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What do you do if your top line expectations do not match expectations? – Remember to have a backup plan.
Here’s what they mean…
This is another test to see how the founders respond under pressure, and how well they have thought through their business. This question (“What do you do if your top line expectations do not match expectations?”) is asked to know if you have a backup plan.
The top line is how much revenue you make. The bottom line is how much you lose ;). The implication is that your costs meet expectations but your revenue does not and therefore your net burn is higher than planned and your runway will take a hit.
There are real ramifications of not growing your top line; growth is what investors buy into. If you do not grow your top line, you may not be able to receive additional funding. If you cannot raise on the terms you want, and you’re not profitable, you are default dead with a D.
There are a number of ways to respond to this question “What do you do if your top line expectations do not match expectations?”. There isn’t a specific correct answer. What matters is that the response is logical. You, of course, can disarm this question by making a joke, but you are still likely going to have to give a response.
Offering that you have developed a base, downside and upside scenario depending on the market reception makes you look prepared. So reciting the playbook of the downside case is what you start with. Then you want to slide in the upside case to inspire them to what could be… You are going to have some views of what you will do to ameliorate your less than ideal growth as well as the painful measures you might take to mitigate your burn, which will likely involve a headcount reduction.
You could mention financing implications such as doing a bridge round to help you get to the next stage, but that might put negative thoughts into the investor’s head. Read the situation and make a call.
What you need to say
“Well, I don’t think anyone will be happy, including me!
The team and I, have put a considerable amount of our sweat and tears into building our baby. We have mapped out how we believe we can best go to market and scale. We believe that we have a firm grasp on our unit economics, but of course, no battle plan survives contact with the enemy.
The market is considerably large and we believe this is the best timing for us to penetrate the market with our differentiated product.
There will be warning signs. You don’t suddenly hit a binary test point as to whether or not we have succeeded and are materially off plan. Whether we are meeting expectations can be viewed weekly and monthly. If we are not meeting our monthly target, then we adjust our burn rate and scaling plans and consider options including pivoting.
We have developed three plans in our financial model: a base one, the one we presented. We also have a downside and upside scenario.”
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