Missed the Milestone? You Can Recover
Setting milestones within a company means that, despite the best intentions, you may miss one from time to time. The way an entrepreneur responds to missing a milestone not only shapes the company’s rebound but guides its long-term success.
When a company is building a business plan, it’s important to have a timeline with milestones they want to achieve. These milestones or accomplishments keep the entrepreneur on track to fulfill their business plan and improve the value of the company. Having milestones also provides a way for an investor to keep tabs on a company’s progress.
“A milestone is something that increases the valuation of your company,” explains Guy Kawasaki, founding partner of Garage Technology Ventures, during a video presentation at Stanford University. Hitting a milestone for “shipping your product increases the valuation of your company. Filing for a patent or trademark does not increase the valuation of your company.”
In the beginning, milestones may take the form of finishing the product design, completing a prototype and shipping the product to the first customer, Kawasaki says. The milestones do not fall under the category of ordering a company logo or equipping the office with furniture.
Breaking news of missed milestones to investors.
For companies that secured funding through an angel investor or venture capitalist, the thought of informing their investors of missed milestones may seem daunting. But it doesn’t have to be.
“Most entrepreneurs miss their guidelines or milestones,” says Manny Fernandez, co-founder of equity crowdfunding firm DreamFunded and founder of the SF Angels Group, both based in San Francisco. “Entrepreneurs have wildly optimistic goals and the investor likes hearing about those milestones and goals. Although the entrepreneur tries their best effort to reach those goals, sometimes they don’t but they end up with a better or different solution.”
Venky Ganesan, managing director of Menlo Ventures, stresses the importance of informing your investors as soon as you suspect the milestone will be missed.
“The best time to tell your VC you are going to miss your milestone is as soon as you know. Bad news, unlike wine, does not get better with time,” Ganesan says. “By telling a VC as soon as you know that you are going to miss a milestone, you build credibility instead of losing it; you can get help on how to manage this setback and (the VC can be) part of the solution instead of just hearing the news.”
How to Move Forward
If the milestone has already been missed, Ganesan advises entrepreneurs to inform investors immediately. A meeting should be scheduled within a day or two to figure out how to move forward.
When informing the angel investor or venture capitalist about missed milestones, Fernandez says it is important to tell a compelling story about what the business plan was and why it will be better reconstructed in a new way.
“Entrepreneurs have unique insights into their companies and can explain to investors what they don’t see,” Fernandez says. “So, if you accomplished three of your 10 milestones, then talk about what happened with the three.”
He says angel investors tend to invest based more on their emotions and connection with the entrepreneur. Venture capitalists typically fund companies based on various metrics and numbers. For entrepreneurs who missed their milestone and plan to approach a VC for further funding, it may be helpful to see where the VC is coming from.
Getting Back on Track
With the milestone or milestones missed, entrepreneurs may wish to try any one of 10 tips offered by Doug Yakola, a senior partner with McKinsey & Co.’s recovery and transformation services arm.
Yakola offers tips for moving companies out of a crisis. For some companies, missing a milestone or milestones can be a precursor to a crisis.
Executives rarely review their own plans and ask themselves if this is where they say their plan going. Yakola says that it’s a problem because acknowledging that your plan isn’t working is a necessary first step.
Companies can avoid falling into crisis by periodically reviewing their business plans and changing course if needed. If companies do find themselves in crisis, a good strategy is to build traction for recovery with several quick wins.
Yakola says most managers tend to put their focus into a few big bets to turn the company around. Multiple quick wins is less risky, and will gain the confidence of the company to get on board with the new plan.
“Everybody misses a milestone or misses (their business) plan. That’s the reality,” Ganesan says. “You can build credibility by being direct, upfront and thinking about a plan on how to fix it going forward. The most important thing for the entrepreneur to do is take responsibility for the miss, focus…all energies on what to do next and try to make the VC part of the solution.”