Starting to plan the future of your startup
As you begin to understand what product or service you might be able to successfully offer, you need to start taking the first steps in planning ahead. You do not need to spend large amounts of time planning because planning at this early stage is mostly unproductive. On the other hand, you want to think ahead in an organized fashion so you will be prepared with the resources you need, in time for when you need them. You want to plan simply, in a way it can be updated easily, because your plans will change constantly as you receive loads of new information as you start to experiment making your idea a reality.
You do need to plan. You do not want to run out of money, or people, or time unexpectedly. And you want to know if your idea has any chance of making money; you never want waste your time on an idea that is destined to leave you poorer.
At some point, perhaps in the not-too-distant future, your plans will need to become more detailed and sophisticated, particularly if or when you need or want to attract investors. For now, only do the minimum planning you need.
What is your recipe?
Start by asking a different question: what is the recipe for your idea or service?
Write down the instructions as if they were a recipe you were giving to some smart jack-of-all-trades assistant so he or she can do everything necessary to deliver your product or service to an actual customer.
Like in a recipe, you need to list all the ingredients and their quantities that are necessary to deliver a single serving to one customer. Do not forget to include in your recipe the steps and costs required for shipping and packaging. If you plan to get support from a contractor or service support organization, list them as separate ingredients.
Now price out what you think it will cost for each ingredient. Keep in mind that if you are successful then you’ll be buying some or all or your critical ingredients from wholesale distributors or perhaps directly from a supplier or manufacturer. These prices will be lower than what you pay if you buy these ingredients one at a time in a retail establishment. The price you list for this exercise should be the cost you expect to pay once you have your first few clients or customers. If you did sprint 5, then estimate the cost you expect to pay in acquiring enough of the ingredient to satisfy what you estimated as your initial number of customers.
Add up all your costs of your individual ingredients and you have a first crude estimate of your variable cost per unit.
In general, variable costs should be a fraction of what you think your customers will gladly pay you. You may have a good estimate of this amount from doing sprint 6. As we described, doing sprints 5 and 6 together results in an initial revenue estimate. If you multiply the estimated number of initial customers by your newly estimated variable cost per unit you get a best case estimate of how much you’ll spend delivering these initial products or services. Subtract this total from your initial revenue and you get an estimate of your initial operating profits.
This operating profit estimate does not take into account set up costs, out of pocket overhead costs, or how much all the freemiums you might offer will cost. This initial operating profit number also does not include development and prototyping costs. We’ll take all these other costs into account in due time, for now you are doing a gut-check with your initial operating profit estimate. Is this more or less than you expected. Will it be enough to keep you going?
There is no formula that we can tell you that determines if your operating profit is too small or a bad number. It depends upon too many variables, many of which you may not yet know. At this point, we think your gut will tell you about whether your initial profitability is good enough to continue exploring creating a business around your idea.
Planning that is necessary at the start
If you decide to proceed, you also need to plan what you expect your next set of development, prototyping and setup costs will be versus what investment or other payments you expect to receive. You can do that by projecting your expected bank account balances.
At this point we want to mention that ideally you want to have a separate bank account for your startup activity as this makes understanding and managing your startup expenses much easier than if your startup expenses are all paid from your personal account. Banks often make it easy to set up another account if it is in your own name. If you set it up as a new business account, then that could be a hassle. It is best to leave setting up a business account until you are sure you are in business.
Whether or not you set up a separate account, you need to project out your costs and your personal investments associated with exploring starting an enterprise.
You do this with a spreadsheet or with any table you create with 7 columns, where you can add as many rows as you need, whenever you need them. The seven columns are labeled, left to right: 1) Date, 2) Transaction, 3) From or To Whom, 4) Receive, 5) Pay, 6) Balance and 7) Notes.
In each row you document one transaction that pays you money or where you spend money.
In the first column you write down the date money changed hands or you expect money to change hands. In the second column you write type of transaction, for example, “Investment,” if you received an investment, or “Software” if you bought a new piece of software or perhaps paid a monthly fee for a piece of software. In the third column you write down from whom you received the money or to whom you paid the money. The fourth column is used to write down the amount of money you received or were paid in that transaction. If the transaction involved you paying money, then you would put that amount in the fifth column. The sixth column is where you write down the balance that would result in your bank account. This is calculated row by row by adding the received quantity of the newest transaction to the balance of the previous row. If the transaction paid out money, then the amount paid listed in column 5 would be deducted from the balance of the previous row to get the new balance. The last column on the right labeled notes is for making notes to yourself about anything special about the transaction, like if you paid $50 more than expected for a contractor to complete their job.
Starting your simple financial plan
Your first row under your column headings is for your initial investment. This is how much you are willing to risk to further explore your startup idea as it gets more serious. If you set up a separate account, then this is the sum you deposited into the account to open it. If you do not have a separate account, then this is the maximum amount you are willing to spend investigating whether starting an enterprise is a good idea for you; In other words it’s your budget. You label this transaction as “Investment” and in the column “From or To Whom” you put down “me.” The amount goes under “Receive” as well as under “Balance.” Note the date in the first column and write down any notes you want to remember about this amount in the Note column. You are now off to the races, so to speak.
Now catch up by writing down any transactions that have already happened, in the order they have happened. If you are still in the thinking mode early in your startup journey, then there won’t be much to list, maybe some special software or you paid for a designer to create a conceptual drawing of your idea that you’ve showed to potential customers. These will all have entries only in the Pay column and each of these amounts will be subtracted sequentially in the Balance column.
For example:
| Date | Transaction | From / To Whom | Receive | Pay | Balance | Notes |
|---|---|---|---|---|---|---|
| 10/10/25 | Investment | Me | $1,000 | $1,000 | First of 5 installments | |
| 10/12/25 | Software | Staples | $125 | $875 | ||
| 10/12/25 | Contractor | William Tell | $200 | $675 | $75 more than I thought |
Projecting forward
Now you want to project your balance forward. To do this you add new rows for any and all projected transactions, as far out as you can realistically project how much they might cost. There could be cases where you may expect to receive some money. For example, maybe you are doing some side-hustle consulting to help fund your startup, then add that amount when you receive it in column 4 and list the transaction as a side-hustle.
If or when you get to a negative balance, that tells you that by that time you will need to make a decision about whether to continue by putting more money into your startup exploration or deciding not to continue.
You want to update this plan any time you receive or pay money or anytime your expectations of paying or receiving money change. If you have a co-founder or other people helping you, then get together and get their inputs about expected receipts and expenditures.
You may want to plan for other critical resources, like your time
As you think through the initial steps you’ll need to turn your idea into reality, there may be other key resources you need to project over the next 3 months or so. For example, you may need to project how many hours you may need to invest in your project in order to figure out how long it will take and how much home care you may need to arrange.
Your time is a precious and limited resource. You want to visualize your next steps. In this early stage, it will almost surely involve creating a prototype and that will take several differently steps. You can do this visualization very simply on a calendar or on a spreadsheet. Even if you are unsure about what you’ll be doing beyond your next steps and when you’ll be doing them, put down your best guess for how much time you’ll be investing in doing so each day until you expect that next step will be done. As you put down the hours you expect to invest by day, you will realize that you may not be able to do that every day, or you will need support in making those time investments. And unless you are super experienced at making these estimates, you know your first estimates will be way too low. Make the estimates anyway, as best you can. As you update them, you will learn from the experience. If people are helping you, then make them give you calendars with their projected hours and expected outputs. As more people become involved and help you, then turn all these estimates into a spreadsheet. These are exactly the realizations you want to get from doing this simple planning.
As an example, consider if you are going to do the coding yourself for a new app. You may even have some experience in estimating how many lines of code will be required, or how many pages you’ll need to script. Your experience will tell you how many total hours or full days that will take. Plot out day by day how many hours you plan to work and how many lines of code you plan to write or how many pages you’ll lay out.
And don’t forget to estimate the time required for contractors to give you their work. Most contractors won’t give you their hours in detail, what you need from them is their payment schedule and what will be delivered for the payment. This will give you what you need for both your bank balance projection and time budget spreadsheets.
Keep focused on your primary goal, getting a paying customer
This sprint is important because most aspiring entrepreneurs and even many serial entrepreneurs plan in too great of detail, or alternatively think they do not need to plan. Skipping over doing any planning is a very bad idea because minimal planning reduces a ton of risk in wasting time and money. If an idea is very likely never going to be profitable, don’t waste your time. Same goes for if you do not have the time or resources to launch a product in the time window you have available. A little thinking ahead goes a long way in helping your next steps be fruitful.