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Using Offtoa to Plan my Lean Startup Business

What does Offtoa do?

Offtoa:

  • Provides step-by-step guidance to craft your business strategy and capture your business strategy as a set of assumptions.
  • Automatically creates your pro forma financial statements from your business strategy assumptions.
  • Provides detailed analysis of your pro formas, just like a potential investor would. And we recommend what you need to change in your strategy to fix any problems.

How do you use Offtoa?

  • Go to www.Offtoa.com/app/login
    • If you do not already have an Offtoa account: Press Sign Up. Select a subscription package. Follow the registration instructions.
    • If you already have an Offtoa account: Enter your email and password and press the Log In button at the bottom.
  • In the upper left, press Create New Plan. Then press Continue in the lower right corner.
  • You will be asked to enter assumptions about your company in this order:
    1. General Assumptions
    2. Products
    3. Markets
    4. Pricing
    5. Sales Model - Predict Units Sold/Year1
    6. Raw Materials2
    7. Cost of Goods Sold2
    8. Personnel
    9. Commissions2
    10. Other Expenses
    11. Major Purchases2
    12. Loans3
    13. Investments3
    14. Customer Payments
    15. Supplier Payments
    16. Cash at Beginning
  • Use Back and Continue button of every screen to navigate between screens. To jump to any specific screen, just press the Assumptions link in the expanding menu bar on the left of the page.
  • While you enter your assumptions
    • Occasionally take a quick look at the OfftoaScore to obtain a very quick idea of the financial health of your company - on a scale from 0 to 100.
    • Occasionally press the gray Offtoa Scoreboard link in the upper right (just below the OfftoaScore) to obtain a slightly more detailed summary of the financial health of your company.
    • At any time, press the Reports link in the expanding menu bar on the left to examine your financial statements. Offtoa produces them for you automatically.
  • Before taking a close look at your pro forma financials, we recommend you let Offtoa do a check of your assumptions to make sure that what you entered makes sense. Do this by clicking on Business Analysis/Assumptions Review link in the expanding menu bar on the left.
  • When examining your income statement, press the Analysis Findings link at the bottom of the page to look for issues in your income statement. Use the blue View Next Finding and View Previous Finding buttons to thumb through all issues. When you find something you wish to address, press the green How Do I Fix This button, and Offtoa provides a list of changes you can make to your assumptions that could fix the problem.
  • When examining your cash flow statement, press the Analysis Findings link at the bottom of the page to look for issues in your cash flow statement. Use the blue View Next Finding and View Previous Finding buttons to thumb through all issues. When you find something you wish to address, press the green How Do I Fix This button, and Offtoa provides a list of changes you can make to your assumptions that could fix the problem.
  • Repeat the previous step while examining your balance sheet, capitalization table, and valuation and IRR report. Fix any problems.
  • In many cases, fixing one problem may cause other problems. So before you declare yourself complete, take one more pass through all the issues by pressing the Business Analysis/Final Review on the menu on the left and fix any remaining problems.

How the “Use Marketing and Sales to Drive New Customer Acquisition” Sales Model Supports the Lean Startup?

A startup company's revenue growth occurs as the result of only three activities: paid growth, viral growth, and stickiness. Offtoa provides the lean entrepreneur with the ability to define (during the planning stage) values for the assumptions underlying these three engines of growth. Then, as the company launches, as experiments are conducted, and as actual values for these assumptions are determined, Offtoa allows the entrepreneur to replace the values with more accurate values, slowly iterating toward more and more accurate predictions of revenue. As a result, entrepreneurs can be assured at all times that they are on a path that could result in a positive financial outcome.

The parameterized assumptions that drive revenue are unique to Offtoa and are “complete” in that they completely define all aspects of paid, viral, and sticky growth. The assumptions are all defined under the sales model called “Use Marketing and Sales to Drive New Customer Acquisition”, as follows:

  • Assumptions for Paid Growth
    1. Marketing and Sales Activity. Of the many marketing and sales activities that your company may have, which one is going to drive revenue growth?
    2. Customer acquisition cost (CAC). If spending $10,000 on the specific activity creates, say, 200 leads, and you expect to convert 20% of them into prospects, and 50% of those into paying customers, then CAC should be recorded as $500, i.e.,

      $10,000 / (200 x 20% x 50%).

    3. Sales cycle. On average, how months elapse between the marketing and sales activity and the resultant customers being acquired?
  • Assumptions for Viral Growth
    1. Viral coefficient. How many new customers will each existing customer attract?
    2. Viral cycle. How many days elapse between each new generation of customer referrals, i.e., how long does it take (on average) for customers to “spread the word” and get their friends to become customers?
  • Assumptions for Sticky Growth
    1. Average order size. What is the average recurring revenue attributed to each customer?
    2. Periodicity. How often will each customer place an order of the above size? Daily? Monthly? Quarterly? Annually? Once per lifetime?
    3. Annual retention rate. What percent of customers remain customers after 12 months?

Enjoy!

[1] For more accurate results, use top-down ("Predict Market Penetration") and bottom-up ("Marketing and Sales Dollars Spent to Drive New Customer Acquisition") models of sales projections and compare them.

[2] Offtoa will give you the option to skip this step if it isn't applicable to your business.

[3] If you have specific plans for future loans or investments, you may also enter them now, or you can wait, and Offtoa will tell you when you need to raise money and how much.

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