Brewed From Within

Fresh Powder

After a gondola ride, whether you ski or snowboard, you’re not getting far without the right equipment.

Let’s imagine you’ve made it to the top of a snow-covered mountain. The distant view is inspiring and there are endless ways to enjoy the ride back down. Similarly, there are endless ways a business can evolve.

Financial modeling is an important technique that helps us simulate different scenarios for a business.

Extra Shot

This contribution was written by Jeff Erickson. Jeff is an investor, advisor, and skier on the silicon slopes of Utah.

A financial model helps forecast the financial performance of a company. They are based on the company’s historical performance and assumptions about the future. This tool can be used to make better decisions when raising financial capital and to assess potential returns of a given venture.

Returning to our mountainous metaphor, think of financial models as your map of the snowy terrain. It provides an overview of the area, routes to explore, and dangers to avoid. Like a trail map, financial models use numbers to set the scene, then help us determine the speed and direction of our business. They also help identify potential risks and optimize how different types of resources are used.

A financial model is essentially a roadmap for the future, and it gives investors an understanding of how you plan to generate revenue and scale over time. A solid financial model demonstrates that you have done research into the market, understand potential risks and opportunities, and have thought through the key drivers for success. Your financial model helps investors see how you think about your business and whether you understand the levers that matter. It also gives them confidence when they see that you know how to strategically allocate the money they may invest and that you know how to manage cash flow.

Most investors speak in the language of finance. Terms like run rate, CAC, LTV, runway, and burn rate are common vernacular. Building your financial model helps you learn, decipher, and understand this language of finance, enabling you to more effectively work with investors.

A common mistake is thinking that it’s you and your financial model versus the world. Instead of falling in love with assumptions, work with potential investors by using the financial model to analyze various scenarios. When founders can cruise down the mountain with investors while using a financial model to explain different scenarios in real-time, partners will get more excited about taking the lift back up for another run.

Entrepreneurs need to be aware of the changing terrain to make the best decisions for their evolving business. Let’s avoid the trees and carve out a few steps that will land you in a position to know the numbers.

Define

Before building a financial model, it is important to define the company’s business model, revenue streams, and financial objectives. This information will determine how you structure assumptions for the projections to accurately reflect what could realistically happen with your business.

Gather

Once you define company goals, gather historical data relevant to creating accurate projections. This includes past sales, costs for running operations, generating revenue, customer acquisition, and any other financial data that may help tell the story of your business.

Extra Shot

Prevent that new business idea from floating toward someday by compiling relevant resources that brew confidence in getting others excited to join you.

Build

Using qualitative (industry trends) and quantitative (past results) data points, build realistic assumptions to drive your financial model. This can be done using spreadsheets, but dedicated software makes it easier. With a framework in place, begin with customer acquisition data (sales outreach, paid ads, referrals, etc.). Next, make assumptions around revenue streams by considering all the ways you can make money (product sales, services, advertising revenue, etc.). Continue by including resources related to building a team, then focus on any changes in operating expenses. Finally, consider any required expenses to scale your business and how to finance the venture long term.

Validate

Once initial assumptions are plugged into a financial model, it’s important to track the accuracy of your assumptions each month and to update the numbers based on actual data. With metrics consistently tracked over time, your financial model becomes more accurate and reliable. You will notice trends in customer acquisition, identify the most profitable revenue streams, and monitor your expense projections. Additionally, you will be able to run different scenarios using your financial model to help you confidently make better decisions in running your business.

As we add financial models into an investor pack, dynamic understanding is supported by an interactive tool to project progress. This shared awareness brews confidence and helps more people enjoy the ride in a shared direction.

By Ben McDougal, ago

Escorting Execution

After a few early moves, developing a business plan is a hearty exercise. Business plans are less pivotal than scholars may preach, but developing a business plan does force you to pick through the specifics of any business. The detailed planning can pave a path toward sustainability and help you articulate opportunities to potential co-founders, new hires, outsourced talent, investors, and early adopters.

The first version of a business plan does not need to be long, but it should include a handful of key elements:

    1. Executive Summary
    2. Company Description
    3. Market Analysis
    4. Products & Services
    5. Marketing & Sales
    6. Operations
    7. Financials
    8. Appendix

One size does not fit all, and earlier moves like canvasing and wireframing will lighten the load as you flesh out details. To determine how particularized your business plan needs to be, consider who will be reviewing this dynamic document. Learn more and explore different templates online, then craft something you’re proud of.

Even without an audience, creating a business plan is rarely a waste of time. They can also become a required asset when you’re raising financial capital. Situations where you’ll likely need a business plan include grant applications, bank loans, and pitch competitions. Entrepreneurial support organizations (ESOs) may request a business plan to warrant professional services as well.

As you build a business plan, use clarifying frameworks, concise content, and mark areas that may need to more frequent updates. This makes the document interesting, more digestible, and easier to maintain.

As you update this dynamic document, consider how your business plan supports other related resources that collectively paint the picture of your company. Sharp business plans integrate with a cool one-pager, slide decks that ignite verbal presentations, a pitch deck with similar content brought to life with enhanced visuals, and ongoing investor updates. This shapes a forwardable investor pack geared to keep your ideas from slipping toward someday.

By Ben McDougal, ago

Not to Lose

Whether it was traveling with the teams my dad coached as a kid, playing club soccer at an early age, monopolizing my time in high school, playing all through college, or being the focus of my first entrepreneurial venture, soccer was a part of my identity for over 20 years. I’ve since shifted toward the more secret exercise of golf, but memories remain, and sports have so many playful metaphors.

Sports and other organized activities help us push to be our best, and the sense of belonging is the real magic.

No matter the sport, it can be easy to get ahead before slipping into a dangerous trap. Instead of staying sharp by maintaining the offensive pressure that earned an early advantage, it’s natural to start playing not to lose.

In soccer, this often means a team sinks back into an overly defensive formation. Less variety invites frantic desperation, and the added pressure often leads to the opposing squad scoring an equalizing goal. Even if the need for another goal shifts your team back into a more balanced attack, the momentum has shifted.

When applied to business, getting ahead and then playing not to lose can be seen all over the map. For instance, snagging a few early adopters, then assuming customer discovery is over. Hiring new talent, then just hoping everyone can work together. Launching a new product with existing customers, then not supporting them through the chasm of change. Securing product-market fit, then avoiding innovation due to a misguided sense of risk. Finding generous mentors, then forgetting to nurture relationships. Those are just a few ways we get ahead, then play to lose, but many leaders are lulled into this trap.

Tactics to stay ahead differ based on situational factors, but when in doubt, trust that uncertainty is certain. Be strategic to avoid recklessness, then maintain pressure and stay on the offensive by leaning into the pain.

As you find fresh ways to serve customers, continue celebrating milestones and stay ahead with more initiative to keep playing beyond the fear of losing.

Brewed From Within
📖 Entrepreneurship

By Ben McDougal, ago

Extra Credit

As a high school student interested in business, extra effort was required to first find and then get involved with the local startup community.

There are business and entrepreneurship classes at any school. Extracurricular programs and student-organized clubs also hint at what an entrepreneurship is about, but too often these insulated activities don’t paint the full picture. For students interested in understanding the realities of an entrepreneurial lifestyle, the assignment is to meet more entrepreneurs.

EXTRA SHOT

This contribution was written by Ani Soni. Ani is a student leader at the University of North Carolina.

Finding entrepreneurial events was easy; showing up for the first time was not. As a student, an environment full of adults can be intimidating. My own ability to contribute felt unlikely, which fed more hesitations. Succumbing to unspoken fears would have been easier, but it was time to leave the training wheels behind.

A willingness to show up paid off quick, as fellow attendees were welcoming and incredibly interesting. The early initiative I showed seemed to make more people eager to help. This made showing up again easy. After a few months, it was clear. Entrepreneurs sure like helping one another.

Listening unlocked new learnings, but I was also able to contribute more than expected. There were opportunities to provide feedback, discuss trends, share a young person’s perspective, and even lend a helping hand. The more I gave, the more I received.

This demonstrated how unconventional action shines bright when chill is status quo. Real-world extra credit was earned by expanding my network before it was needed. Awareness around non-student activities also fed increased curiosity, which can be combined with this type of initiative, more real skills, and vocational knowledge that can caffeinate whatever we care about. Embracing Playforce Principles built confidence to continue my education along with a readiness to make my mark within the realities of our time.

Brewed From Within
#60 📖 Leadership

By Ben McDougal, ago

Reluctance

There’s an art to keeping the right people engaged for the right amount of time. When things feel stale, it’s a signal of disinclination. To infuse new energies into a group, create space by releasing the reluctant.

Life happens, so it’s natural for interest and commitment levels to change over time. While engagement may expand, anyone’s ability to contribute can just as easily be reduced as transition occurs, missions evolve, and roles transform.

The spiral of someone’s reluctance will soon create stress between others who are still devoted. The longer this misalignment lingers, the more tension it creates.

Even so, people hold on too long, and most of us choose to avoid confrontation. This extends the pain for everyone. The reluctant feel guilty for not contributing while the zealous begin to resent the perceived lack of integrity. Stakeholders experience obscure toxicity and less dependably, which devolves into reduced trust, enthusiasm, and engagement.

Extra Shot

“Winners quit all the time. They just quit the right stuff at the right time.” –Seth Godin

Keeping an eye on our personal bandwidth adds clarity for what and when to quit. This self-awareness helps leaders stay centered and motivated by the way we spend our time. It also helps maintain good relationships by avoiding the unnecessary roughness of dramatic encounters, even when it’s time to explore a new direction. When bridges don’t get burned, we can make a ruckus, move on, and actually expand our impact while still staying connected.

For leaders dealing with lingering reluctance, let’s finish with a few friendly tactics to keep a group vibrant, while maintaining lasting loyalty from the departed.

Start by respectfully inviting individuals who have written their story to graduate gracefully. Sometimes, good people simply don’t want to quit on the people or program they care about. If time has been committed or someone’s identity as a leader is closely connected to their position, the transitional period takes more time, and the group will need to show proactive initiative to prove they are ready to lead without the departing individual. Rarely is there a perfect time to step down, but when given a polite opportunity to exit with elegance, appreciation leads to smooth transitions.

Another way is to ask everyone to do more. Inviting initiative provokes less committed members to bail. The danger is that you may lose others who may not like being asked to go beyond the original game plan.

Lastly, recognize the end will always come. Be clear with expectations, transparent as things evolve, and keep succession a part of ongoing planning.

Along with being open up front, complement internal clarity with external celebration. Acknowledge individuals who made a difference in the past, and praise those who are being generous now. This nurtures an environment where people are inspired to do their best when they’re involved, without feeling a sense of loss when it’s time to let go.

Brewed From Within
#54 📖 Leadership

By Ben McDougal, ago