I got an interesting question from Brian of Slope the other day on the process of communicating internal stretch goals (which should be much higher than the external milestones) to your board or investors.
If you have bought into the discipline of setting milestones and measuring the right metrics to support them, then you will realize quickly that you will need to push yourself and your team harder to set goals that will require you all to persist even against difficult circumstances.
The first step to come up with milestones is when you and your management team (or you and your co-founder, when you are small) meet together to understand where you want to be and when. That usually tends to happen at your kickoff meeting or your offsite or when you decide you want to plan and execute against your goals.
Lets say for example, in 12 months, we should have 15 paying enterprise customers, or 10,000 daily active users or 500 transactions on our eCommerce platform. The metric and the milestone would be something you have derived from various discussions including what your think you are capable of doing, where your competitors are, what the market adoption rate will be etc.
Then the next step is to understand the list of items that need to be done , their dependencies and synchronized in order for that to happen. For example, your product needs to have a set of features, or your need to demo your product 30 times to specific titles and roles in your target prospect, or you will need to hire these profiles in your company, or if you need to help obtain the initial set of users via word of mouth.
Now, before you and the team decide whether the goals are achievable I’d advice you work on the process bottoms up. What that means is what you think you can do as opposed to what you should be doing.
Lets say again for example that you can realistically process successfully 100 orders per day, but you believe that without you doing 250, you wont be the market leader, or you wont get the valuation you’d like, then I’d still document the bottoms up number first.
Typically the top-down number for your metric will be something the market dictates. That’s not very much in your control. In any event, I’d ignore all competitor information until you know how you can do better yourself.
Once you have decided that metric and the goal achievement number, you should run it by your 1-2 top trusted advisors before your communicate it more broadly.
The next step is to communicate that to your board (if you have one), or to your advisors (if you dont have an advisory board, I’d recommend you do that first) or to your existing investors. Most entrepreneurs ask me what the difference should be between the externally communicated goal versus the internal stretch goal you set for the team.
I dont think there’s a formula, but typically I have seen on the boards I advice a 15-20% difference, on average.
That means if your goal internally is to hit 100 orders/day, I’d commit to 85 / day to the board.
The final step in the process is to communicate to your entire team again, typically in an all hands meeting. I’d do this even if your team gets larger. That also gives your entire team a chance to ask questions and see the same information that has been committed to the board.