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
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