After you’ve refined your concept, it’s time to get ready to launch. I’ll call this stage The Runway–because that’s what it’s called. This is where you get funding and get your product to market. The length of your runway is determined by the resources you have to keep you going until you can “fly solo” and profit from your concept. Whether you’re creating software, a game, a physical product, hosting an event, or some other venture the objective of The Runway stage is the same: get it funded and get it out there to profit. The Runway stage of the CROP model is all about getting the right people on the bus (see Good to Great book review; I guess I should say get the right people on the plane!) and fueling it with enough money to get yourself into the Operations stage. In the runway words of Tim Gunn, it’s time to “Make it work!”

Tops down and Bottoms up…budgets, that is

As part of your concept development, you will have done a lot of research on your opportunity. Hopefully you did a very thorough feasibility study and determined your COGS (Cost of Goods Sold) as part of your concept. If not, now’s the time. This is a very important piece of your financial picture, but it’s far from the only piece. Before you go seeking funding, there are some important considerations. I’ll call this paving your runway: thinking through *everything* it’s going to take to make your vision reality. And then assigning cost to it.

When I worked for the 2002 Olympic Organizing we did a lot of budgeting. Sooooo much budgeting. I cannot explain to you the depth and breadth of budgeting that was done. Then Mitt Romney, Fraser Bullock and their team from Bain came in, looked at our budgets, and took us to new levels of budgeting. Our contingency budgets had contingencies. And because of this, not only did we cover our costs, we were able to leave a substantial legacy for the community.

One thing I learned from this exhaustive multi-year process is the value of a bottom-up budget with exhaustive contingency brought into alignment with a top-down budget which was then tested, revised, and re-aligned. Let me explain. In the years leading up to the Games, we didn’t just ask people how much something would cost and then add it all up, which is the basic bottom-up budget process.

Yes, we sent out extensive RFP’s (requests for proposals) and got bids on everything from lanyards to bleachers. And I mean everything. How many boxes of pens you you think we need? What kinds of pens? How many bottles of water? Do they need refrigeration? What capacity? How much power is needed? How much space is needed for the generator powering the refrigerator and how many feet of cable and how will we keep the area clear? Who is responsible for this and how many people are needed for this operation, how many uniforms, how many lunches? Where will they park? What signage do we need to designate their parking? So so so many details. So many. I cannot express the number of meetings we had discussing details of who, what, when, and how much. As the Event Operations Planning Group Coordinator I had the once-in-a-lifetime honor of a front row seat to watch expert planning at work. For six years. Amazing.

But we didn’t leave it there. Next, we added a contingency budget as a percentage. With that number, it was time to now do a masterful top-down budget. We looked at the budget and estimated what could come through VIK (value in-kind) partnerships from sponsorship donated goods and what would need to come from cash. With those numbers, we ran it from the top again. Would it be better to accept $500 in VIK or just buy $100 worth of pens? What was the right blend of cash vs. sponsorship. We took the top line numbers of the financing we could get of either type would cover our bottom-up numbers. And if/when they didn’t match, we took a hatchet to the budget and decided where we could cut costs. And there were a lot of costs cut!

This was a very good and very thorough process. We even did this thing called dot planning where we took maps of our venues and placed a dot on every location where we needed staff. And we color coded those for types of skill (and therefore types of budget) required. Could this location be handled by a volunteer? Did it require a skilled technician. Could we get that skilled technician as part of a VIK package from a sponsor? Or would we need to hire? The conversations felt endless. We did this for each sport and each venue. It was amazing. You’d think it was enough, right?

But then we did one more critical thing. And this, in my opinion, is what really made us successful. We tested our assumptions.

You know what they say about assumptions

You see in the years leading up to the Games we had “test events,” which were events such as World Championships, etc. held at the Olympic Venues prior to the actual Olympics. Ostensibly, the events were for athletes to test out our facilities and for the governing bodies to identify any corrections that should be made to the field of play. It also allowed us to test logistics such as transportation, spectator services and the like. But for the organizing committee, and for our leadership, these test events were validation exercises.

Did we, in fact, need this many pens? Were the dots, in fact, in the right place? Did we in fact have the right ratio of staff to food? Did our bottom-up assumptions prove valid, and did our top-down distribution result in a fantastic outcome? Did we dip into any contingency and if so, why? In retrospect, what could/should we have done differently?

And this is how to pave a CROP Runway: budget. Bottom-up, top-down, contingency, and most importantly, assumption validation.

In the “Real World”

I realize this is extreme. Not many real world ventures have the luxury of time/runway length, experience, or experts to go to this extreme. But I’m so grateful to have been a part of this amazing experience and learned so much. It’s helped me create amazing budgets and forecasts for startups because I learned not only to think of everything, to ask experts, to chase details, and to verify…but also because I learned that nobody gets it right the first time. Knowing this, and knowing that it’s not only ok to be wrong the first time, it’s expected, relieves a lot of pressure. This way when you start raising capital you can have a really mature conversation with your investors. You’re prepared to show them where you started, how you validated your assumptions, revisions you’ve made, and where things stand now.

More about The Runway later; I’ll be adding resources and more thoughts on The Runway later. I wanted to share my best budgeting experiences first!