Category Archives: Finance

Accounting

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Accounting

Your accounting resource will be one of the most important vendor relationships in your business. An accountant often provides day-to-day tactical support via bookkeeping resources (or referrals to same). In addition, your accountant is a critical strategic resource for tax planning, networking and referrals into their network of professional services providers such as legal, consulting, business brokers, banking, etc.

Consequently, it is very important to have a solid, mutually beneficial relationship with your accountant.

Start by asking other business owners for referrals. Ask people who run businesses that you aspire to emulate for a referral. That immediately puts you into a network of professional and business suppliers that will match your business as you grow. If you start by asking business owners at the size and scale you are now, you can end up with an accounting resource that cannot scale with you as you grow and whose network is not well matched for your aspirations.

Next, talk with at least five potential accountants by phone and meet personally with at least three. Do not settle for anything less than a good to perfect fit with your accountant. In particular, it is critically important that you share common values related to integrity, honesty and trust.

Your accounting and bookkeeping resources can literally make or break your business, so choose them wisely and with due time, effort and consideration.

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Startup Funding

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To have enough money to start; I have a small amount

Answer:

The absolute best source of money is customers.

The more time you spend with your customers the more you will understand their needs and what they will pay for. If you provide a product or service people want to buy, you have instant cash flow and a proven business model.

A proven business model that has cash flow, and maybe even profits, is a lot easier to fund than an unproven idea.

If you don’t have enough existing capital to provide the initial product or service, then invest in market research—talking to and surveying customers—to document and prove market demand.

Proven market demand with survey results, web site tracking data, signed letters of intent or provisional purchase orders is a lot easier to fund than an unproven idea.

Some basics on funding:

If you don’t take in any external money and retain 100% of the company it’s called “bootstrapping.” Bootstrapping is a very viable option for many business models.

The biggest downside to bootstrapping is that it is extremely challenging to win a big market opportunity unless you take in external money.

The reality of bootstrapping is that it is very hard to build a business through profits alone, even in the best of times.

Most businesses need to take in external funding at some point in their life.

There are two basic types of external funding:

  • Non-Dilutive
  • Dilutive

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The Short Story on Pitches

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The short story on pitches is:

1.      The purpose of the pitch is to get the next meeting. This rule applies to everything from a 30 second elevator pitch to a one hour VC pitch. Note that the purpose is NOT to tell the entire story, especially about your technology, what you built and how it works.

2.      The most important things to talk about in a B2B business model pitch, in priority order:

a.      Relevant and target market size (see stage 1 at Idea to Exit)

b.      Market pain you are solving

c.      Sustainability of that pain (will the pain be around long enough for the company to grow into and be viable over the company’s life cycle)

d.      Level of that pain (who, specifically, is in pain, e.g. CEO, CxO, VP, director, manager, users)

e.      Price they will pay to solve that pain

f.       Recurring revenue aspects of that price

g.      Sales model (type [direct, channel, etc.], sales cycle, signing authority, # of functions you need to sell to, e.g. finance, CMO, IT, etc.)

h.      Distribution channel(s)

i.       Barriers to (competitive) entry (Intellectual Property (IP) rights (patents), proprietary sales/distribution channels, etc.)

j.       Everything else, especially the technology, what you built and how it works

 

Note that what you know the most about, have the most passion for, etc., is down at the bottom.

This is why most pitches fail.

Most startup guys come in and spend 99% of their time on their tech, what they built, how they built it and demoing what they built. That is, in the end, the least important thing when you are pitching.

The most important thing is the pain you are solving, the scale of that pain, the sustainability of that pain and who owns that pain.

The impact on pitching and funding are:

  • Large scale market (.5 – >billion dollar scale) = VC
  • Medium scale market (several hundred million) = Angel & Super Angel
  • Small scale market (<several hundred million) = bootstrap, Friends & Family

You can cover points a – f in less than 90 seconds. That’s enough time for an elevator pitch.

Remember, all you want them to do is follow you off the elevator. The point of the pitch is to get the next meeting.