Startups
5 Lessons from a Startup Veteran
Cathy Goldsticker , CPA , MST
Working with startup companies and entrepreneurs is a unique specialty and creates interesting and challenging work for a consultant . Not only do you have to define what is a startup ( which is not a “ one-size-fits-all ” template ), but it is also important to address startups ’ ever-changing diverse needs due to rapid growth , changing directions and frequent priority switches at a moment ’ s notice . But as they say , if you love your job you never work a day in your life , and that is the best approach to startup consulting work .
Future growth opportunities aside , there are inherent challenges startup companies tend to face . Here are five lessons startups and entrepreneurs can glean from a veteran startup consultant :
1 . Make sound and timely bookkeeping a high priority .
When an entrepreneur is busy getting a startup off the ground , accounting and bookkeeping are often back-burner considerations . The day-to-day focus is consumed by operational tasks but there should be allotted time for managing the financial reporting process . Sound bookkeeping provides the clearest picture of a business ’ health and lays the groundwork for the reliable financial information lenders and investors rely upon to gauge a loan or investment . It also sets the business up for proper tax filing . Unfortunately , too many startup companies do not have accurate financial data to file income tax returns or prepare financial statements . Without contemporaneous and accurate information , the resulting cost for these services is much higher than it needs to be .
2 . Appreciate the power of a valuation and its impact on maximizing investment dollars .
Potential investors want to know what your startup is worth , but startup companies don ’ t typically fit the traditional valuation framework . Formal valuations are incredibly expensive , comparable companies to use in the valuation study are difficult to find , and many startups don ’ t have any earnings history . Due to this disconnect , alternate methods may achieve better valuations that affect investors ’ demands . To improve the prospect of maximizing and closing a round of funding , research your industry and become an expert at demonstrating why your product or service can maintain a share of the target market . Learn the characteristics of your value drivers as well as your weaknesses , and be able to discuss the areas that have room for improvement . Ultimately , entrepreneurs must be flexible to significant changes in their plans over the financing cycle for their startup .
3 . Be flexible , watch the cash flow and redirect expensive efforts when appropriate .
Spend your dollars carefully because once they are gone it is quite the journey to replenish them . For example , as your workers perform R & D , they drain cash quickly . Take the time to reassess and redirect your efforts if needed . Being flexible and adhering to budgets will help control the outflow . Reach out for counseling and listen to what is being advised .
4 . Don ’ t let cash be the main focus of operations and distract from the energy and momentum of business activities .
In the 2017 Brown Smith Wallace St . Louis Startup Survey Report , St . Louis startups , and the diverse community that supports them , indicated that cash flow was their greatest challenge . The time and additional funds actually spent by startups and entrepreneurs to obtain cash is frequently avoidable and indicates an area that requires assistance and support . Preparing cash flow statements , spending carefully and utilizing budgets are just a few of the management tools that
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