How Is Your Q1 Going?

Now that we are in March, you should have a pretty good view of how your Q1 is likely to end up. If you are a revenue generating company, you’ve probably got a formally approved 2013 plan by now (if not, why not?) Your board is paying attention to your performance against plan, and you and your management team are executing based on the plan you had approved, which likely includes both a revenue plan and an expense plan.

If your sales and revenue are not on or ahead of plan, it’s time to take a hard look at what is going on. Q1 is the easiest quarter to make since you just created the annual plan. If you miss Q1, especially in a recurring revenue, services oriented business, or adtech business, there is almost no way you will make it up over Q2 – Q4. Sure – it’s nice to think something magic, special, and happy will happen, but it almost never does.

Step 1: Put on the brakes right now on discretionary spending, especially headcount. You are probably spending at plan. If sales / revenue / MRR are behind plan, you are just creating a bigger problem for yourself.

Step 2: Do an aggressive root cause analysis of why you missed Q1 so far (January and February). Use the five whys approach and keep digging until you actually understand what is going on. Don’t let your sales organization wave things off. Don’t assume it’s all going to come together on 3/31. Don’t assume the high level metrics you are looking at tell the story. Go deep as a management team. Get everyone on the management team in a room for the day on Saturday 3/9, and figure it out. Yeah, I know some of you are going to SXSW – figure it out. It’s important.

Step 3: Keep playing through on your plan for all of Q1 other than discretionary spending. Be surgical about what is going on. Use this as a wakeup call that you aren’t executing well yet, or at least to the plan you put out there. Do you have confidence you’ll make it up in March? If you do after you think hard about it, then you’ll know in a few weeks. But don’t wait for those weeks to pass to get your mind into the issue.

Step 4: Re-forecast Q1 and the rest of 2013 based on what you expect the actuals for Q1 to be. Again, go deep. You just created an annual plan so the process and the numbers should be fresh. Use it to re-forecast based on the new information you learned in January, February, and Step 2. Get it in shape so that after you know the score for Q1, you can quickly put it in front of the board.

Step 5: Call a board meeting for around April 15. Make this a Q1 review and Q2 – Q4 planning meeting. As part of this, get a new 2013 plan approved that takes into consideration what you learned in Q1.

Don’t panic, but don’t be caught off guard. Assume you won’t make things up and get ahead of them by figuring out what your real trajectory is.

Oh – and if you are beating your Q1 plan, then start thinking about how you can accelerate and grow even faster!

  • jcap49

    Would also love to hear your thoughts on a framework for personal life in Q1 – I imagine you’ve got a lot to say on the subject as well.

    • Mid February I decided my Q1 wasn’t working well on the personal front. Things with Amy were great but things inside my head were not. I’m still working through it but after making some changes the past two weeks things are getting a lot better.

      • Post?

      • jcap49

        Thanks for the honesty Brad – always know to count on you for that. And happy to hear that things are trending upward 🙂

  • I’m with you and doing this with my accounts now.

    Head in the sand is way worse than pie in the sky.

    Q1 is a key Q for all companies that have Q4 holiday seasonality cause this is the time to measure lift from the season, one of the more interesting measurements that seems a great indicator of yearly growth.

    • Concur, “head in the sand” only leads to failure in both the short & long run.


  • The q1 number is necessary but insufficient. With just a little extra work tech startups can build a dynamic linear model and a time series analysis. Build if once, it will pay off again and again. You don’t need a phd to do this, but during your next hiring round, why not check to see if the applicant (hacker or hustler) has the skills to do this.

  • You must have been reading people’s minds on this, as I’m sure it’s going to resonate with a lot of companies.

    I think after Step 2, you’ve got to ask yourself – what are we going to do differently based on what we know isn’t working? If you don’t change what you’re doing wrong, you will keep getting the same results.

    Typically, you know what’s not working and why. Then focus on that one or two things, and put everything else aside. Roll-up your sleeves. Don’t plan anymore. Just execute better. If it’s the product, fix it. If it’s the process, improve it right away. If it’s a person or two, work on them, fire them or move them out. The Why’s are very revealing.

    Be realistic. You can fool your board members (sometimes), but you can’t fool yourself.

    • Actually you can fool yourself, and many people do. I had a great board member who told me, look you can lie to me (yes, sometimes I want spin because I discount the number), lie to your employees (yes, they don’t want to hear all of the nitty gritty), and lie to your spouse for all I care. But never ever lie to yourself.

      • Exactly. Great line and reminder. What you know is what you know. Trick is to act on it. You can fool others a bit, but if you are truthful to yourself, you’ll know what the right “to do” is.

      • Correct – do not EVER deny reality.

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  • thoughtful piece. Works best if your relationship w/your Board is constructive. Also works for personal goals if you are a personal goal setter as I am.

    • Yup. And if your relationship with your board isn’t constructive, it doesn’t matter what you do, the result of missing Q1 is going to suck all around.

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  • Great Post Brad–we’re ahead of plan and doing what you suggest but it is always great to be reminded

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  • Brad, this is a phenomenal post. About to tweet it out… now.

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  • Good one. I’m cooking up a post on what CEO updates to the Board should look like (been getting lots of rah rah and not a lot of metrics lately)

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  • orisfa

    Brad, Great advice. When companies are doing the root cause analysis of why they are missing their quarter, to what extent do they need to examine why they are missing their quarter vs. how the expectations for the quarter were set in the first place? In other words, is it possible that the plan they signed up for was totally unrealistic in the first place?

    What has been your experience with this? and What do you do as a board member if that is the root cause?

    It seems like young/1st time entrepreneurs have a hard time pushing back against a boards even when it’s the right thing to do.


    • Often the plan is unrealistic for a variety of reasons. Sometimes the board puts pressure on the entrepreneur to create unrealistic growth. Other times the entrepreneur is unrealistic about what growth can be accomplished. Often the root cause is deeper and something to do with the structural sales / pipeline / investor / resource dynamic that wasn’t well understood in the forecast process.

      I just keep pressing / asking way / trying to get underneath the numbers. My goal is to get to a realistic forecast, not the “right” forecast.

      And yes – many entrepreneurs (not just young / first time ones) don’t know how to push back on a board.

      • orisfa

        Lesson to board members everywhere: “get to a realistic forecast, not the “right” forecast”

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  • Hey Brad,

    Any thoughts on how to run a quarterly review process like this if you are still very early stage and don’t have a board? Obviously co-founders and team need to hold each other accountable, but seems difficult to have that level accountability/perspective without some outside perspective.


    • 1. Get a board. Even early stage companies should have a board.

      2. In the absence of the board, do this as a founding / exec team.

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