Creating a financial plan for your startup? Here’s how we do it at Rippling
Adil Syed — Jul 16, 2021
What makes for a good financial plan? That’s a question I hear a lot from founders and early finance teams. And while there’s no single answer that applies to every business, here’s a handful of principles I’ve put to work successfully at Rippling and previously Snapchat—principles I share with most startups seeking advice.
1. Start with good strategic planning before you get into financial planning
To get a good strategic plan in place, collaboration is key. Simply put, everyone with a stake in the business needs to be involved—because each leader has something to contribute as well as something to gain (or lose) in the process. If you don’t take the time to get the input and agreement from all stakeholders, you’re almost certain to end up with a plan that doesn’t reflect the realities of the business or help with the decision making of leaders across the company. Buy-in from all business leaders is essential.
Just as essential is a clear, shared vision for the business. From the CEO to every member of every team, everyone needs to agree on the why behind their work. Without this alignment, again, you’re going to have a plan that’s fragmented at best and fatally flawed at worst.
With a vision in place, it’s time to establish clear company- and team-level goals. At the company level, I recommend three to five thematic goals that serve as rallying cries for everyone over the next quarter or year ahead (for quarterly and annual planning cycles). These should be key initiatives that reflect the priorities of the business. It’s a little cheesy, but these goals should be SMART: specific, measurable, achievable, relevant, and time-bound. The same applies to individual teams, from product and engineering to sales and marketing. Each team should agree on a set of objectives in support of the company’s overarching goals. And each team—and the company’s leadership—should revisit goals each quarter and make any necessary adjustments.
Frameworks can also be a big help when it comes to defining goals and organizing your activities. And good news: there are plenty of proven frameworks to choose from. A few of my favorites are here:
Objectives and Key Results (OKRs)
The name says it all. The framework originated at Intel and is used by some of the most well-known tech companies around, including LinkedIn, Twitter, and Snapchat. We’ve adopted a version of OKRs at Rippling as well.
Progress, Plans, & Problems (PPPs)
Another self-explanatory framework, this one centers on visibility into achievements from the past week, objectives for the next week, and any hurdles or blockers in sight. It’s been super helpful as we manage team-level and individual progress at Rippling.
Important vs. Urgent
Breaking from the three-part theme of the frameworks above, this one is a simple matrix that is great for prioritization of objectives whether for the company, teams, or individuals. Do we use it at Rippling? You bet, and it is particularly helpful in getting team leads to prioritize their projects.
2. Maintain a focus on the key areas of the business, especially in the face of uncertainty (see: global pandemic and now global re-opening)
It sounds like a no-brainer, but it’s not always easy to maintain a laser focus on what matters most for companies:
Listen to existing customers and adapt your product
Product and customer experience, together, are the lifeblood of any company. And retaining existing customers is just as important as acquiring new ones. So make sure you’re listening. You may learn, for example, that you need to introduce features now that you had planned to launch later down the line. Or it might become clear that a strategic partnership is essential to satisfying immediate customer needs. Keep your eyes and ears open at all times.
Listen to prospective customers and fine-tune your marketing and sales pitch
On the marketing side, you need to make sure that the message you’re putting out is one that resonates. You also need to ensure that you’re using the right channels to reach customers as cost-effectively as possible. For both message and channels, just because it worked six months ago doesn’t necessarily mean it’s still the best approach today.
Play offense and defense strategically
It’s all about balance. There will be some areas and opportunities that require more aggressive investment, even if it’s outside of your comfort zone. On the flip side, sometimes you’ll need to focus on pumping the brakes and cutting costs. The key is to keep in mind the difference between two-way doors, which allow you to reverse course if you need to, and one-way doors, which don’t provide that flexibility.
Take recruiting, for example. You can shift hiring out a few months while continuing to interview, which allows you to jump back into the marketplace for talent and hire someone amazing that appears unexpectedly. That’s a two-way door. On the other hand, you can freeze all hiring and stop interviewing altogether—which makes it really hard to ramp up recruiting if needs arise sooner than expected. That’s a one-way door.
Keep in mind the difference between two-way doors, which allow you to reverse course if you need to, and one-way doors, which don’t provide that flexibility.
Measure and adapt
Continuously measure the time you’re spending on key areas and the time you’re spending on non-key areas. Don’t overlook reporting functionality as you start to build out your company’s tech stack. While you’re small, of course you’ll have a good gut feel for how much time your team is spending on interviewing or onboarding employees for example, but as you grow, these commitments in time grow and typically are unseen costs of building a company.
It is important to identify opportunities to save time and money and where possible find solutions to the busy work that comes with building a company. Think onboarding new hires, running payroll, provisioning software apps, and administering insurance and benefits. By investing in the automation of functions like these, you can dramatically reduce the time it takes your team to complete them, from days or weeks to hours or even minutes. This is where we think Rippling can help in a big way.
3. Be nimble in decision making and ensure you set yourself up with near real-time visibility into performance
While you’re building and implementing your plan, as well as while you’re acting on it and monitoring results, it’s critical that you be as nimble as possible. Visibility into weekly performance is a must. Sales metrics, marketing metrics, support metrics: you need to keep a close eye on all of these areas and more. Be prepared to make decisions and take action quickly.
At Rippling, the Marketing team is a great example of what it means to be nimble in decision making. By creating a weekly budget and spend forecast and tracking it continuously, the team is able to jump on opportunities—both big and small—that are always popping up unexpectedly. If they planned and tracked on a monthly basis, waiting to take action until month’s end, these opportunities would be lost in almost every case. This kind of approach is equally applicable to product, sales, finance teams, and so on. Always set your team up to adjust plans and adapt activities at a moment’s notice.
What if you fail to change course in time? Being nimble in decision making also means learning from surprises, both good and bad. When an opportunity or event takes your business or team by surprise, the worst thing you can do is shrug it off. Even if you fail to take advantage of a good surprise or sidestep a bad one, it’s essential that you acknowledge it, document it, and derive learnings from it—so you can handle similar surprises successfully in the future.
4. Use a financial checklist
As you navigate financial planning and cost management in the wake of the pandemic here’s a simple checklist I use and recommend. Whether you’re VC-backed or self-funded, it’s relevant to all businesses at all stages, across industries.
Headcount and professional services
Balancing full-time employees with contractors, adjusting salaries and bonuses, identifying any terminations necessary—you need to be paying close attention to these things at all times. This can be very company specific, so be sure to weigh all the near-term and long-term needs of the business. When it comes to professional services and consultants, think about which non-core parts of your business can be handled—preferably automated—by software solutions like Rippling.
Marketing and advertising
As I mentioned above, reviewing your marketing channel spend and reallocating dollars based on what you see is a smart strategy, not just in tough times but all the time. There may be big benefits or opportunities you’re missing out on if you simply follow the same playbook month in and month out (or week in and week out).
Other general and administrative
There are countless other general and administrative expenses, but technology is a particularly great place to find efficiencies. Renegotiating old terms on software deals you did a year or so back is relatively commonplace and often successful, given the flexibility of many software vendors.
Bigger picture, make sure you’re setting business expense controls. This is an ongoing process, but it’s more important now than ever. Make sure you have a good expense management solution in place. Make sure you have limits in place for your corporate cards. On top of it all, make sure there’s a clear and consistent reporting on your biggest area of expense: headcount. Using Rippling, all the key teams helping us expand headcount are kept on the same page whether it’s recruiting, human resources, or finance.
As always, in the end, you have to measure the bottom line. Knowing how every item above is impacting your monthly cash burn and your remaining cash runway (in months) is absolutely essential.
Learn more about Rippling HR, Payroll, IT, and Benefits Administration and get in touch if our solutions seem right for you.