actually go talk to a potential customer to figure out what it is they want to do. Or they overcomplicated and we’ve talked about this with Giga book. It’s like, we just kept adding all these features and stuff. And you know, if we want to talk to our customers and thought about it, maybe we would have made it simpler product.
Matt DeCoursey 36:28
And meanwhile, simple as Calendly was running away with Yeah, with with the race, like they really were and they just did one thing and like I look back at that. I’m like God, that was a strategic error, as we even thought about doing the exact same thing. And they weren’t even that great at it with that point. So
Matt Watson 36:46
the other part of that it’s easy to go to like your uncle or your uncle’s best friend. And they’re like, oh, yeah, that’s the greatest idea ever. This is awesome. Yeah, that’s Oh, great job. Good. Yeah, keep going. And he talked to some real person who would actually be a customer. That’s not like your buddy’s friend. And they’re like, it was a stupid ass idea. Like, you gotta get outside your little friend network, you gotta go talk to strangers.
Matt DeCoursey 37:14
I mean, I think that that’s a key ingredient. You know, like, I mean, if you if you surround yourself by with Yes, people, you’re I mean, you got to be, you need to be ready to hear the critical. I think a big thing to avoid is, don’t get defensive about the feedback that people give you. Thank them for the feedback. Thank you for the input. Thank you for your time. Because in reality, those people can choose to do anything else in the world, besides give a shout about your plan and what you’re doing. So like, people ask me a lot to talk about this or look at this or do whatever, and I always disclaim it upfront, I’m like, Okay, two things. One, you can’t get mad at me if I don’t tell you what you want to hear. And two, I’m not going to argue with you about whether why I’m wrong. And you’re right. That’s good. Yeah, those are, those are pointless. That’s not That’s not it. That’s not what we’re wanting to do here. If you want the input, take the fucking input. And lesson.
Matt Watson 38:15
Yep, lesson, take it under advisement.
Matt DeCoursey 38:19
Spongy, spongey vague goals. Now I want to acquire 30 to 80% market share, and three to six years, we’re going to be number one.
Matt Watson 38:32
True. I have told my mark, I have told my marketing team a couple of times that we should just change our website to say we’re number one at something like just whatever, we’re number one.
Matt DeCoursey 38:50
And there’s ways to do that. Because then you don’t even have to say number one. And you’re not we become a bit of an expert on on these kinds of in this messaging. But, you know, I mean, overall, you know, another thing too, is is well, you know, when it comes to your plan, and what you’re wanting to do one size does not fit all. You know, one of the things the reason I don’t get like all the shit that Full Scale does Full Scale on Startup Hustle, Startup, Hustle TV, Giga book, six portion and six different portfolio companies like what do we do? You know, that’s the thing is like, you know, and on something like there’s not a one size fits all plan for the stuff that we do, overall, or what we let ourselves do so just in the business is just
Matt Watson 39:43
well, and I was gonna say the business plan of different kinds of tech companies, even if you’re in the same industry, doesn’t mean your business plan is the same, right? Like, take Uber and Lyft. For an example. Their business plans could be different. Uber could be like, Oh, we want to partner with these types of people and that’s our go to market strategy and we want to deliver or food and lift is like shit. We don’t ever want to do that. But we want to do this other thing, right? Like everybody’s gonna have a unique business plan.
Matt DeCoursey 40:08
Yeah, and that’s and you know, with that there’s priorities in there. And this next tip that we have, I think is the most crucial thing. For early stage companies do not dilute your priorities. You need to be good at one, maybe two things. Yep. Before you try to be good at six, like and I’ve made this mistake, I’m sure you have now like pick something to be aces out the most important thing, and that’s something that drives users or revenue to your platform. Right? It’s never vanity shit. It’s like always like you like to that. How do you like what? Talk about uh, you love boring businesses?
Matt Watson 40:46
Matt DeCoursey 40:48
Matt Watson 40:50
Because they just make money and people need them. There are utility like, I can’t remember the name of the one here. And that’s Kansas City that like they just help people optimize how they deliver freight and the optimal route. It’s not sexy, but
Matt DeCoursey 41:05
it’s like, no, that was that was that was? That was my my buddy. Jeff. Icelander. Yes. And of course, I just forgot the name of his business, but it was it’s a logistics company.
Matt Watson 41:17
Yeah, nothing sexy about it. Yeah, nothing. Yeah, yeah. And yeah, would never exist, but they’re killing it. They’re making it a thing.
Matt DeCoursey 41:23
Yeah, that one thing and they’re frickin aces added, though. Same thing. It’s like we’ve, we’ve used this example of the chicken fingers restaurant here in Kansas City. Yes. They just make chicken fingers. That’s it, but god damn good. They’re good. They’re so intent are steep and that line down and it makes chicken fingers like kind of chicken fingers do you want or it’s actually more like, how many do you want? Do you want fries? Or coleslaw and lemonade?
Matt Watson 41:50
I mean that that’s, I mean, that’s the greatest example, right? Like, you can think about like, I’m hungry. Anything of like a million restaurants you go to, but if you think about I’m hungry, and I want chicken fingers. You’re like, oh, there’s only one logical choice. We’re going there. Why would I? Why would I go to McDonald’s for chicken fingers when I can go to so and so. And that’s what they do.
Matt DeCoursey 42:09
Well, that’s exactly what McDonald’s did when they first became a franchise. And this was before Ray Kroc. And you know, the the brother, the McDonald brothers, they looked at, they said, We make all of our money off of hamburgers, fries and shakes. And they looked at each other. And I said, Well, why don’t we even make why do we even do the rest of this and said, well, we want a full menu? Do we even need to have one? And they kind of like each other? Like, we do whatever we want. We own the place. Yeah. So there they go. They took all the other crap out and they got real good. At a couple things. Our buddy Larry Holt back in episode 12. We’ll talk about being cowardly, and going, taking an idea that no one else is doing and going somewhere where everyone will leave you alone to get real good at it. Yep. I love this approach.
Matt Watson 42:56
And one of my favorite sayings. And I think I picked this up from my friend Craig, that worked for me, in if people listening to this only remember one thing from this podcast, it’s this, every time you say yes to something, you’re saying no to everything else. And so you can’t say yes to everything, you cannot do all the things, you can do one thing and you’re not doing all the rest of them, you don’t have enough time to do all of them.
Matt DeCoursey 43:21
Yeah, and that’s and that’s also a roundabout way of beginning to describe opportunity costs. So and one of the five and one of the five colleges that I dropped out of which this one was the top 10 business school, so I want a little bit of credit on that one. They’ve drilled that into our head. So opportunity cost is the value of the forgone option. Right. And that can and here’s the thing is, there’s not necessarily a right or wrong because if Okay, Matt, so by choosing to be on this podcast, we’re recording it, we’re choosing to not do a bunch of other shit, some of which could be playing with my kids. It’s like I can’t really put a tangible like spreadsheet value on that. But I’m not doing that because I’m doing this. And it’s the same thing when it comes to your priorities and what you’re building at the business. If you’re trying to build seven things, you’re gonna probably at the same time before you’re good at any of them, you probably going to end up with three things that are average and for that never get finished, because you run out of money or something or just the way it goes. Okay, so here’s another thing i This is that I really don’t like when I see a lot of people’s business plans is all of a sudden, like, here comes year three and there’s the hockey stick on the graph. But there’s not a there’s not a real way like why like what are you doing different at that point? What part like what made that occur? Why is this Why did you just suddenly began to triple triple double double FES.
Matt Watson 44:53
You know, as an investor, I kind of like those if they make it performance-based. It’s like, Hey, if you don’t hit those numbers I own 100% of the company. Because I would own 100% of all of them.
Matt DeCoursey 45:05
Every lot of companies. Yeah, you got a lot of numbers, right?
Matt Watson 45:09
Every, every forecast I’ve ever done, including Stackify and Full Scale. We’ve never hit any of the numbers.
Matt DeCoursey 45:18
Nope, nope. And then sometimes we sometimes we grossly outpaced them and sometimes we underwhelmed. But yes, never know. And it’s hard to it’s hard to say it’s hard to say. So no one knows. But don’t paint yourself in the corner and some of that just because it just looks unrealistic. You know, I’m like, a Giga book, we’ll have 28% of the entire booking market in three years. No, we won’t. It’s frickin huge. There’s no like a billion people out there in that market. Like, I’m not going to have 280 million users in three years. I’m not I’m sorry. I’m not I mean, maybe if someone gives us $10 billion to buy the market. Okay, so this last tip, not paying attention to the plan. This is goofy dumb shit, like ugly typos, terrible formatting, like you’ve spent all this time to put this thing together, proofread it?
Matt Watson 46:18
Well, I think also then not following it. You’re like, Okay, we decided we’re going to do this, we’re going to sell this, we’re going to sell it to these people. And then you metal around and do everything else. They’re like, No, now we decided to do this, and we’re gonna try to sell it to somebody else. And then, oh, one customer called, they want us to do this thing. So now we’re gonna go metal around with that thing somewhere. Now, we’ve pivoted, and you’re not focused on the plan.
Matt DeCoursey 46:42
So mad I asked the Startup Hustle Facebook group, a question phrased as how much of your original business plan was accurate? So I got 28 votes for one to 33%. That won in a landslide. So about half the votes. That was about half of it was more than half of the votes. Yep. It was actually two thirds of the votes. Because 28 votes for one to 33%. A couple comments. Were in there as well. All right, so let’s move on. So 14 votes for 71 to 90%. I believe that 13 of those people are wrong about assessment and probably, you know, maybe 11 votes for 34 to 70%. Now I can buy that range. Pretty well, hold on, I can get into that.
Matt Watson 47:37
They’re not lying. They just haven’t been in business long enough to realize that it was proven wrong.
Matt DeCoursey 47:43
Yes, yeah. Yep. Or there are Yeah. And then two votes for 0%. They know what zero is zero votes zero. For 90%. Plus, over overall, that’s a pretty self aware, voting populace in my opinion. And, and you know, like, I’m not I’m not buying the whole as you hear my my GoPro turn itself off. And yes, I use that to help us with Startup Hustle, TV. Sorry, I’m always talking to people about turning quiet thing, noisy things off. So yeah, but I mean, those are people that that’d be that group and come check us out. Like, I know, there’s a lot of really experienced savvy entrepreneurs in there. So I mean, I think really, in the end, Matt, is the conclusion that you have an air quote, slightly better chance of being successful if you create a business plan.
Matt Watson 48:39
I mean, there’s a diminishing return, right? Everybody should have a business plan, they should know who their customer is the go to market strategy, the product, what is the long term vision, like we want to sell X to Y. And the most important thing is staying on that plan. Or deciding that you’re going to change plan but not doing both. And just having a plan. One step at a time.
Matt DeCoursey 49:05
You know, I think the plan is good. But the business plan as we know it. So I’m gonna go first on the as we close this out, Matt, I think overall, I think like, I think we were pretty clear. With the message here today, like the I think the plan is more important for you, for you and your team. I like the Know your audience, part of this for the tips like what you’re taking to the bank, what you’re taking to an investor and what you’re taking to your internal team are going to have variances, right? Like they really are, I mean, just know your audience. I think I as the further the more and more experience I get as an investor as an entrepreneur, all of it is I just really love simplicity lies make it easy, like like, present it to me as if I’m a small child or maybe a Labrador Retriever. You know, and just like because I, you know, like, I really don’t want to listen to the 19th Minute about features and bullshit like, what do you do? How do you do it? Why are you different? And how are you going to compete? What are your takeaways? And Master Watson?
Matt Watson 50:15
I think the most important thing is identifying a unique problem. If you’re a tech company, you gotta identify a unique problem, and you got to solve it better than anybody else. Being a me too, is not a solution. Unless you’re targeting a different audience, right? Like, okay, we’re gonna create an accounting system, but it’s for a specific industry. So we don’t really compete with QuickBooks, right? We come it’s a different, we only focus on a specific industry or whatever, a specific niche, right? That’s fine. But you got to you got to do something unique. And you got to do it better than everybody else. And you got to know how to find your customers, you got to know what your go to market strategy is, how to reach them, are you going to sell something for $10 A month or $1,000 a month, completely different business models? Those are the really simple things you got to understand as an investor; I definitely want to understand those things.
Matt DeCoursey 51:04
Speaking of understanding things, Matt, you were amazing. And Startup, Hustle, TV, all of the recent episodes. You you letting everyone know that a great salesperson is good at picking up girls. Man, I got a lot of fun comments about that. Now, now, I don’t know if you’ve watched episode 5.0. But I actually did leave the part in there where I said My butt hurts. Because I had been sitting on the plastic interview chair for two hours. So if you’re interested in seeing the real look of what it’s like to that, figure out how to make our own TV show, video version of the Startup Hustle podcast. It’s there on YouTube, we’re having fun with it. If you want to get involved, go to Startup Hustle dot XYZ. Today’s episode of the show was brought to you by FullScale.io. Look, if you’re trying to build a tech company, you need people to build the technology. That’s what we can help you with. We did and built everything about Full Scale, using ourselves as clients fair to say, Matt, yet for three years. We truly we took all of the shit that people don’t like about building tech teams, and we kind of just did the opposite was pretty. That part of the plan was pretty simple. We asked our potential clients, what do you hate about hiring developers? So we did the opposite? Yeah. And then we ask our employees, what do you not like about where you were? And we did the opposite of that. Yeah, it was it was simply elegant. So now next week, part 1010 You know one other thing before we go here we didn’t plan we met made this a 52 part series and then started in the third week of January. Are we going to have to pivot?
Matt Watson 52:50
I don’t know that we double up. Is it going to be a bonus week?
Matt DeCoursey 52:55
Triple, triple-double, double me on the court, dude. Are you just thinking of me with like a Lakers jersey on me and LeBron, he’s just throwing it up. I’m just slam it at home. Yeah, that didn’t happen, either. I’m gonna get back to having fantasies somewhere else other than on the air, man. I’ll see you next week.
Matt Watson 53:12