At the beginning of the business, whether it is to contact investors or take care of the company, there are inevitable financial problems, but there is neither a financial consultant nor a full-time financial director. Where should entrepreneurs go? Let’s take a look at how the founders of financial freedom do it. Silicon Valley Bank Kamir Kothari explains to you that entrepreneurs must understand financial analysis.
Editor’s note: This article is from WeChat public account “ SPD Silicon Valley Bank” (ID :spdsvb) Author Silicon Valley Bank Kamir Kothari, Pudong Silicon Valley Bank Chinese Compilation, authorized to reprint.
The “Baodian” of entrepreneurs is here! The 7th Anniversary of Pudong Silicon Valley Bank launched the new Entrepreneur Guide. Among them, not only provide specific and feasible suggestions on how to register the company, how to find funds, but also provide guidance on the operation of the company from the aspects of finance, taxation, law and talent. Regarding the many problems on the road to entrepreneurship, perhaps you can find your own answer here.
Core content
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The benefits of doing your own account
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When do I need help with accounting
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Managing increasingly complex finances
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Finance can shape and strengthen your fundraising appeal
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Choose a loyal and trusted financial expert
Jason has served as a CEO for a startup in a startup. As an experienced senior executive, he understands the importance of ensuring that the final digital summation results are justified. Therefore, when Jason founded the information transmission and start-up startup in 2005, his first step was to work closely with mathematics experts who had a deep understanding of the telecommunications industry. He needs to calculate the cost of the carrier bandwidth based on various variables, which requires complex analysis.
Jason said, “I don’t want to go to the promotion meeting, and finally end up with a debate.” Soon after, he hired a former colleague to be the chief financial officer, and he was also the company’s third employee. When he raised $3 million to investors, his investment paid off.
“Continuous learning, making strategic decisions based on financial information”
Not every startup’s business model involves complex numbers, especially at the beginning. But if you want to build a successful and well-managed company, it’s important to have a basic understanding of finance. When you’re writing code source to hiring people, attracting market attention, and then making recommendations to investors, what you need to know and the services and experts you should rely on will change. But you don’t have to keep doing your own work. And, after the initial period of time, you probably shouldn’t do it yourself.
01 Benefits of doing your own account
When you are just starting a business, for example, if you are still working full time or just starting a company in a shared workspace, it is best to take the DIY route. After all, most of the work you have to do is basic accounting, such as recording simple transactions.
Be concerned about the cleanliness of your accounting books, such as ensuring that individual and corporate expenses are separated, accurately categorizing each expense, and so on. Maybe you will feel like it’s unnecessary busy, but you can save a lot of money on finishing work later, Jasmine mentioned. Jasmine is a corporate development strategist at an early growth financial services firm that provides accounting and financial services to venture capital-backed startups.
“Besides the cleanliness of the accounts, there are other real benefits from hands-on accounting.”
Besides you are not muchIn addition to saving money when you can spend less, managing your own accounts allows you to master basic financial concepts. Beth, the founder of a company that provides financial and operational support for start-ups in the seed round and A round of financing, said: “What you learn is debit and credit, and you will learn how bank deposits differ from income.”
02 When do I need help with accounting?
After reaching a certain node, it is no longer worthwhile to spend enough time on it. Beth recommends following the rules: Think about how many dollars your hour is worth. “If you find that the time you spend is not cost-effective, then ask someone to help.”
She mentioned that the founders should focus on building products, building teams, and getting money from banks. Everything else should go through a cost-benefit analysis – including the time spent on finance.
At that stage, hire an accountant to do the job and spend time supervising it, so Betty mentioned. She has served as a senior technology executive and is now an angel investor and CEO of a corporate security monitoring services company.
“I don’t want the CEO to take the time to settle the check or prepare a financial report”
Betty said: “As a founder, I always keep people accountable. In this case, someone will be responsible for contacting potential investors and introducing them to our business.”
03 Managing increasingly complex finances
As your business becomes more complex, you are also starting to think about attracting venture capital, taking more time to control your finances, and more help. In addition to basic accounting and accounting that must meet strict regulatory standards, you also need to deal with increasingly complex tax returns, company valuations, budgets, forecasts, and record your capital expenditures. You must master key business metrics such as acquisition costs, customer lifetime value, and break-even point.
The speed at which your business becomes complex depends on your specific business. Are you developing iPhone games with some friends? Still building hardware products that rely on global supply chains and will be sold in multiple countries?
“There are a lot of ‘temporary CFO’ services”
In any case, you will definitely have the expertise of an accountant or CFO. This doesn’t necessarily mean you have to hire a full-time job – there are a lot of “interim CFO” service companies that can offer part-time services or even hourly billing services.
04 Finance can shape and strengthen your fundraising appeal
The work you do in the early days is a great help for understanding how the business works, and helps you understand what your finance executive is doing. “Finance is more than just paper numbers,” Beth said. “Finance lays the foundation for understanding the leverage you can make when you are financing in Series A.
For example, you might use bold predictions to market your business to investors: Building a featured product requires four engineers to complete six months. However, you should also understand that if you build a featured product that takes five months to complete, what your business will look like.
“You have to prove to the VC that you understand the financial model”
Beth said: “They won’t treat your predictions as truth.” If you don’t understand the variables that make up financial forecasts, you may not realize that you can use other leverage to get the same results over time. This can cause additional stress or bad decisions when it turns out that the predictions are incorrect.
05 Pick a loyal and trustworthy financial expert
Professional knowledge and trust are critical when selecting a financial professional to work with. Most of the work of the finance staff will be to teach you to understand all of these variables.
“If you outsource your finances, you should look for someone who can work for you for two to four years”
The long-term nature of people can not be ignored, the company’s engineers, product managers and sales staff may be more liquid. But in terms of finance, it is vital to have an expert who understands the complexities of the company and goes through all stages of the business.
When hiring a former colleague as treasurer, Jason considered the long-term. “It’s important to have someone I trust so that financial continuity is guaranteed,” Jason said. The colleague left the company’s chief financial officer in his company.
Summary
You can choose different financial management methods at different points in time – from DIY to recruiting experts. But the key is to keep a close eye on how to add value at critical points without being overwhelmed by the details.
There are not many start-ups whose founders are accountants or potential CFOs. And with a schedule that is already constrained, strict control over the financial situation can easily be unconsciously relaxed. However, only if you are satisfied with the financial situation of the supporting company, can you make strategic business decisions over time. Learning the basics and finding the right help in times of instability can be a great help in streamlining the finances of start-ups.
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