Startups are interesting “beasts”. I should know, I have a few under my belt. I worked on my own startups, for which I had a hard time funding thus they never really went anywhere, and since I was the only source of investment, not only did they not go anywhere, but I was taken along with them – 100% my choice and I learn a great deal. In a way, I paid for an education.
I have also participated in other peoples’ startups as well. One thrived but never found its execution groove and finally collapsed. One never got off the ground. One I helped sell. The other is a work in progress (a good opportunity that now needs to execute from a business point of view since the technology is in a good and stable place). I also have big company experience as well: Prudential Group Insurance, Xylan, Disney, NASA. And I have also helped other startups as a consultant, as one of my own companies did technology strategy consulting.
One of the things I have noticed is that usually proper and true estimations are either not done or not respected. Estimations are paramount as they help provide a clear picture of the road ahead in more than the conventional ways.
One of the cornerstones of my home grown development methodology is estimations. I wrote a post, Software Development Methodologies, that describes the methodology in some detail. However, I purposely left estimation out of the post. On one hand, I implied and assumed estimations as another step. On the other, estimation is such an important part of managing projects and technologies, that it deserves its own post. And here it is.
These are some reasons why estimating a project is of paramount importance:
- Managing expectations
- Managing cost
- Planning technical resources
- Planning marketing calendars
- Planning sales channels
Overall, these reasons point to the fact that nothing in a company is an isolated component. Each part of the company has a direct dependance on all of the others. In technology companies, companies that provide technology services, or companies who’s core product rely heavily on technology, their dependence on technology is obviously greater. Thus, estimations of technology projects are core and dictate how these company behave.
In contrast, companies who just use technology – in other words, their dependance on technology is based on the fact that technology is a means to create efficiencies, but hardly core to the business – estimation remains important as a budget control factor. It remains important and critical from a project point of view, but its influence on the business is marginal. However, budget control factor influence is not at all marginal.
But why are estimations so important on a startup?
Startups, by their nature, struggle to survive, and it is not a matter of funding. Even the best funded startups go through this struggle. The question of survivability wears heavily on management and to some extent, the rest of the employees. Nobody joins a startup to fail, as a matter of fact, they join for the upside. The big upside comes from the risk factor that the opportunity represents. Furthermore, there are no assurances that the company will make it but everybody to a large or even larger degree believe in the opportunity. The flip side of this is that startups are in sell mode from the get go. Everybody is aching to have the product finished, on the market and generating some form of revenue. Even the most steady handed startups expose the same sell mentality. And it is perfect, it drives the company to early survivability. Or at least it tries.
One of the problems that startups have is creating a “perfect roadmap”. The roadmap to success. This roadmap includes defining the product and features, developing the product, marketing and selling the product and providing follow on services to the product; by either providing support, additional features or additional products. A factor of the roadmap is the people needed that will get all of these done. Who and when should discreet employees be hired is an important element of the “perfect roadmap”. If you hire too early, you are wasting cash and if too late, then there is the potential to overburden the organization to the risk point of missing the market opportunity.
Estimations have a direct impact on the “perfect roadmap”. If you understand estimations as only providing a ballpark or precise timeframe of when something will be done, then you are missing the point of providing a good and thorough estimation. A good estimation showcases how the project will evolved. It will provide you with hints as to when different parts will be done and become available. A good estimation will tell you when you can start marketing and selling your product before it is even completed (if that is what you choose to do). In particular, in startups, a good estimation will also provide you a timeframe for hiring.
Good estimations reduce the risk of startups and elevate the survivability factor. They provide the framework for growth and expansion. Estimations help manage cash flow. And finally, estimations help manage anxiety so we can all focus on what is important, building success stories.