Standard accounting won’t work here because startups are too unpredictable for forecasts and milestones to be accurate. Instead, you need innovation accounting.
Innovation accounting involves three steps:
You use a minimum viable product to establish a baseline on where you now are
You attempt to fine-tune so you move towards your ideal outcome
You make the judgment call whether you should persevere or pivot in a new direction
The good thing about innovation accounting is it aligns with the three learning milestones every startup needs to know:
Are our business plan assumptions correct?
To establish a baseline, some companies have a single prototype, others have multiple prototypes which gets compared while a third approach is to perform a smoke test – have customers order from a brochure and only build if there are enough pre-orders. All of these approaches work because they allow business plan assumptions to be validated.

What will be our key drivers of growth?
Once you have that baseline, you can then test how changes will affect growth by running experiments. You can learn what you need to do to grow the business.

Is our business model sustainable?
If your real-world baseline is near break-even, you will be able to tell you’ll get there with a little more fine-tuning and improvement. If your real-world results are far below expectations, that’s a good sign you should pivot and try something different.