In order to accomplish great things, you need a roadmap for how to get there. To create a roadmap, you need to set goals first, so you know where you are headed. If you were building a railroad, you would research and determine what your goals were (destinations), and then build the tracks to connect them; you wouldn’t build tracks in all sorts of funky directions as you went along.

Contrary to what you might have heard, as an entrepreneur, when you sit down to set goals, you need to set them high. For people not looking to be in business for themselves, setting goals just out of reach are OK. But you’re an entrepreneur, so you need to think bigger. Generally, your maximum potential is what you set your goals to. Thus, if you set a goal to make a $100,000 salary and you’ve executed on your roadmap to get there, chances are you’ll come close and make $90,000/year. You might even hit your goal, or just above it. You will probably not have a chance at making $500k/year because that requires a different roadmap… a roadmap you haven’t discovered because you set your sights at the $100,000 salary. You need to set your goals high, even if they seem unrealistic to others. When combined with ideas and a purpose, goals that high become dreams.

One of the things that makes you unique as an entrepreneur is that you’re a dreamer. It seems like everyone thinks you dream too much and have ethereal ideals. Employees don’t dream; sure, they dream in their sleep, and perhaps they have an imagination, but real employees tend to look to others to set their dreams and ambitions for them. Entrepreneurs live and breathe dreams. It’s in their DNA. They work to persevere by making them a reality, even when everything is going against them.

If you don’t dream that you are going to build a $50 million dollar enterprise that revolutionizes the way people power their vehicles, then the chances of you ever making it happen are slim.

How To Set Goals

You may already know how to set goals perfectly. If that’s the case, drop into the comments section of this post (contest is at the bottom), and show your expertise by sharing some tips with the rest of our readers. Otherwise, don’t worry, here is how you get started. There are many ways you can set and track your goals, but here is what I recommend:

1. Create a list of things you want to accomplish. Begin by creating a list, in no particular order and in free form, of all the things you would one day like to accomplish with your business. While you’re at it, do this for your personal life as well, because believe it or not, your personal and business goals have a lot in common and will influence each other over time. Spend at least 1 hour thinking and writing down your goals. Doing this on paper is probably the easiest effort, because you can do it anywhere. Some people find sitting in a spacious park with a notepad to be a really effective way of purging the distractions.
2. Categorize your goals. Beyond “Business” and “Personal”, you want to categorize your goals that are in common. If you wrote down goals like “Start a business”, “Hire a lawyer”, and “Hire 2 employees”, then you might consider categorizing them as “Company Formation.” Other goals might be “Visit Eastern Europe”, “Live in Paris”, and “Skydive in Cairnes, Australia” and mark those as category “Travel.” This step just helps you build context around your goals. Later, when you want to discover new goals, you can pull out the goal list for a particular category so you can have some focus to further refine it. Spend 15 to 30 minutes categorizing your goals, and don’t let this step frustrate you.
3. Map your goals to a timeline. For each categorized goal list, you want to start thinking about when you expect to complete the goal. For example, the previously mentioned goal “Hire a lawyer” would most likely be a Short Term goal. A goal of “Bring in revenues of $1 million” might possibly be a long term goal for you. Ideal timelines would be: this week, this month, this year, 3 years, 5 years, and 10 years. The more frequently you revisit these goal timelines and your goal lists in general, the higher probability that you’ll actually complete them. For some, this step may take hours as they try to visualize when in their lives they think the goal is realistic. Other people might actually do this instinctively.
4. Break down your mega-goals into smaller goals. If you have made incredibly lofty goals, that’s OK. But you need to break them down into more digestible and time-sensitive goals too. A goal of “Grow my business into a multi-national organization with 450 franchises and a gross revenue of $500 million” is most definitely not accomplishable with only a set of tasks as a roadmap. You need to chop it into sub-goals, such as “Grow revenue to $10 million”, “Develop a franchise business plan”, “Setup 5 franchises”, “Establish opportunity in franchise conferences”, and “Build presence in Mexico.” How you keep track of your goals and sub-goals is up to you, but a manilla folder for each category and sheets for each major goal seems appropriate for most people. Others use elaborate Excel spreadsheets, or other custom software.
5. Break your goals into tasks. Now that you’ve set your eyes on what you want for your personal and business lives, it’s time to create a roadmap to get there. I find it amazing that a lot of people have trouble with this part of achieving their goals. You need to spend many hours, and possibly days on this step, although thankfully, you can do this one goal at a time. What are the tasks necessary to accomplish your goal? If your goal is “Start a business” some of your tasks might be “Research types of businesses”, “Purchase books about starting a company”, “Talk to other business owners”, “Do some preliminary market research”, or “Hire a formation lawyer.” If you have trouble coming up with the tasks you need to do for the roadmap of your goal, phrase your goal as a question (“How do I start a business?”) and ask your network for help.
6. Each morning, create a Today List. That’s right, you should be starting every day by sitting down and reviewing what you think you need to do, and then create a list to get those tasks done. There certainly will be interruptions and derailments, but that’s fine, because you can always get back on track. If you’re not starting your day with a clear understanding of what you’re attempting to do, how could you possibly get them done properly? This may be obvious to most, but you would really be shocked at how many people just “wing it.”
7. Resolve your day with some cleanup and reflection. The last thing you may feel like you want to do at the end of a stressful day is sit down and check things off, but you need to do it! Not only is it absolutely rewarding to see all the work you’ve completed, but it’s a way to identify what you need to finish tomorrow. You can also think back and examine if your tasks were on track for reaching your goals. Did you feel like they helped you get closer? Can you clean up your task lists at all to refine your roadmap?
8. Revisit all of your timeline goal lists on a regular basis. Over time you are going to change. Your desires will change, and you will refine your ability to track your goals. You should be revisiting your weekly goals every day, your monthly goals every week, and your yearly goals every month. It won’t hurt to post your goals on the wall on occasion to remind yourself what you’re working towards too. For some, this might be too aggressive and overkill. But, for the rest of us, this is exactly what we need to stay on track.

Additional Reading

• wikiHow – How to Set Goals
• Gene Donohue - Powerful Written Goals In 7 Easy Steps!
• eHow – How to Set New Goals
• Dosh Dosh - Social Media Marketing Campaigns: How to Set Goals and Define Your Target Market
• Minnesota Office of Higher Education - 
• USA TODAY – Learn to set goals for your department
• trizle – How to Set Your Business Goals

Contribute and Win

If you have a technique or resource that I’ve overlooked, please leave a comment! I will be choosing a comment at random (on Sunday, November 16th) to receive a copy of Seth Godin’s new book, Tribes: We Need You to Lead Us.

Sure, it starts with an idea (hopefully one that is based on solving a problem in the real world market and not just something that is ‘cool’). Very soon after, you need to start considering a million things:

Business plan, formation and legalization, tax plan, cash flow, capital investment, partnerships, financial projections, strategic partnerships, expansion of the idea, architecture, functional and technical briefs, functional and technical specs, wireframes, compositions, prototypes, implementations, marketing plan, system architecture, system and network implementation and administration, alpha and beta testing, marketing implementation, and eventually your launch!

Chances are that in the beginning it’s just you (and maybe another person) bootstrapping all of this. The reality is, most of these components are absolutely necessary, and it can seem incredibly overwhelming. The fact that many founders skip a lot of these steps is one of the main reasons startups go bust so early (take for example that many forgo the financial forecasting, and thus, have no true sense of their revenue and profitability potential). The contrary can be said as well, that because some entrepreneurs focus too much on these areas they never really get off the ground.

You need to have thought out your business well and you need to successfully launch and continue to deliver. But how can one or two people do all of this? The answer is that you need to stay balanced and not get too focused into any particular stage or topic, and you need to reach out and discover what other successful entrepreneurs have done.

• Is it really necessary that your pitch includes a 50-page business plan instead of a concise but meaningful 10-page one?
• Do you really need to understand every detail about how to erect a functional specification, or can a short set of mockup diagrams be sufficient?
• Do you really need to spend a lot of time meeting with marketing consultants, or should you just hire a firm to take it over?
• How can you fund your business, and once it’s funded, how do you manage your cash flow?
• What do I really need in my business plan? Isn’t that overkill?

These are questions that are difficult to answer, and there is no single answer that works for everyone. You could get caught up in years of researching each of these fields if you’re not careful (this is why eventually businesses hire people that specialize!). Thankfully, there are conferences and training programs that can be really helpful. There are conferences that help you network and hone in on your skills for a piece of technology that you may use (i.e. RailsConf, Oracle OpenWorld, WWDC) and then there are conferences that help you with starting a business or marketing it (i.e. START!, Seed, TechCrunch50, BlogWorld Expo).

For example, coming up on October 2nd, 2008, is a one-day conference called STARTonomics in San Francisco that could help you figure out what pieces are critical to your startup, and which ones really aren’t. The sessions are led by entrepreneurs for entrepreneurs. Here’s a little glimpse of some of the sessions that will be taking place during this intense day:

• Welcome to Startonomics & Startup Metrics for Pirates (AARRR!)
  Overview of conference agenda + Intro to Startonomics: how to create simple, actionable metrics to help startups make better decisions in product development & marketing.
• Product Development 101: Designing & Prototyping the DNA of a Killer App
  What does it take to plan, research, and develop a great web 2.0 application? Learn tips & best practices for setting the right process, goals, and metrics for your startup.
• Marrying Design & Development: a Match made in Heaven, not Hell
  Learn about the basic fundamentals of web design, and find out how developers and designers can work together to create great websites and applications.
• Creating & Implementing a Web 2.0 Marketing Plan
  How to design and implement an online marketing plan for acquiring users from multiple marketing channels, how to prioritize & mix channels based on stage of startup growth.
• Revenue: The Internet Wants to Be Free, but You Need to Get Paid
  Learn how to generate revenue using a variety of business models & strategies including advertising, digital goods, subscriptions, lead generation, & e-commerce.
• Funding Wisdom: What I Wish I Knew
  Forget the school of hard knocks – this is your chance to hear what 3 successful startup executives learned about the funding process, including timing considerations, types of funding, term sheets and working with investors.
• View the full list here.

This is a must-attend conference for startups working on Internet-based products! Beyond general session topics, you will be able to connect with other startups and successful entrepreneurs who can help you answer the really tough questions.

I’ll be there, soaking it all up. After the conference, I’ll write up a summary of some of the things I’ve learned from others that I think is most important for a successful startup!

For some, maybe that’s a realistic exit strategy. And for even a subset of those, perhaps that’s also a realistic revenue generator (i.e. the exit strategy IS the model). But for most entrepreneurs, this is unrealistic. You need a fallback plan, because, chances are, even if you plan your business like a perfect game of chess with the hopes of being purchased by a giant, it’s not going to work out. Even if it does, it’s likely to not be as lucrative as some of the deals that have already happened. What do we do then? We develop a financial model with realistic projections to create a cash flow that actually makes sense (uberly simplified: profit = revenue – expenses, not profit = 0 – expenses).

Before you get frightened by the idea of actually building a real business instead of one of these socially driven flukes, think about what we’re talking about here. We’re talking about building a business on a reasonably small number of investment/capital dollars, having one or more legitimate revenue streams, and eventually, a profit. As intimidating as some people think this is, it’s not rocket science (and it surprises me how many people “claim ignorance” by saying “I’m just a tech person, not a business guy” in order to avoid this basic concept). Having some idea of how you’re going to make money is a vital path to success.

Here’s how you start:

1. Find and review example financial models, including forecast and cash flow examples.
2. Think about your market and your products.
3. Gather details about what you think it will cost for your research, parts, labor, prototypes, and other expenses.
4. Gather details about what you think you will charge for your products and services, or how much you will be able to monetize from other forms of revenue.
5. Build your financial model!

Find and review example financial models.

Before you can even start to begin building your own models, you should probably look at what other people have done (or, actually consider enrolling in a business course at a university). Examples can give you a lot of great ideas, and are a quick way to get introduced to the concepts of what a financial model really is. Just keep one thing in mind: it’s your money-making recipe from a financial perspective.

Here are some examples (and a few other introductions):

• A real business model for Redfin, used for 2 years (supplied on Guy Kawasaki’s blog).
• A very, very simple financial model for a rehab business.
• Some ideas from a bulkier perspective from an enterprisey white paper on financial models for IT projects.
• Another blogger‘s perspective on the truth of financial models.
• A surprisingly useful Ning community for financial models.
• Learn some of the science and technical terminology.
• A beautiful excel example that, although quite lofty, cleanly identifies the elements in the Nouncer (a now defected Twitter clone) model.

Think about your market and your products.

How can you build something for the people you haven’t even yet identified? You need to figure out who you’re trying to target; who you’re trying to sell your product or service to. This can be a little difficult, but it’s best to start with what you actually know. As you grow, you may be able to use some unique strategies of discovering what your market wants (market research reports, surveys, email questionnaires, and contests come to mind quickly).

Once you know what your market wants, you can consider what is consumable. Blindly building products that you think your community is demanding might not be the best idea. Keep yourself in it, because a large piece of your product is actually you (you can really mean the spirit of your company, morals, or views). Stay true to your vision, but don’t ignore what the reality of the market is telling you. Selling out to the demand may actually destroy the foundation you spent so long to build. Think about how to make money while delivering a product that is able to drive your client base wild.

Gather details about what you think it will cost for your research, parts, labor, prototypes, and other expenses.

In the beginning, you’re going to wing this one. But, you need to be conservative, and as thorough as possible. Ask what consultants are charging for research or labor activities. Look on the job boards to get an idea of what a full time employee will cost. There are too many questions to ask and consider, and they will be unique to your particular business. How many different components do you need for your device? What are the price points for various tiers of bulk purchasing of one component? How much time and labor do you expect you’ll need for your first prototype? What will it cost to form the business legally? How many administrators will I need on launch day? How many will grow over 3, 6, and 12 months? How about 3 years?

Write these out in the form of a FAQ or research paper if you’d like. But at a minimum, write it out in written language. This will make it easy to translate to attributes/variables in a financial model, but will provide the train of thought you had when you first sat down to put it all together. Trust me, you’ll find it valuable when you’re trying to figure out what “%vol / num. visitors” really meant, and how it was related to your project.

Gather details about what you think you will charge for your products and services, or how much you will be able to monetize from other forms of revenue.

This is the meat and potatoes of your financial model. Think of it as the framework of how you’ll make money with your business, but not the blueprint or implementation of it. For some, this is really challenging. For a born-to-be-an-entrepreneur, this might come very naturally (after all, you had a lot of experience with that lemonade stand; don’t lie, I had one too).

Ethan Zuckerman posted recently with a really useful enumeration of some of the ways you can make money. He focuses on the news industry (specifically journalism), but I think a lot of it applies to other industries too. He goes beyond the traditional ‘advertising’ and ‘premium services’ models too. This is a valuable way to get a start right now.

Build your financial model!</h3

No better time than to start building it right now. This really should be one of the first things you think about when you start evaluating your genius ideas. But don’t worry, this thing needs to evolve. It will change over a conversation with a colleague, and most definitely change over a time period of 6-12 months. And that’s good, so don’t get too stressed out if you think it’ll be too time consuming to do it all in one sitting. Get the basics down. Try to quickly prove that your idea will actually make a positive balance!

And if you already have an established business, building a real financial model for the first time can be extremely revealing! It can quickly show you what your real future holds (perhaps not as aggressive as you thought), and give you some ideas on how to refine your business so that you can actually target making progress towards that goal of early retirement.

If you’re in the sharing mood and would like to help other entrepreneurs develop their models, please feel free to link us to your model (or perhaps a model-in-progress) in a comment on this article and tell us what has really worked for you.

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