Time to File the Flight Plan

Alright, you’ve zoned in on your idea and done the checks to make sure you’re ready for the journey ahead. Now it’s time to map out your business plan—your flight plan.

Here’s my top tip: don’t get stuck here. Don’t waste too much time “number wanging” (aka making yourself a spreadsheet millionaire or billionaire). From running multiple businesses, I can tell you this—things never play out exactly as your plan predicts (usually, they’re worse and take longer). And when pitching for funding, investors will heavily discount your projections anyway. So why bother with a plan? Good question.

Here’s why: a solid plan helps you answer three critical questions.

1. Are Your Gross Margins High Enough?

When you first think of an idea, it might seem promising, but when you dig into the costs, you might find the margins are too slim to make it worth your while. Gross margin is the revenue you earn per unit minus the cost to produce that unit—whether it’s a widget, a client service, or a design. Low margins mean running and scaling the business will be tough.

Now, this doesn’t mean low-margin businesses are impossible—they’re just harder to build. For example, grocery businesses operate on low teens or single-digit margins. Compare that to a SaaS (Software as a Service) business, where gross margins are often 75%–90%. That’s one reason I like SaaS—while upfront R&D costs can be high, once you find product-market fit, the payoff is large.

That said, starting a SaaS business often requires more capital and a longer runway, unlike a consulting business, which can sometimes launch with almost no overhead. My first business was IT consulting. I started from a room in my house, with a laptop and a car in the driveway. I ran it for two years before taking on any significant additional costs (offices, highly paid staff), but by then, I had multiple clients and steady revenue.

2. Can the Business Scale?

Does your idea have the potential to hit the upper atmosphere, or are you stuck flying at 1,000 feet? You can figure this out quickly by mapping out a realistic target market. And no, don’t say, “If I just capture 0.5% of Facebook users…” That’s a red flag. Instead, focus on whether your product or service is truly tailored to your audience and whether you have the resources to break into that market.

Look at these key factors:

Acquisition potential: Can you realistically secure 5%, 10%, or 20% of your target market? (If you project needing to hold more than 30% long-term, think carefully—great products attract competition.)
Churn rate: How many customers will stick around? Churn directly impacts your ability to scale and profitability. As an example most mobile apps have a churn rate in excess of 90% by day 30, if you're scaling an app business cost of acquisition needs to be really low, lifetime value needs to be high and you need a decent sized market.

If your model shows the business can grow sustainably without massive churn or over-the-top expenses, you’re in good shape to move on.

3. How Much Cash (Runway) Do You Need?

This is the big one. Every business needs a runway—the cash to get off the ground before revenue starts covering costs. To figure this out, break your journey into three phases:

Phase 1: Build

This is where you’re developing your product or service, with little to no revenue coming in. If you’re thinking, “I’ll fund this by doing consulting work on the side,” be cautious—splitting your focus can delay progress. Need help estimating costs? Platforms like Upwork can give you rough ideas. (And remember the 4X rule: it will cost way more and take way longer than you think.) SaaS and infrastructure-heavy businesses usually need a longer build phase compared to retail or consulting.

Phase 2: Acquire

Here, revenue should start building as you acquire customers. Expect acquisition costs to spike during this time while other costs stay stable or grow slowly. Ideally, your revenues should scale rapidly in this phase—think 100X, 50X, 20X, then 10X growth. If your model doesn’t show this, take a step back and reassess. (And watch out for rising costs, especially fixed costs unrelated to customer acquisition—they can drain your cash and shorten your runway.)

Phase 3: Steady State

This is your cruising altitude. The business is running efficiently with stable customer numbers. At this point, you want to see gross margins of 70%+ and net margins of 30%–40%. Investors often use the “Rule of 40” to evaluate SaaS businesses: your growth rate plus profit margin should equal or exceed 40%. Few companies achieve this, so aim high in your planning.

Once your model shows how you’ll take off, build altitude, and hit cruising speed, it will also show when you’ll break even (revenues exceed costs). Add up the cash needed for all the pre-breakeven phases, and you’ll have your runway length. (Again, don’t forget the 4X rule!)

Next Steps

If your idea survives this process—and it should only take days, not weeks—then congratulations! You’ve already cleared more hurdles than 95% of the ideas I've taken through this process. Now it’s time to prepare your plane: fuel it up, lighten the load, and extend your runway as much as possible.

The next post might not be the most thrilling—it’s all about minimizing costs and preparing mentally for the road ahead. But it’s critical for a successful takeoff.

Some helpful reading - a few books that will help your thinking at this stage:

Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne
Crossing the Chasm by Geoffrey A. Moore
The Lean Startup by Eric Ries
This is Marketing by Seth Godin
The Art of the Start by Guy Kawasaki

Let’s get ready to fly! See you in the next post.