Interviewed

I was recently interviewed for a podcast titled “The Struggling Entrepreneur”, and wanted to share a link to the interview now that it is live. Myself and Fred, the host, discuss several topics related to startups – raising capital, having the drive to see things through even in tough times, advice for people thinking about starting their own venture and advice for those who have and are truly a struggling entrepreneur. We also discuss myself as an entrepreneur and the trials and tribulations I went through in my first year on my own starting a consulting/virtual CFO company without the safety net of a steady paycheck.

If you have the time (about 45 minutes), I’d love for people take a break from their hectic schedules and listen in. Hopefully there are some words of inspiration for the entrepreneurs out there.

You can find it at:

http://www.strugglingentrepreneur.com/

Click the play button or download. Likewise if you are an avid ITunes podcast subscriber, search for Struggling Entrepreneur and get Fred’s weekly interviews pushed out to you.

uBoast profiled on the news

One of my clients, uBoast.com had a piece on the local news. This is a short clip of it on the site. Big things happening with uBoast, stay tuned will be a huge success.

http://www.wusa9.com/news/local/story.aspx?storyid=77479&catid=158

Cool stuff coming

I have some very cool content coming to the site, hopefully by Monday. Will post all about it when it's launched. Stay tuned!

Just launched: BidsTick.com

Check out www.bidstick.com - just launched this last Tuesday, and it's taking off fast. Exciting site, addicitive even! 1 cent auctions on high end electronics, with 1 cent increments. The catch, each bid costs $1. So you buy a block of bids... pick your time to jump in and bid, and try to win. Auctions are ending at super cheap prices (Xbox 360s for a few dollars), so there's definitely deals to be had. Shipped from Amazon via UPS, it's a win win.

The hunt for funding continues

I basically took a hiatus from looking for VC/Angel funding for my clients over the summer. It was going no where fast, and I wanted to focus on finding some top quality companies to work with as a CFO, and engage them in the fund raising process. No longer do I only help companies locate funding, I want to be involved beyond the task of "fund finder".

As such, here's my top tier roster of companies I work with as CFO who are trying to locate capital.

uBoast - www.uboast.com - seeking $750K
InternetVoiceMail - www.internetvoicemail.com - seek $1M (PPM in place)
Hot Home Network - www.hothomenetwork.com - seeking $500K

Feel free to check them out!

So what do I do again?

My website www.roguecfo.com / www.chrisdbenjamin.com (links above) highlights more or less everything I do... but what do I really do, day to day?

If I had to slice it up -
30% of my time is spent with ongoing clients where I am acting as CFO. The current roster includes:

• Paradise Publishers www.paradisepublishers.com
  
• Internet VoiceMail www.internetvoicemail.com
  
• Big Bang Names www.bigbangnames.com
  
• uboast www.uboast.com

I also have 2 potential ongoing CFO roles, one dot.com, one retail product.

20% of my time is spent on ad-hoc projects. One time projects for startups who don't need a CFO at all right now, but are in the process of establishing themselves. Typically business plans, financial forecasts, investor packages, and/or some combination of all of those.

50% of my time: marketing. Including looking for new places to market, sending out emails, talking with potential clients, placing ads, etc. I enjoy it honestly, and it's fun to see what works and what doesn't (note: ad in Entrepreneur magazine: expensive, and zero inquiries from it. Free ads on Craigslist: drive the most traffic to my site, creates the most leads. Go figure.)

What does the future hold? All of the 4 startups above plus the other 2 have amazing potential. A LOT of things are in the works for everyone, and I help them on driving towards taking off. It's only a matter of time, but one by one they will hit. That said, I see a big transition in 2009 to working much more with the companies I'm an ongoing CFO for, with any remaining time spent on marketing/ad hoc projects.

Why there's a deposit on services

Note: This post comes on a day when I've decided that too much time is being spent chasing non payers, and honestly I was pretty ticked about it. Update though - sent out some collection notices, everyone, EVERYONE, who owed me either paid immediately or agreed to pay in the next week.

That said, I still think a stricter policy will help... here's the reasons for deposits, from my first hand experience:

1. I've had nothing but trouble collecting from people who put no deposit down. I didn't think it was necessary to get a deposit on something for only a few hundred dollars, yet time and again its these small project clients that balk at paying.

2. It gets the client involved in the project, now there's real money involved, and the client wants to see the project through.

So new policy -
Minimum project fee is $500.
Minimum deposit is $500.
Any projects over $500 requires a 50% deposit, with the minimum being $500.
All project fees, as always, are due immediately on completion. There are no terms.
Any unpaid project fees get sent to collection 30 days after project completion.

Seems like a jerk move, but honestly, we are all small business owners, and I need to be paid for my time.

I'm Back!

Hello everyone,

It's been all too long and honestly a lot of great things have been happening in the start up world. I plan to begin posting regularly with information articles for Start Ups, happenings in the startup world, and other misc. tidbits of information. Stay tuned!

Rogue CFO,
Chris Benjamin

Startups: Primer on Raising Capital

By Chris Benjamin of Chris Benjamin Consulting LLC (www.chrisdbenjamin.com)

Two questions I hear often – “how much money should I try and raise” and “how easy will it be”. There’s no set answer to either, and it depends on a myriad of factors.

How much money should I try and raise?

It is a difficult question indeed. You are the brains behind the operation, and have images of where you are going to take your new venture. It all starts to add up though. Hiring good people, renting a space, keeping your site search engine optimized, marketing – quickly you have some hurdles to tackle, and the number one issue is money.

A good starting point is your business plan & financial forecast. If you haven’t done these, stop right here. You’ve jumped a few steps, and worrying about funding isn’t a high priority yet. If you have these done, become very familiar with the numbers.

How do they shake out? Things to consider are:

When do you start making a profit?

How long can you sustain the business before needing money?

What are you going to need money for? Funding operations, capital expenditures, launching? Other?

A few examples:

Company A is a manufacturing startup. They will sell online, and not have a storefront. They plan to rent a warehouse and invest heavily in capital equipment. They need money up front, because without the warehouse & equipment, there’s nothing to sell. It is an all or nothing situation.

Company A needs money, and for a specific purpose. Besides funding the capital, they need to think about the ramp up transition. Covering operational costs for a period of time until the revenues of the company can sustain the cash flow.

Company B is a dot.com service company. They run a resource online, and revenues come from ad revenue & affiliate revenue. They have a site up, receive a small amount of traffic, and are steadily growing. They have received lots of positive feedback, but need money to really market the company properly.

Company B is already operational, but needs the capital injection to get them to the next level. This one is a bit tougher. What amount is the right amount? Coming up with a solid list of the operational expenses and where the money will be spent is important. It’s a bit less tangible than Company A. You could spend $250K in Marketing, or $1 Million. How do you decide? It’s your company, come up with a justifiable plan.

How easy will it be?

Raising capital is not a scientific process. Nor is it the same process for all levels of funding. The general categories & where you should look are:

Under $100K

• Friends & Family
• Credit Cards
• Home Equity Loan
• Sell Assets
• Borrow Against your 401K

$100K - $1 million

• Angel Investors
• Commercial Lenders
• Small Business Association (SBA)

$1 million +

• Venture Capital
• Investment Banks
• IPO
• M&A

All of these warrant a lengthy discussion about the pros & cons, and if they are right for your specific situation. Just know there are options, ones beyond this list as well. Determining what level you are at, and then how to go about raising the funding is a process.

So how difficult is the process? Well, depends on your definition. Certainly no one will be coming to you handing you money. Time is your friend, and the more money you want, the longer it will take. It makes sense: if you lent a friend a $1, you’d just do it. But to lend them $1,000, you’d want to know they can pay you back.

If you are in the Under $100K category, it should be a somewhat simple process. A home equity loan takes about a week to get, as does borrowing against your $401K. Credit cards are of course not recommended, but many an entrepreneur have gone that route and funded their startup.

When you get into investors, they will be taking a position in your company. So at this point you are giving up a bit of ownership, but for a capital injection. This process can span a month to several, and includes:

• Finding the investors
• Due Diligence process
• Filing with SEC
• Funding

So how easy is all this? Well, it’s more a test of patience and being able to take rejection than anything. No one will ever be as passionate about your new company as you, so when someone says “no thank you”, it can be a tough blow. Finding the right investor is key, and from there it becomes a natural flow of moving through the due diligence.

In summary, decide how much funding you really need, within that range decide what method you want to look for capital, and begin the hunt. Keep your chin up, preserver, and if your idea is great, the money will be attracted to you once people know about you.

Startups: Why You Don’t Need A Full Time Controller

By Chris Benjamin of Chris Benjamin Consulting LLC www.chrisdbenjamin.com

It seems like a natural progression. The founders have taken the company to the point where it’s really time to get serious about the financial side of the house. Thoughts of going public are starting to brew. It’s time to start managing the capital in place more effectively, and prepare for a pre-IPO round of funding. The obvious next step: hire a controller. Well, that’s typically the route startups go, but it’s not in your best interest.

It seems like a good idea, hire a full time controller. Why would you NOT want a full time, devoted professional to guide your growing venture? Well, there are good reasons.

1. You need 20 hours, not 40+ per week of time
The biggest fallacy I see in startups was that everyone has to work 80 hour weeks. The reality is some people thrive on that environment, while others quickly lose productivity. Not only that, in the first few years of operation, there is only so much a controller can accomplish. Once the budget & forecast are set, the reporting standardized, the audit completed, the accounting system up graded, there isn’t that much left to do other than routine accounting. The better mix of staff would be a part time bookkeeper who can increase to full time, and a part time controller who can increase to full time. Taking the job and splitting it into 2 part time jobs is a terrific strategy. Otherwise the controller job does become an 80 hour job, because they are doing routine accounting, and then doing the entire CFO work. A sure fire way to make someone not interested in their position.

By using a consultant, you gain flexibility. If you need 80 hours in one week of CFO time for a special project, you got it. The person isn’t burdened with routine accounting. If the next week you need 10 hours, then you get 10 hours. There is also the added benefit that hourly paid professionals typically work harder. They are there to do a job, and they are being paid to create specific deliverables.

2. Cost Savings
Startup’s have the tightest purse strings of any venture. Typically limited resources are available, with many demands for those resources. Trying to spread your limited capital to all areas without ignoring any one is a challenge when trying to make the wisest decisions, in a changing unknown environment.

Payroll with inevitably be your largest ongoing expense. Adding head count before the right time can be a large burden. Hiring just the right person costs money in itself. The job posting, the interviews, the investment in computer equipment, desks, and time of other employees to train alone can add up quick. One startup estimated it cost approximately $8,000 to add a new employee.

From a mathematical perspective, compare the 2 situations:

A full time CFO/Controller would make at a minimum $100,000 per year. Benefits and payroll taxes typically end up being 20-25% of the salary, ending with a number somewhere around $120,000 per year. Also remember this is the lowest potential cost, you won’t find many quality CFO’s for $100K a year.

Instead if you used a $75/hour consultant 20 hours a week on average the first year, that translates into 1,000 hours and $75,000 for the year. The company saves a substantial amount of money, enough to hire a full time bookkeeper if need be, and have the contract CFO focus exclusively on important issues.

3. Limited Candidates with the Experience Needed for a Full Time Position
Startup companies have different needs than a public company. Startups thrive on creative, energetic people with fresh ideas. Finding a seasoned pro that still has the entrepreneurial zest is a difficult proposition. While someone with 20 years of experience brings an unbeatable background, they tend to have difficulty adapting to the startup atmosphere. Creating 5 year plans, waterfall reports, adjusting quickly to strategy change aren’t engrained in someone with big corporate America thinking. 5 years from now is when you need that person.

Hiring a consultant, you are hiring a person who does this for a career. Working with startup companies is their passion, and they have exposure to several. A controller/CFO in a startup is focused on the numbers and how to make tweaks to operations to help improve. Working with the board of directors who is typically made up of venture capitalists, whose money you are spending by the day, is a different skill than a board of directors meeting for a public company.

4. Conclusion
To conclude, is this the case for every company? Of course not. At the same time, it should not be assumed that every company needs to hire on full time staff and then work them senseless with tasks that are better handled by an administrative person, solely for the purpose of getting your 40+ hours out of them. Using an outside contractor until it makes sense to bring on full time staff is a very effective method of managing the largest expense to a company, bringing on experience you most likely wouldn’t find in a more expensive full time person.