Hello everyone,
I wanted to put together a short video showing a fairly simple financial model built for a startup company. This gives an idea of what a model should include, the style, and most important how to model in assumptions.
Financial Model Sample - Video Tour
The video is a bit squished from the sides, but still gives you the idea.
Let me know if you have any questions, comments or need help with your own financial model!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
Friday, May 27, 2011
Wednesday, May 25, 2011
Podcast Episode 34 Available
Hey entrepreneurs, startups, CEO's and everyone inbetween - I just recorded a new episode of my FREE podcast "The Rogue CFO's Expert Guide to Launching a Startup".
Get your learn on. In this episode I talk about the management level positions, who they are, what they do, and most important if they are needed in the early stages.
Rogue CFO Episode 34
Check it out, and you can also subscribe via iTunes and stay on top of my podcast endeavors. Link on the page above, or in the iTunes store give a search for Rogue CFO.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
Get your learn on. In this episode I talk about the management level positions, who they are, what they do, and most important if they are needed in the early stages.
Rogue CFO Episode 34
Check it out, and you can also subscribe via iTunes and stay on top of my podcast endeavors. Link on the page above, or in the iTunes store give a search for Rogue CFO.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
Monday, May 23, 2011
Globalization & The Entrepreneur
Why US based businesses need to open their eyes.
One exciting aspect of the large web 3.0 push is the access entrepreneurs have worldwide to all the tools available online.
An interesting phenomenon though is that entrepreneurs outside of the United States have embraced the ability to expand globally much more than US based startups. This isn't to say no entrepreneurs have caught on to the globalization wave, although I think many are missing opportunities they could be capitalizing on worldwide.
I think we've forgotten the world when planning.
Thinking of the hundreds of startups I've talked with in the last year, only a handful come to mind as having a global business model. Certainly some models don't need a global perspective. A consulting firm which relies on face to face meetings is okay with a local growth strategy. Conversely, the social network looking to connect the local consumer with local businesses certainly would want to focus on proving their model in communities they are familiar with. But why not consider expanding to Canada down the road? 3 large cities are easily accessible, no language barriers, minimal cultural differences, and most important a market otherwise deprived of the overload and litany of dot com's we experience in the U.S.
Why not take the consumer luxury good auction site beyond U.S. soil? Why not appeal to aspiring writers in Africa? Certainly people in Australia could utilize an online education portal. It's a simple question of what is limiting your business model, and if there are no real barriers, would going global make sense? If not now, what about I'm a few years once you prove your business?
Maybe we are just greedy?
As well, I'm learning that many proven business models in the U.S. haven't made their way globally. This is even more mind boggling. Now we are not talking about a startup planning ahead for growth of their yet to be proven business, these are companies generating revenue, with 100% tunnel vision on a limited, albeit large U.S. market. As an example, one startup out of England is launching a much improved upon version of mint.com very soon. Features, user interface, capabilities and most important a value proposition reaching well beyond Mint's are all part of this up and coming companies model who I've been fortunate to work with. The obvious question to me was "why didn't a company like Mint.com plan ahead to tackle the global market? And why was this company out if the UK able to build something which puts a successful company to shame?" I don't claim that Mint.com is doing a bad job, or claim they didn't explore options. To a degree this also related to my theory that being the first mover isn't always best. Without a Mint.com would the UK company have had anything to springboard from and improve on?
My point instead is that there are plenty of greatly successful U.S. Companies go have somehow forgotten the rest of the world. At least consider your own continent - Canada and Mexico are very receptive to emerging businesses, and would welcome improved upon business models.
I'm proud to say only 1 startup I am CFO is U.S. based. Canada, India and Costa Rica are the home countries of 3 amazing companies I work with, not to mention the startups I've worked with on projects such as financial forecasts, business plans, investor presentations and cash forecasting. Japan, England, South Africa, China and Australia have all produced top notch entrepreneurs with business models not yet seen in the U.S.
There's money elsewhere than Silicon Valley
Along with globalization of the startup community, there is a likewise expansion of investor capital beyond Silicon Valley. As an example, the Canadian startup I am CFO for (a first year multimillion dollar revenue startup) is actually backed by an Indian investment firm. The Costa Rica firm has investors from Europe, including England and Germany. Another startup I've worked some with is funded out of Dubai. When sending out those executive summaries, expand your search worldwide and tap into investor networks anxious to find the best of the best.
In summary, set yourself apart and think, act and serve the world. You'll be amazed what it means for your startup.
As always, feel free to contact me, Chris Benjamin Rogue CFO with any questions at the below link.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
One exciting aspect of the large web 3.0 push is the access entrepreneurs have worldwide to all the tools available online.
An interesting phenomenon though is that entrepreneurs outside of the United States have embraced the ability to expand globally much more than US based startups. This isn't to say no entrepreneurs have caught on to the globalization wave, although I think many are missing opportunities they could be capitalizing on worldwide.
I think we've forgotten the world when planning.
Thinking of the hundreds of startups I've talked with in the last year, only a handful come to mind as having a global business model. Certainly some models don't need a global perspective. A consulting firm which relies on face to face meetings is okay with a local growth strategy. Conversely, the social network looking to connect the local consumer with local businesses certainly would want to focus on proving their model in communities they are familiar with. But why not consider expanding to Canada down the road? 3 large cities are easily accessible, no language barriers, minimal cultural differences, and most important a market otherwise deprived of the overload and litany of dot com's we experience in the U.S.
Why not take the consumer luxury good auction site beyond U.S. soil? Why not appeal to aspiring writers in Africa? Certainly people in Australia could utilize an online education portal. It's a simple question of what is limiting your business model, and if there are no real barriers, would going global make sense? If not now, what about I'm a few years once you prove your business?
Maybe we are just greedy?
As well, I'm learning that many proven business models in the U.S. haven't made their way globally. This is even more mind boggling. Now we are not talking about a startup planning ahead for growth of their yet to be proven business, these are companies generating revenue, with 100% tunnel vision on a limited, albeit large U.S. market. As an example, one startup out of England is launching a much improved upon version of mint.com very soon. Features, user interface, capabilities and most important a value proposition reaching well beyond Mint's are all part of this up and coming companies model who I've been fortunate to work with. The obvious question to me was "why didn't a company like Mint.com plan ahead to tackle the global market? And why was this company out if the UK able to build something which puts a successful company to shame?" I don't claim that Mint.com is doing a bad job, or claim they didn't explore options. To a degree this also related to my theory that being the first mover isn't always best. Without a Mint.com would the UK company have had anything to springboard from and improve on?
My point instead is that there are plenty of greatly successful U.S. Companies go have somehow forgotten the rest of the world. At least consider your own continent - Canada and Mexico are very receptive to emerging businesses, and would welcome improved upon business models.
I'm proud to say only 1 startup I am CFO is U.S. based. Canada, India and Costa Rica are the home countries of 3 amazing companies I work with, not to mention the startups I've worked with on projects such as financial forecasts, business plans, investor presentations and cash forecasting. Japan, England, South Africa, China and Australia have all produced top notch entrepreneurs with business models not yet seen in the U.S.
There's money elsewhere than Silicon Valley
Along with globalization of the startup community, there is a likewise expansion of investor capital beyond Silicon Valley. As an example, the Canadian startup I am CFO for (a first year multimillion dollar revenue startup) is actually backed by an Indian investment firm. The Costa Rica firm has investors from Europe, including England and Germany. Another startup I've worked some with is funded out of Dubai. When sending out those executive summaries, expand your search worldwide and tap into investor networks anxious to find the best of the best.
In summary, set yourself apart and think, act and serve the world. You'll be amazed what it means for your startup.
As always, feel free to contact me, Chris Benjamin Rogue CFO with any questions at the below link.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Sunday, May 22, 2011
Primer on Raising Capital
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.
Things to consider are:
How do they shake out?
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.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
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.
Things to consider are:
How do they shake out?
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.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
Saturday, May 21, 2011
Top 10 Mistakes When Dealing with Venture Capitalists
I've talked with several Venture Capitalists in my day, and have a pretty good connection to a few. That doesn't mean they'll write a check for a company I represent any easier, but it does mean I can be a bit more laid back and communicate with them. I wanted more information on what mistakes startups constantly make, and avoiding them would at least put them ahead of the pack when approaching VC's.
1. Making ridiculous claims
Ridiculous is in the eye of the beholder, but take a step back and do your best. Do you really think you are the next Google and are going to beat the pants off of them in your first year? Making statements like the above (and I've heard them time and time again from company's) immediately labels you as not grounded in reality and probably with a flawed business model.
2. Ask the VC to sign a NDA
VC's aren't in the business of stealing your ideas and passing them onto other companys to execute. A VC firm easily see 500+ business plans a year, and it would be a full time job facilitating the NDA process. Asking them to sign one is an amateur move, everyones idea is unique and VC's aren't going to take them.
3. Pitching To VC's who don't invest in your sector
People don't realize but VC's are really just investment managers. They aren't investing their money necessarily, often times its a fund created by the VC which others invest in, with set parameters. One of the parameters will be the industries a VC will invest in. Don't pitch a VC who only does biotech on your new service firm, they won't listen.
4. Sending all your material in one blast
Working with a VC will not just be a transaction, you are creating a relationship. Sell them on your company. Sending them a business plan, financial forecast, presentation, executive summary, margin reports, industry reports, etc. all at once will overwhelm them and probably go in the trash.
5. Playing hard to get
If you act as if other VC's are interested in you and it's only a matter of time before someone else picks you up, so this current VC better act fast, you probably just bought your way out the door. This isn't a late night commercial, be honest and don't trump up the demand for your company. VC's hold the power here, it's your job to impress them.
6. Management is 1 person
It's going to be difficult to run a company with 1 person. Sure, your idea might be great and you don't want to let others in on it, but that's more of a issue to a VC than a positive. Saying that you can't afford to pay others yet won't necessarily work either, since if your company is as great as you say, others should surely see this and work for equity. Success attracts success, and when you are running solo, it speaks volumes about your idea and yourself if you can't get others to work with you.
7. Sending "Dear Sir or Madam" emails
Immediately this can be read as "I'm sending this email to a laundry list of VC''s hoping for a few bites". If you really are interested in a VC, approach them directly, not through a mass email.
8. Mail a hard copy of a business plan
If you are a startup, especially a dot.com, and send a hard copy business plan, you've wasted your time and postage. Be progressive, and follow the VC's rules for submission, you can find them on their sites. If not, email an introduction and ask what their process is. Chances are it won't say "Mail your Business Plan to ....".
9. Focus primarily on the numbers
Yes it is an investment for the VC and you want to show that they will earn a substantial return for their investment. Realize though the process is a bit more involved than 1. Impress VC 2. Get check. The VC who does invest in your company will be working with you, will own a decent amount of equity, and will be involved. They look at management and marketing as much as the money.
10. Tell the VC they are only getting 5% of the company at most
The correct way to go about determining what you would ideally give up for an investment is to create a valuation for your business, and compare what investment you are seeking to the valuation. If your valuation is $5million and you want $1million investment, that isn't exactly 5%. Valuation will be something you and the VC will definitely negotiate, as they want a low of a valuation as possible and you as high as possible. If both parties are grounded in reality though, the 2 should not be too far off, and you can settle on a fair amount, and what amount of equity that means for their investment.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
1. Making ridiculous claims
Ridiculous is in the eye of the beholder, but take a step back and do your best. Do you really think you are the next Google and are going to beat the pants off of them in your first year? Making statements like the above (and I've heard them time and time again from company's) immediately labels you as not grounded in reality and probably with a flawed business model.
2. Ask the VC to sign a NDA
VC's aren't in the business of stealing your ideas and passing them onto other companys to execute. A VC firm easily see 500+ business plans a year, and it would be a full time job facilitating the NDA process. Asking them to sign one is an amateur move, everyones idea is unique and VC's aren't going to take them.
3. Pitching To VC's who don't invest in your sector
People don't realize but VC's are really just investment managers. They aren't investing their money necessarily, often times its a fund created by the VC which others invest in, with set parameters. One of the parameters will be the industries a VC will invest in. Don't pitch a VC who only does biotech on your new service firm, they won't listen.
4. Sending all your material in one blast
Working with a VC will not just be a transaction, you are creating a relationship. Sell them on your company. Sending them a business plan, financial forecast, presentation, executive summary, margin reports, industry reports, etc. all at once will overwhelm them and probably go in the trash.
5. Playing hard to get
If you act as if other VC's are interested in you and it's only a matter of time before someone else picks you up, so this current VC better act fast, you probably just bought your way out the door. This isn't a late night commercial, be honest and don't trump up the demand for your company. VC's hold the power here, it's your job to impress them.
6. Management is 1 person
It's going to be difficult to run a company with 1 person. Sure, your idea might be great and you don't want to let others in on it, but that's more of a issue to a VC than a positive. Saying that you can't afford to pay others yet won't necessarily work either, since if your company is as great as you say, others should surely see this and work for equity. Success attracts success, and when you are running solo, it speaks volumes about your idea and yourself if you can't get others to work with you.
7. Sending "Dear Sir or Madam" emails
Immediately this can be read as "I'm sending this email to a laundry list of VC''s hoping for a few bites". If you really are interested in a VC, approach them directly, not through a mass email.
8. Mail a hard copy of a business plan
If you are a startup, especially a dot.com, and send a hard copy business plan, you've wasted your time and postage. Be progressive, and follow the VC's rules for submission, you can find them on their sites. If not, email an introduction and ask what their process is. Chances are it won't say "Mail your Business Plan to ....".
9. Focus primarily on the numbers
Yes it is an investment for the VC and you want to show that they will earn a substantial return for their investment. Realize though the process is a bit more involved than 1. Impress VC 2. Get check. The VC who does invest in your company will be working with you, will own a decent amount of equity, and will be involved. They look at management and marketing as much as the money.
10. Tell the VC they are only getting 5% of the company at most
The correct way to go about determining what you would ideally give up for an investment is to create a valuation for your business, and compare what investment you are seeking to the valuation. If your valuation is $5million and you want $1million investment, that isn't exactly 5%. Valuation will be something you and the VC will definitely negotiate, as they want a low of a valuation as possible and you as high as possible. If both parties are grounded in reality though, the 2 should not be too far off, and you can settle on a fair amount, and what amount of equity that means for their investment.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Friday, May 20, 2011
Financial Model for your startup and half the going rate: the Rogue CFO Weekend Special
I've got a hankering to help out an aspiring startup with their financial model. Either building a model from scratch, or taking your existing one and refining it.
Obviously I am but one man, so the first company to act on this gets my time at half the normal rate. Send an email letting me know more about your business and needs and I can give you a quote, with samples and references as well.
Looking forward to working with a great startup over the next few days and bringing you that much closer to funding!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Obviously I am but one man, so the first company to act on this gets my time at half the normal rate. Send an email letting me know more about your business and needs and I can give you a quote, with samples and references as well.
Looking forward to working with a great startup over the next few days and bringing you that much closer to funding!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Thursday, May 19, 2011
Growing company in need of a U.S. based C-level management?
Hi everyone,
If you are a growth stage company, don’t have a CFO in place and a virtual, outsourced CFO would work for you then let's chat. I work exclusively with startups and growing companies who need C-level management on a part-time basis. Bring in an expert whose helped launch successful companies.
My passion is working with companies globally, so I prefer non- U.S. companies. I've been impressed time and again by the companies out there on other continents, and partnering with exciting businesses is what gets me up in the morning.
To learn more, take a look at my site: http://www.roguecfo.com. As well I offer plenty of free resources for startups & SME’s – several white papers, podcast, and audio interviews.
Looking forward to hearing from some tremendous companies & CEO’s!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
If you are a growth stage company, don’t have a CFO in place and a virtual, outsourced CFO would work for you then let's chat. I work exclusively with startups and growing companies who need C-level management on a part-time basis. Bring in an expert whose helped launch successful companies.
My passion is working with companies globally, so I prefer non- U.S. companies. I've been impressed time and again by the companies out there on other continents, and partnering with exciting businesses is what gets me up in the morning.
To learn more, take a look at my site: http://www.roguecfo.com. As well I offer plenty of free resources for startups & SME’s – several white papers, podcast, and audio interviews.
Looking forward to hearing from some tremendous companies & CEO’s!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Tuesday, May 17, 2011
Interim/Outsourced CFO for Growth Stage Companies - Ready to take your company to the next level?
Are you are a growth stage company and don’t have a CFO in place? I work exclusively with early stage and growing companies who need C-level management on a part-time basis. Ex-corporate CFO, 15 years in the game, I take companies from growth stage to IPO. No suits & ties, just actual results.
How can I help? Several ways - anything a CFO would normally do, I do. Working with the auditors, SEC, financial modeling, cash flow management, growth strategy, profit improvement, just to name a few.
To learn more, take a look at my site: http://www.roguecfo.com. If you think there'd be a synergy I encourage you to reach out and lets discuss.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
How can I help? Several ways - anything a CFO would normally do, I do. Working with the auditors, SEC, financial modeling, cash flow management, growth strategy, profit improvement, just to name a few.
To learn more, take a look at my site: http://www.roguecfo.com. If you think there'd be a synergy I encourage you to reach out and lets discuss.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Looking for Companies Seeking Board of Director Members
Recently I’ve gone beyond acting as a CFO for growing ventures, and joining the Board of Directors for a few companies instead. The main differences are whereas a CFO is an operational, hands on role directly involved in more day to day decisions, the Board oversees the direction of the company from the 10,000 foot level. It allows someone like myself to offer their knowledge and experience with startup & growth ventures to help out the current companies I work with. Avoiding pitfalls and minefields, best business practices and ideas & suggestions for growth are all topics that come up at the board meetings.
So if you are a growth stage company (typically favor ones with traction in place where I can add the most value and relevance) and are looking to round out your board with a seasoned CFO to bring a finance perspective to the team then get in touch. I’m always open for the discussion and to learn more about each other to see if there’s a synergy to be had.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
So if you are a growth stage company (typically favor ones with traction in place where I can add the most value and relevance) and are looking to round out your board with a seasoned CFO to bring a finance perspective to the team then get in touch. I’m always open for the discussion and to learn more about each other to see if there’s a synergy to be had.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Monday, May 16, 2011
Investor quality financial model - what does it take?
Over the years I’ve seen financial models from the worst to the best, and don’t feel comfortable building anything but the most finely tuned, high performance model possible. When looking at some past models I’ve built compared to other models I’ve seen, you can compare the quality to that of a finely tuned super car compared to a mass produced daily commuter car. It may be hard to believe, but once you experience having the best, you won’t know how you survived thus far without having a quality model.
What are a few differences?
1. Lack of central assumptions - embedding assumptions throughout multiple spreadsheets is a rookie move I see often. Makes the model NOT a model, just a complex spreadsheet.
2. Financials that don't tie. You have to uphold the basics of accounting, ie. a balance sheet that balances is a great start.
3. Unrealistic numbers. Expecting $20M in year one sales on a shoestring budget doesn't ring true, regardless of what industry you are in.
4. Lack of valuation/capitalization. Often times financial models show the end game, but you have all the tools in place to also compute if anything a rough valuation & capitalization structure. Show people you know what you are doing.
5. A forecast for no purpose other than to showcase investors. Ultimately the forecast is what you will live by, make sure it reflects reality. It's your benchmark investors will expect you to live up to.
If you want to impress investors and have a tool in house that outperforms anything you’ve seen elsewhere, send me an email. I’m looking to help those exciting, growing startups with passionate entrepreneurs at the helm. Invest in your business and it pays off in the long run.
Chris Benjamin,
Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
What are a few differences?
1. Lack of central assumptions - embedding assumptions throughout multiple spreadsheets is a rookie move I see often. Makes the model NOT a model, just a complex spreadsheet.
2. Financials that don't tie. You have to uphold the basics of accounting, ie. a balance sheet that balances is a great start.
3. Unrealistic numbers. Expecting $20M in year one sales on a shoestring budget doesn't ring true, regardless of what industry you are in.
4. Lack of valuation/capitalization. Often times financial models show the end game, but you have all the tools in place to also compute if anything a rough valuation & capitalization structure. Show people you know what you are doing.
5. A forecast for no purpose other than to showcase investors. Ultimately the forecast is what you will live by, make sure it reflects reality. It's your benchmark investors will expect you to live up to.
If you want to impress investors and have a tool in house that outperforms anything you’ve seen elsewhere, send me an email. I’m looking to help those exciting, growing startups with passionate entrepreneurs at the helm. Invest in your business and it pays off in the long run.
Chris Benjamin,
Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Sunday, May 15, 2011
You Need an Investor Package. Rogue CFO is here to help!
Need an Investor Package (business plan, financial model, exec summary & PowerPoint presentation)?
Hi everyone,
In my time in between CFO'ing for several startups, I like to take on project work in the startup realm. Usually it's putting together term sheets, valuations, financial analysis, etc. In the past though what I really enjoyed most was helping a startup go from 0 to 100 by working with them to create an investor quality full package - business plan, financial model, Powerpoint presentation and 1-2 page executive summary. Something to benchmark your company against, as well as something to demonstrate to potential investors as well as potential partners & employees you are both serious about your endeavor and have a solid, concrete plan of action.
So I'm throwing my hat in the ring - if you are a small to mid sized growing startup and need someone whose been around the block in the startup and investor world for several years to jump in and lend a hand, send an email and lets discuss.
You can learn more about me and what I've done on my site: www.roguecfo.com , and if you have a bit of time, check out some of my free resources on the media page, as well as my free weekly podcast: roguecfo.podomatic.com - 10 to 20 minute audio show where I discuss various topics of interest to entrepreneurs.
A few FAQS -
1. I do not help in the capital raising process except for companies I'm engaged with as ongoing CFO
2. Yes it does cost money to hire me as a CFO, no equity only or post funding payments :)
3. Yes I know the definition of Rogue. If you appreciate the idea of a CFO who bucks the normal conventions of a CFO who is only numbers-minded, comes on board and makes a difference, and isn't your normal suit & tie CFO, then you get it. If it's not your style, no worries just don't bother to email me and let me know why you aren't interested.
4. Yes if you have materials already and just need someone to review them to make sure they make the investor grade, happy to do that as well.
Hope to hear from all those amazing, dynamic, world changing companies out there!
Chris Benjamin
Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Hi everyone,
In my time in between CFO'ing for several startups, I like to take on project work in the startup realm. Usually it's putting together term sheets, valuations, financial analysis, etc. In the past though what I really enjoyed most was helping a startup go from 0 to 100 by working with them to create an investor quality full package - business plan, financial model, Powerpoint presentation and 1-2 page executive summary. Something to benchmark your company against, as well as something to demonstrate to potential investors as well as potential partners & employees you are both serious about your endeavor and have a solid, concrete plan of action.
So I'm throwing my hat in the ring - if you are a small to mid sized growing startup and need someone whose been around the block in the startup and investor world for several years to jump in and lend a hand, send an email and lets discuss.
You can learn more about me and what I've done on my site: www.roguecfo.com , and if you have a bit of time, check out some of my free resources on the media page, as well as my free weekly podcast: roguecfo.podomatic.com - 10 to 20 minute audio show where I discuss various topics of interest to entrepreneurs.
A few FAQS -
1. I do not help in the capital raising process except for companies I'm engaged with as ongoing CFO
2. Yes it does cost money to hire me as a CFO, no equity only or post funding payments :)
3. Yes I know the definition of Rogue. If you appreciate the idea of a CFO who bucks the normal conventions of a CFO who is only numbers-minded, comes on board and makes a difference, and isn't your normal suit & tie CFO, then you get it. If it's not your style, no worries just don't bother to email me and let me know why you aren't interested.
4. Yes if you have materials already and just need someone to review them to make sure they make the investor grade, happy to do that as well.
Hope to hear from all those amazing, dynamic, world changing companies out there!
Chris Benjamin
Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Qualities of Board of Director Members
As a growing company, establishing a well rounded Board of Directors is an important step towards your emersion from startup phase into a full-fledged company. It’s not often thought about in the early stages, but finding qualified professionals who are outside of the day to day operations of your company who can add value can be a tricky task.
Trickiness aside, what makes for an ideal board of director member? Below are the qualities I look for in both forming boards for clients, or for boards I’m looking to join.
Commitment
Being committed to the organization and the ideals it represents is an ideal quality. Even if the individual has great skills and potential, if the level of commitment and concern for the organization's well-being is low, the person might not be able to use these skills to the advantage of the organization. Commitment in terms of doing what they say they will do also counts, as empty promises on the part of a board member only weaken the decision-making powers of the group.
Responsibility
Members of the board should know the responsibilities that they are or will be holding. This role is not merely a position that can be taken lightly. A board of directors is the guiding force for the organization, and must ensure the goals are met, and initiative is a key to knowing what must be done next.
Impartiality
Biases are not beneficial to the organization and its members. Having a member of the board think about his own prejudices or biases cloud his judgment and ultimately weaken the decision-making process. Board members should put the welfare of the whole organization first. Open mindedness should play in this aspect, for there are a lot of ideas for the organization's advantage that are limited by being selfish and biased.
Variety/Diversity
Having people in the board from only one expertise would be a very limiting factor. A board should have representation from various industries or schools of thought. Diversity among the board members paves the way for proper deliberation and decisions, from various points of view, but not necessarily to the point of total clashes.
Integrity
Integrity plays a big part in how an individual member handles dilemmas and hard decisions that involve ethical reasoning. The board member must have a firm stand on things, and principles shouldn't be based on weak reasoning. The individual should choose to discipline what is to be disciplined, give credit to those who deserve it, and call black as black and white as white.
In Summary
There are no hard rules to choosing the members of the board, since organizations differ in goals, views and even structures. However, these simple qualities are important in making sure a board of directors can drive a company, foundation or any organization into success in its chosen field.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Trickiness aside, what makes for an ideal board of director member? Below are the qualities I look for in both forming boards for clients, or for boards I’m looking to join.
Commitment
Being committed to the organization and the ideals it represents is an ideal quality. Even if the individual has great skills and potential, if the level of commitment and concern for the organization's well-being is low, the person might not be able to use these skills to the advantage of the organization. Commitment in terms of doing what they say they will do also counts, as empty promises on the part of a board member only weaken the decision-making powers of the group.
Responsibility
Members of the board should know the responsibilities that they are or will be holding. This role is not merely a position that can be taken lightly. A board of directors is the guiding force for the organization, and must ensure the goals are met, and initiative is a key to knowing what must be done next.
Impartiality
Biases are not beneficial to the organization and its members. Having a member of the board think about his own prejudices or biases cloud his judgment and ultimately weaken the decision-making process. Board members should put the welfare of the whole organization first. Open mindedness should play in this aspect, for there are a lot of ideas for the organization's advantage that are limited by being selfish and biased.
Variety/Diversity
Having people in the board from only one expertise would be a very limiting factor. A board should have representation from various industries or schools of thought. Diversity among the board members paves the way for proper deliberation and decisions, from various points of view, but not necessarily to the point of total clashes.
Integrity
Integrity plays a big part in how an individual member handles dilemmas and hard decisions that involve ethical reasoning. The board member must have a firm stand on things, and principles shouldn't be based on weak reasoning. The individual should choose to discipline what is to be disciplined, give credit to those who deserve it, and call black as black and white as white.
In Summary
There are no hard rules to choosing the members of the board, since organizations differ in goals, views and even structures. However, these simple qualities are important in making sure a board of directors can drive a company, foundation or any organization into success in its chosen field.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Saturday, May 14, 2011
In need of a Financial Model? Rogue CFO is here to help!
It's the weekend again, and the Rogue CFO is looking to help out some lucky startup or growth stage company.
I've been promoting my "half price financial model weekends" for a few weeks now, and they've been a huge success. Why only the weekends? Because I'm busy being a CFO to several growth stage companies during the week.
So if you are like most startups - great at what you do but not an Excel jockey and a bit lost when it comes to putting together a financial forecast, one that is investor worthy no less, send an email. Let me know a bit more about you and your company, where you are at, and I'll return with more info about me, some samples of what I can do, and a time frame. If all is good, great lets rock and roll!
Looking forward to working with a great startup over the next few days and bringing you that much closer to funding!
Chris Benjamin, Rogue CFO
www.RogueCFO.com
chrisb@roguecfo.com
I've been promoting my "half price financial model weekends" for a few weeks now, and they've been a huge success. Why only the weekends? Because I'm busy being a CFO to several growth stage companies during the week.
So if you are like most startups - great at what you do but not an Excel jockey and a bit lost when it comes to putting together a financial forecast, one that is investor worthy no less, send an email. Let me know a bit more about you and your company, where you are at, and I'll return with more info about me, some samples of what I can do, and a time frame. If all is good, great lets rock and roll!
Looking forward to working with a great startup over the next few days and bringing you that much closer to funding!
Chris Benjamin, Rogue CFO
www.RogueCFO.com
chrisb@roguecfo.com
Thursday, May 12, 2011
Outsourcing Executives – Why It’s A Smart Idea
As an outsourced executive, I’ve been asked what are some of the benefits of using someone like myself to fill an executive role compared to bringing someone on full time, in house.
Cost – A full time CFO who is worth having on board (not a startup rookie, you want a seasoned professional) will command a 6 figure salary, benefits, options, etc. Chances are you don’t have the cash flow or the need for a full time, 40 hour a week executive. On average, my startup clients need CFO services 20 hours/month. Far more affordable.
Expertise – an outsourced executive is experienced with working with several clients and gaining the knowledge of different industries. Rather than hiring the full time executive whose maybe worked at 1 or 2 other companies and has a limited scope of information & experience, hire someone who has been around the block with multiple startups and industries. The mistakes other companies made and the lessons learned from those can be invaluable in helping your company.
Commitment – While it’s not against the law to hire and fire employees in most states, lets be honest. It’s much more difficult to be flexible and adjust your staffing model with full time employees. It doesn’t look good to the other employees if you have to let a few go. Of course we’d all like to assume your startup will be as wildly successful as you are hoping, but in reality very few experience the growth boom they anticipate. It’s much easier to have a an outside consultant under contract on board, where that contract can be modified to fit your needs vs. the full time employee you have to fire because you can no longer afford them, and their benefits.
Availability – I can’t say this will apply to all outside contractors, but speaking for myself, you have a 7 day a week, 24 hour a day executive at your disposal. Fire drills happen in the startup world (urgent investor request, change in the revenue model, responding to competition, etc), and I’m on board to make your company a success, weekends, evenings and all.
The biggest hang up’s I’ve typically experienced about an outsourced team is the lack of face to face time, and how that will affect the efficiencies. Guys, it’s a technology age. Skype, email, phone, online virtual drives – there’s really no excuse. Certainly in some circumstances I can see the need for a complete in-house team, but think outside the box a little and determine if the benefits outweigh any small perceived downfalls.
If you’d like to discuss further or see some case studies of clients of mine and how I’ve helped them succeed, reach out and get in touch.
Chris Benjamin, Rogue CFO
www.RogueCFO.com
chrisb@roguecfo.com
Cost – A full time CFO who is worth having on board (not a startup rookie, you want a seasoned professional) will command a 6 figure salary, benefits, options, etc. Chances are you don’t have the cash flow or the need for a full time, 40 hour a week executive. On average, my startup clients need CFO services 20 hours/month. Far more affordable.
Expertise – an outsourced executive is experienced with working with several clients and gaining the knowledge of different industries. Rather than hiring the full time executive whose maybe worked at 1 or 2 other companies and has a limited scope of information & experience, hire someone who has been around the block with multiple startups and industries. The mistakes other companies made and the lessons learned from those can be invaluable in helping your company.
Commitment – While it’s not against the law to hire and fire employees in most states, lets be honest. It’s much more difficult to be flexible and adjust your staffing model with full time employees. It doesn’t look good to the other employees if you have to let a few go. Of course we’d all like to assume your startup will be as wildly successful as you are hoping, but in reality very few experience the growth boom they anticipate. It’s much easier to have a an outside consultant under contract on board, where that contract can be modified to fit your needs vs. the full time employee you have to fire because you can no longer afford them, and their benefits.
Availability – I can’t say this will apply to all outside contractors, but speaking for myself, you have a 7 day a week, 24 hour a day executive at your disposal. Fire drills happen in the startup world (urgent investor request, change in the revenue model, responding to competition, etc), and I’m on board to make your company a success, weekends, evenings and all.
The biggest hang up’s I’ve typically experienced about an outsourced team is the lack of face to face time, and how that will affect the efficiencies. Guys, it’s a technology age. Skype, email, phone, online virtual drives – there’s really no excuse. Certainly in some circumstances I can see the need for a complete in-house team, but think outside the box a little and determine if the benefits outweigh any small perceived downfalls.
If you’d like to discuss further or see some case studies of clients of mine and how I’ve helped them succeed, reach out and get in touch.
Chris Benjamin, Rogue CFO
www.RogueCFO.com
chrisb@roguecfo.com
Financial Projections - Bring Out The Crystal Ball
Financial Projections - Bring Out The Crystal Ball
By Chris Benjamin, Rogue CFO (www.roguecfo.com)
Financial projections, the backbone of any new venture. When all is said and done, the business plan polished, the website up, the office space rented, what most investors and outsiders will focus on is the numbers. Will the company make money? Are the projections realistic? When does it break even?
So how do you put together a reasonable, yet conservative, yet attainable, yet attractive 5 year financial forecast? Seems like an impossible feat to balance all the requirements. With reasonable assumptions, a straight forward model that captures all of the moving pieces of the company, and easy to change inputs that flow through the model, you will be well on your way to demonstrating the potential of your venture.
Assumptions - where it all happens
The use of an assumptions tab, one central location for all inputs into the model, will make your model dynamic, easy to change, professional, and understandable. Someone can look at one page, see all the inputs and how they relate to the final numbers, and quickly decide if everything looks reasonable.
When the assumptions are built properly, you will have put thought into every line on the P&L and Balance Sheet, as well as have some sense as to any investment funding needed, what amount of the equity you are willing to sacrifice, how long it would last, and what the future funding requirements will be. All going to plan of course.
Common Modeling Mistakes
Below is a list of things I see time and again in others models. Not that everyone should be an Excel expert, but avoiding these pitfalls will add to the credibility of your model, and ease of use.
Embedding data into formulas
I've seen lots of models built by other financial types as well as entrepreeneurs. The biggest mistake that is quickly apparent is embedding data into formulas. If revenue will be $20 per unit, don't hardcode $20 into each months revenue formula. Instead an input on an Assumptions tab would be Revenue Per Unit: $20, and the sales calculations all refer to this cell. Down the road when you realize you want to charge $25 per unit, it's a lot easier to change 1 cell vs. 12 months X 5 years. Also hard coding numbers into formulas creates an inevitable error down the road when some formula doesn't get updated like it should.
Projecting over a million in Revenues Year 1
I've yet to see a startup hit over $1 million in revenues in its first year. Investors have been around the block, and the further north of $1 million your projections go for year one, the less credible they become.
The financials all have to tie together in the end
Accounting 101: Debits = Credits. Balance sheets have to balance, cash flow statements have to reflect the same cash balances that are on the balance sheet, net income needs to match the equity section, etc. A properly built model will link all financial reports together in a way that when a change is made, all financial reports reflect the change and stay in balance relative to the others.
For example, if you change an expected investment of $100,000 to $200,000, not only does the equity section change on the balance sheet, your cash position as well as your cash flow statement would also.
Presentation goes a long way
Excel is a powerful tool, make use of all the formatting capabilities. It is difficult to follow spreadsheets that have inconsistent formatting tab to tab, use several colored cells, several fonts, or worse no distinguishing headings. When Revenue, COGS, Operating Expenses and all the subtotals are one long list with no bolding, offsetting, subtotal lines, etc, it looks unprofessional and difficult to really grasp what the results are.
As always, if you have questions, concerns, or need to call in the pro to help you build your financial model, get in touch with me, Chris Benjamin the Rogue CFO!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
By Chris Benjamin, Rogue CFO (www.roguecfo.com)
Financial projections, the backbone of any new venture. When all is said and done, the business plan polished, the website up, the office space rented, what most investors and outsiders will focus on is the numbers. Will the company make money? Are the projections realistic? When does it break even?
So how do you put together a reasonable, yet conservative, yet attainable, yet attractive 5 year financial forecast? Seems like an impossible feat to balance all the requirements. With reasonable assumptions, a straight forward model that captures all of the moving pieces of the company, and easy to change inputs that flow through the model, you will be well on your way to demonstrating the potential of your venture.
Assumptions - where it all happens
The use of an assumptions tab, one central location for all inputs into the model, will make your model dynamic, easy to change, professional, and understandable. Someone can look at one page, see all the inputs and how they relate to the final numbers, and quickly decide if everything looks reasonable.
When the assumptions are built properly, you will have put thought into every line on the P&L and Balance Sheet, as well as have some sense as to any investment funding needed, what amount of the equity you are willing to sacrifice, how long it would last, and what the future funding requirements will be. All going to plan of course.
Common Modeling Mistakes
Below is a list of things I see time and again in others models. Not that everyone should be an Excel expert, but avoiding these pitfalls will add to the credibility of your model, and ease of use.
Embedding data into formulas
I've seen lots of models built by other financial types as well as entrepreeneurs. The biggest mistake that is quickly apparent is embedding data into formulas. If revenue will be $20 per unit, don't hardcode $20 into each months revenue formula. Instead an input on an Assumptions tab would be Revenue Per Unit: $20, and the sales calculations all refer to this cell. Down the road when you realize you want to charge $25 per unit, it's a lot easier to change 1 cell vs. 12 months X 5 years. Also hard coding numbers into formulas creates an inevitable error down the road when some formula doesn't get updated like it should.
Projecting over a million in Revenues Year 1
I've yet to see a startup hit over $1 million in revenues in its first year. Investors have been around the block, and the further north of $1 million your projections go for year one, the less credible they become.
The financials all have to tie together in the end
Accounting 101: Debits = Credits. Balance sheets have to balance, cash flow statements have to reflect the same cash balances that are on the balance sheet, net income needs to match the equity section, etc. A properly built model will link all financial reports together in a way that when a change is made, all financial reports reflect the change and stay in balance relative to the others.
For example, if you change an expected investment of $100,000 to $200,000, not only does the equity section change on the balance sheet, your cash position as well as your cash flow statement would also.
Presentation goes a long way
Excel is a powerful tool, make use of all the formatting capabilities. It is difficult to follow spreadsheets that have inconsistent formatting tab to tab, use several colored cells, several fonts, or worse no distinguishing headings. When Revenue, COGS, Operating Expenses and all the subtotals are one long list with no bolding, offsetting, subtotal lines, etc, it looks unprofessional and difficult to really grasp what the results are.
As always, if you have questions, concerns, or need to call in the pro to help you build your financial model, get in touch with me, Chris Benjamin the Rogue CFO!
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Wednesday, May 11, 2011
The Path to Launching A Successful Startup
The Path to Launching A Successful Startup
By Chris Benjamin, Rogue CFO (www.roguecfo.com)
The Path
1. Vision
You are the visionary. You have an amazing idea, and just know it will be a huge success. Your head can't keep up with the ideas flowing through your head. Online research, building a website, marketing, how much to charge. The list goes on. So much to do, and none of it can be done fast enough.
As entrepreneurs, we've all been there. Nothing in life could be more exciting. Now is the time to take this seed idea and provide all of the ingredients to make it grow into a sustainable venture that exceeds your vision.
I am not one for quotes, although I always take this one to heart:
"Do not worry if you have built your castles in the air. They are where they should be. Now put the foundations under them." - Henry David Thoreau
Congratulations, you are among the very elite who have the gusto to turn visions into reality.
2. Plan
Planning is everything. You need a framework as a foundation for your venture. It may all be in your head, but relaying your vision to another person is best done through a concise plan. It also forces you to answer the tough questions that maybe you've avoided. How much money do you need to launch? Who is your market, and where are they located? What is your value proposition? Convince everyone that you have an amazing idea.
Business Plans
Conceptualizing is best done through the traditional Business Plan. While there are many business plan templates and software packages available, there is one problem. They are very "fill in the blank", and it shows. No matter how much you smooth out the rough edges, a seasoned pro will take one look at your plan and know it was done through Q&A.
Why is this bad? It's too easy to avoid the questions you don't want to answer, and no one business plan should look like another. Focus on what the key points are. If the management team is what will make this ship sail, then we need to make sure that their experience is emphasized. If marketing is the key play in why this will take off, let's explore that and make sure the marketing plan is solid & thorough.
Whether you have a business plan already written and need advice, or you have nothing on paper and want to put together a plan that will showcase your idea, I can help.
Financial Projections
A requirement of any plan is a demonstration that the venture will make money. There are standard financial forecasts any plan should include, as well other financial data that not everyone else will but adds a lot of value to the reader. I am a CFO by trade, and financial projections are one of my strongest skill sets.
Profit & Loss Projections for 3-5 Years
Year 1 Balance Sheet by Month
Year 1 Cash Flow Statement by Month
Capitalization Table
Time line
Break Even Analysis
Best Case/Worst Case Analysis
Assumptions
3. Launch
Now that the plan is set, the vision is crystal clear, and team is ready, it's time to launch. Launching can take many forms, but is defined as taking your idea to the public, and creating a mechanism for someone to purchase your good or service.
Careful management of your resources and being dynamic are key. You want to be able to grow according to the plan, and want to be fluid enough to change quickly to your results after you launch. The business plan is a guide, but not a manual. Recognizing what is working and what is not, and making the appropriate changes will result in reaching your next level.
How can I help you here? I've been in several startup environments, and there is no set operational game plan to follow. It's a very fun, energetic, and exciting time. Use my experience to help guide your decision making, so that what your business plan dictates becomes a reality.
4. Grow
You've launched your venture, and it's becoming an instant success. Now is time to manage the company so it grows in the direction you envisioned, and there are several key factors to accomplishing this task. I can help guide you in several areas, although my expertise through education & experience would be to fill the roll of contract CFO (Chief Financial Officer).
~ CFO
What does a CFO do for your company? A lot. A short list follows of potential areas I can add value as we transition into the day to day operation & growth of the company.
All Accounting - journal entries, reconciliations, meeting deadlines, tracking expenses & revenue
Financial Reporting - Profit & Loss, Balance Sheet, Cash Flow Statements, and much more
Business Intelligence - intelligent interpretation of how you are performing
Budget & Forecasting - using the drivers in your industry, develop realistic forecasts & budgets
Cash management - especially important for a start up or small business
Board of Director Reporting - if you have investors, they will want status updates & regular meetings
Guidance, Strategy & Advice Consulting. Any way I can add value I will.
5. Choose
Now is your time to choose. You can continue to grow the company, and let your vision become your life's ambition. You've succeeded and want to evolve to a new higher goal. In some senses, you begin again with the new Vision and go through the Path again.
Others may have other ventures they want to pursue. They accomplished their goal, and created a sustainable, profitable, growing company. It's now time to be rewarded for your hard work, and use the value you've created to go in another direction.
Often referred to as the Exit Strategy, if you had capital investors, now is the time to let them be rewarded as well for their investment and belief in what you have accomplished.
Determining the exact exit strategy will involve a combination of several factors.
What is best for the company
What are your goals (stay & operate the business, become a passive investor, or completely liquidate)
What are the arrangements with the capital investors
What are the future plans for the company
Depending on how the agreement was structured, there are in general only a few exit strategies.
Merger or Acquistion with/by another company (M&A)
Go Public on a stock market
Liquidate investors and continue to operate the company
Within each of these is a myriad of possibilities. We will work together to structure an exit strategy that is in everyone's best interest.
By Chris Benjamin, Rogue CFO (www.roguecfo.com)
The Path
1. Vision
You are the visionary. You have an amazing idea, and just know it will be a huge success. Your head can't keep up with the ideas flowing through your head. Online research, building a website, marketing, how much to charge. The list goes on. So much to do, and none of it can be done fast enough.
As entrepreneurs, we've all been there. Nothing in life could be more exciting. Now is the time to take this seed idea and provide all of the ingredients to make it grow into a sustainable venture that exceeds your vision.
I am not one for quotes, although I always take this one to heart:
"Do not worry if you have built your castles in the air. They are where they should be. Now put the foundations under them." - Henry David Thoreau
Congratulations, you are among the very elite who have the gusto to turn visions into reality.
2. Plan
Planning is everything. You need a framework as a foundation for your venture. It may all be in your head, but relaying your vision to another person is best done through a concise plan. It also forces you to answer the tough questions that maybe you've avoided. How much money do you need to launch? Who is your market, and where are they located? What is your value proposition? Convince everyone that you have an amazing idea.
Business Plans
Conceptualizing is best done through the traditional Business Plan. While there are many business plan templates and software packages available, there is one problem. They are very "fill in the blank", and it shows. No matter how much you smooth out the rough edges, a seasoned pro will take one look at your plan and know it was done through Q&A.
Why is this bad? It's too easy to avoid the questions you don't want to answer, and no one business plan should look like another. Focus on what the key points are. If the management team is what will make this ship sail, then we need to make sure that their experience is emphasized. If marketing is the key play in why this will take off, let's explore that and make sure the marketing plan is solid & thorough.
Whether you have a business plan already written and need advice, or you have nothing on paper and want to put together a plan that will showcase your idea, I can help.
Financial Projections
A requirement of any plan is a demonstration that the venture will make money. There are standard financial forecasts any plan should include, as well other financial data that not everyone else will but adds a lot of value to the reader. I am a CFO by trade, and financial projections are one of my strongest skill sets.
Profit & Loss Projections for 3-5 Years
Year 1 Balance Sheet by Month
Year 1 Cash Flow Statement by Month
Capitalization Table
Time line
Break Even Analysis
Best Case/Worst Case Analysis
Assumptions
3. Launch
Now that the plan is set, the vision is crystal clear, and team is ready, it's time to launch. Launching can take many forms, but is defined as taking your idea to the public, and creating a mechanism for someone to purchase your good or service.
Careful management of your resources and being dynamic are key. You want to be able to grow according to the plan, and want to be fluid enough to change quickly to your results after you launch. The business plan is a guide, but not a manual. Recognizing what is working and what is not, and making the appropriate changes will result in reaching your next level.
How can I help you here? I've been in several startup environments, and there is no set operational game plan to follow. It's a very fun, energetic, and exciting time. Use my experience to help guide your decision making, so that what your business plan dictates becomes a reality.
4. Grow
You've launched your venture, and it's becoming an instant success. Now is time to manage the company so it grows in the direction you envisioned, and there are several key factors to accomplishing this task. I can help guide you in several areas, although my expertise through education & experience would be to fill the roll of contract CFO (Chief Financial Officer).
~ CFO
What does a CFO do for your company? A lot. A short list follows of potential areas I can add value as we transition into the day to day operation & growth of the company.
All Accounting - journal entries, reconciliations, meeting deadlines, tracking expenses & revenue
Financial Reporting - Profit & Loss, Balance Sheet, Cash Flow Statements, and much more
Business Intelligence - intelligent interpretation of how you are performing
Budget & Forecasting - using the drivers in your industry, develop realistic forecasts & budgets
Cash management - especially important for a start up or small business
Board of Director Reporting - if you have investors, they will want status updates & regular meetings
Guidance, Strategy & Advice Consulting. Any way I can add value I will.
5. Choose
Now is your time to choose. You can continue to grow the company, and let your vision become your life's ambition. You've succeeded and want to evolve to a new higher goal. In some senses, you begin again with the new Vision and go through the Path again.
Others may have other ventures they want to pursue. They accomplished their goal, and created a sustainable, profitable, growing company. It's now time to be rewarded for your hard work, and use the value you've created to go in another direction.
Often referred to as the Exit Strategy, if you had capital investors, now is the time to let them be rewarded as well for their investment and belief in what you have accomplished.
Determining the exact exit strategy will involve a combination of several factors.
What is best for the company
What are your goals (stay & operate the business, become a passive investor, or completely liquidate)
What are the arrangements with the capital investors
What are the future plans for the company
Depending on how the agreement was structured, there are in general only a few exit strategies.
Merger or Acquistion with/by another company (M&A)
Go Public on a stock market
Liquidate investors and continue to operate the company
Within each of these is a myriad of possibilities. We will work together to structure an exit strategy that is in everyone's best interest.
Tuesday, May 10, 2011
Business Plan Software - Use With Caution
Here you are, ready to start your new venture. You know you need a business plan early on in order to talk to investors, potential partners, and entice people to work for you. You disregard the naysayers who tell you a business plan isn't needed (a smart move on your part, these people just want to sell you some other new fangled way to get funding), and it's time to look at your options.
Option 1: Do it all yourself.
Definitely the most affordable option, and as we all know startups are often not in a position to pony up for anything beyond the bare necessaties. Cost savings will be good, but quality will suffer if you don't know what you are doing. If you go this route, try to have someone proof your fine work, hopefully someone with experience. Occasionally, if I'm feeling giving and have some time on my hands, I'll offer to review a business plan for free, and give the entrepreneur some honest feedback for them to incorporate. Feel free to email me your plan for a complimentary review. chrisb@roguecfo.com
Option 2: Hire a professional (i.e. Rogue CFO)
The most expensive option, and it won't mean you are off the hook as far as working on the plan. It is YOUR business after all, and I'm not a mind reader. It will become a collaborate effort, with me doing the bulk of the writing, and asking you questions to elicit the information needed. A professional, such as me, knows what information an investor wants to see, doesn't want to see, and how to emphasis your strengths, and how to put together a professional presentation. More about that later.
Option 3: Business plan software
This is where I give my 2 cents on why I'm not a huge fan of using business plan software.
First off, you have to understand how business plan software works in general. Typically you pick your industry, and then enter a series of information about your company. You are then guided through a Q&A session, essentially populating the common sections of a business plan. Something to the effect of "Who are your competitors?" might be a question. The software then takes your answers, organizes them in a standard business plan, and there you have it. You may even pick a fancy template so the headers look sharp. Not a bad deal for $100 investment it would seem.
The problem is most people call it quits after that. Job well done, you now have a business plan right? If you look at a business plan generated out of a software package it's very evident the approach you took. The presentation couldn't be more canned. It'll read very choppy. It's not like the software takes what you tell it, elaborates on it, picks what is most relevant, asks you to expand on answers, etc. It feels very much like a question & answer document, and essentially tells people "I couldn't be bothered to do a professional business plan, and basically did this because I had to." That's my take when someone gives me one in that form, and I've already written them off.
You also don't get to shine in areas you should. Say your management team is top gun, you'd want to expand on that. Maybe you have some specialized financial information you want to include, but weren't prompted for it. Maybe your marketing plan is so diverse, so expanded that you simply can't capture it by answering a few questions. Business plan software gives equal weighting to all sections, essentially just walking you through the standard format.
My suggestion is if you go the business plan software route, compare the output to a professionally written plan. Use the software output as a starting point, not an end product. As well, your option would be to take the output and then go to a professional to revise as needed. You've laid the groundwork, now it is less expensive to have someone expand and elaborate on your plan, and put it in a usable condition.
I've written, from scratch I may add, a whole lot of business plans. Think of me as the software, but with the ability to take what you say, probe deeper, explain what typically should be included or excluded, reorganize the sections, focus on the important parts, and polish up a plan that is investor worthy. I'm the software that has sat with angel investors and venture capitalists, done presentations, spent time in the board room, and gotten companies funded.
As always, feel free to contact me, Chris Benjamin Rogue CFO with any questions at the below link.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Option 1: Do it all yourself.
Definitely the most affordable option, and as we all know startups are often not in a position to pony up for anything beyond the bare necessaties. Cost savings will be good, but quality will suffer if you don't know what you are doing. If you go this route, try to have someone proof your fine work, hopefully someone with experience. Occasionally, if I'm feeling giving and have some time on my hands, I'll offer to review a business plan for free, and give the entrepreneur some honest feedback for them to incorporate. Feel free to email me your plan for a complimentary review. chrisb@roguecfo.com
Option 2: Hire a professional (i.e. Rogue CFO)
The most expensive option, and it won't mean you are off the hook as far as working on the plan. It is YOUR business after all, and I'm not a mind reader. It will become a collaborate effort, with me doing the bulk of the writing, and asking you questions to elicit the information needed. A professional, such as me, knows what information an investor wants to see, doesn't want to see, and how to emphasis your strengths, and how to put together a professional presentation. More about that later.
Option 3: Business plan software
This is where I give my 2 cents on why I'm not a huge fan of using business plan software.
First off, you have to understand how business plan software works in general. Typically you pick your industry, and then enter a series of information about your company. You are then guided through a Q&A session, essentially populating the common sections of a business plan. Something to the effect of "Who are your competitors?" might be a question. The software then takes your answers, organizes them in a standard business plan, and there you have it. You may even pick a fancy template so the headers look sharp. Not a bad deal for $100 investment it would seem.
The problem is most people call it quits after that. Job well done, you now have a business plan right? If you look at a business plan generated out of a software package it's very evident the approach you took. The presentation couldn't be more canned. It'll read very choppy. It's not like the software takes what you tell it, elaborates on it, picks what is most relevant, asks you to expand on answers, etc. It feels very much like a question & answer document, and essentially tells people "I couldn't be bothered to do a professional business plan, and basically did this because I had to." That's my take when someone gives me one in that form, and I've already written them off.
You also don't get to shine in areas you should. Say your management team is top gun, you'd want to expand on that. Maybe you have some specialized financial information you want to include, but weren't prompted for it. Maybe your marketing plan is so diverse, so expanded that you simply can't capture it by answering a few questions. Business plan software gives equal weighting to all sections, essentially just walking you through the standard format.
My suggestion is if you go the business plan software route, compare the output to a professionally written plan. Use the software output as a starting point, not an end product. As well, your option would be to take the output and then go to a professional to revise as needed. You've laid the groundwork, now it is less expensive to have someone expand and elaborate on your plan, and put it in a usable condition.
I've written, from scratch I may add, a whole lot of business plans. Think of me as the software, but with the ability to take what you say, probe deeper, explain what typically should be included or excluded, reorganize the sections, focus on the important parts, and polish up a plan that is investor worthy. I'm the software that has sat with angel investors and venture capitalists, done presentations, spent time in the board room, and gotten companies funded.
As always, feel free to contact me, Chris Benjamin Rogue CFO with any questions at the below link.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Monday, May 9, 2011
10 Cash Flow Strategies for a Successful Business
10 Cash Flow Strategies for a Successful Business
Strategy 1: Get your pricing right
Determining the price to charge for a product is frustrating for most businesses. However, getting your pricing strategy right is critical to your success in business because it affects many areas of your business. The pricing strategy impacts the type of customers attracted to your business, the quantity of product sold, how the product is perceived, product promotion and your profit.
There is no single way of determining the best pricing strategy for your business. The following is a list of factors that you may consider when developing your pricing strategy:
• The type of customers you are targeting.
• The positioning of your products in the market.
• The relationship between the price and quantity sold.
• How you will promote your products.
• How you will distribute your products.
• The costs associated with your products including the fixed and variable costs.
• Your competitors and their pricing decisions.
• The objective of your pricing strategy.
• The method of calculating price.
Strategy 2: Reduce your COGS
This strategy complements the first strategy ‘get your pricing right’. The gross profit margin is the difference between the price you sell your product for and the price you paid for it. Increasing the margin between the two will increase your profit and your cash flow. There are two ways to increase your gross profit margin: increase your price (as discussed in strategy 1) and/or decrease the cost of goods sold. The cost of goods sold is the cost of the product to you that was sold to your customers.
Examples of ways to reduce your costs of goods sold:
• Negotiate with your suppliers for a better price if you buy in bulk. Only use this strategy if you can turn over the stock quickly.
• Negotiate with your suppliers for a discount if you pay early if there isn’t a discount already in place.
• Shop around with other suppliers to ensure you are getting the best value (this is not
necessarily the best price).
• Purchase new equipment or implement new processes to produce the goods more efficiently.
Strategy 3: Control your expenses
Regularly review your expenses by comparing them against your budget and prior periods. If an expense is greater than budgeted or than the previous year then investigate the reason for the increase.
Examples of how to control your expenses:
• Compare expenses against your budget.
• Compare expenses against the previous year or period.
• Compare expenses as a percentage of sales.
• Train your employees to be thinking about how expenses can be reduced. Reward them for ideas that reduce expenses. Rewards don’t have to always be monetary. Be creative with the reward system.
• Review the transaction listing to understand each expense.
• Prepare regular financial reports.
• Require quotes from various suppliers.
• Rearrange annual payments into small payments. This generally costs more and should only be used when needed. Revert back to annual payments once you are able.
• Implement performance measures to monitor your expenses. For example, measure the costs of vehicles on a cents per mile basis.
Strategy 4: Manage your debtors
A sale isn’t a sale until the money is in the bank. A well managed debtors system is critical for a successful business. Ensure your debtors system has preventative measures as well as a step by step plan to recover overdue accounts.
Some examples of how to improve the debtors system:
• Credit checks for all new customers.
• Receiving deposits on signing of contract.
• Discounts offered for early payment.
• Make it as easy to pay as possible. Offer to take credit card details to move the risk to the credit card company.
• Send out invoices immediately.
• Bank regularly.
• Regularly review aged receivable report and consistently follow a step by step plan to follow up overdue accounts.
• If the customer cannot pay the whole amount, be flexible and arrange a payment plan. Take the first payment straight away while on the phone by asking them to pay by credit card.
Strategy 5: Manage the stock
Controlling how much stock is on hand can be both an art and a science. Not enough stock will lead to lost revenue. Too much stock can impact on cash flow. I have seen how both can have a major impact on profit and cash flow. For example, a retailer increased the amount of stock on hand and sales increased dramatically when customers saw the availability of products. This is more the exception than the norm. Generally, businesses have too much stock that is tying up valuable resources. One possible reason is that the owner doesn’t want to realize a loss on the sale of the stock. However, they have not considered the hidden costs by holding onto old stock such as missed opportunities due to poor cash flow and shelf space that could be used by a fast moving product. Knowing what the right stock level for your business may require some trial and error. However, with a good accounting program you will be able to make an educated guess about how much stock to carry.
Examples of how to improve stock control:
• Monitor stock regularly. Use ratios such as inventory turnover and days inventory to compare to previous periods and industry standards.
• Clear old and outdated stock by packaging together or discounting.
• Don’t buy too much stock even if a discount is offered if it will take an extended time to sell.
• Conversely, for fast moving stock, buy in bulk to receive a discount.
• Focus on a ‘just in time’ ordering system to save build up of stock.
• Set minimum and maximum levels of stock and stay within these levels.
Strategy 6: Don’t pay too much or too early
Ensure you have a step by step purchasing procedure that is followed and monitored. Lack of proper procedures and monitoring may lead to purchasing too much, paying for undelivered goods or overpayments. For example, it is common for payments to be made on a statement and yet not have an invoice to verify the purchase. In my experience this can be the cause of overpayments.
Examples of how to improve purchasing and creditor payments include:
• A purchase order system that has two signatures for accountability.
• A system for requesting quotes for new products or for previously purchased products every six months.
• A procedure for receiving goods.
• A procedure for payment of goods that requires the purchase order, delivery docket, invoice and statement. The level of paperwork required may vary depending on the size of your business.
• Always pay your creditors on the day the invoice is due. Do not pay early or late.
• Negotiate longer payment terms or a payment plan if the business is struggling.
• Negotiate discount for early or up-front payment.
Strategy 7: Prepare 3 months cash flow plans
Cash flow is all about timing. A business can be profitable and still have cash flow problems. For example, ABC bought stock for $5,000 in February. They paid for the stock at the end of March. The stock was sold to XYZ for $10,000 in April and they received the money for the sale in June. In April ABC has recorded a profit of $5,000. However, the profit doesn’t hit the bank till two months later.
Prepare a three month cash flow budget. A cash flow budget includes all the expected cash inflows for the month less all the expected outflows for the month. I prefer to prepare 3 month cash flow budgets as opposed to yearly cash flow budgets which I found needed updating within a couple of months of preparing them. Any excess cash should be transferred to a high interest bank account that can be easily accessed when it is needed. See below for an example of a cash flow budget.
Strategy 8: Get the most out of your assets
Assets that are not producing a reasonable return on investment and do not have any foreseeable benefit in the future should be sold. These assets are tying up valuable capital that could be used elsewhere in the business. You may have to pass on a great opportunity because your cash is tied up in an unproductive asset.
Review your assets for the need to upgrade. If there is a more efficient option available and it makes economic sense then upgrade to the more productive asset.
When purchasing an asset weigh up the benefits and costs of both purchasing and leasing. The better option may not be the same each time. Seek independent professional advice.
Strategy 9: Tax problem or cash flow problem?
Legitimately reduce your tax until the benefits no longer outweigh the costs. Don’t use all your energy on reducing tax, instead focus on improving your business. Always seek advice from your tax accountant before the end of the financial year to minimize your tax. It’s usually too late after the year has ended.
Sometimes there is the belief by business owners that they have a tax problem when they in fact have a cash flow problem. Work out how much tax you paid in the previous year as a percentage of sales. If the tax paid was 10% of your sales then put 10% of your sales into a separate account that returns high interest. If your business has had a significant increase or decrease in its profit then adjust the percentage up or down depending on the change.
Strategy 10: Reduce owner’s salary or draw
One common problem in small businesses, especially those with poor financial reporting, is the owners withdrawing more cash than the business is generating. The owners may be taking a wage that is in excess of the business’s profit or may withdraw money out of the business bank account for personal expenses without consideration for future business cash outflows. This can destroy a business very quickly.
As the business owner you need to find the balance between reinvesting the profits to grow your business and enjoying the rewards of your hard work now. This balance will depend on your individual circumstances. A new business will need to reinvest more of its profits to grow compared to a mature business. I would recommend that a regular wage that is less than the expected profit is withdrawn and that the business account is not used for personal expenses. The regular wage should be based on a personal budget.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Strategy 1: Get your pricing right
Determining the price to charge for a product is frustrating for most businesses. However, getting your pricing strategy right is critical to your success in business because it affects many areas of your business. The pricing strategy impacts the type of customers attracted to your business, the quantity of product sold, how the product is perceived, product promotion and your profit.
There is no single way of determining the best pricing strategy for your business. The following is a list of factors that you may consider when developing your pricing strategy:
• The type of customers you are targeting.
• The positioning of your products in the market.
• The relationship between the price and quantity sold.
• How you will promote your products.
• How you will distribute your products.
• The costs associated with your products including the fixed and variable costs.
• Your competitors and their pricing decisions.
• The objective of your pricing strategy.
• The method of calculating price.
Strategy 2: Reduce your COGS
This strategy complements the first strategy ‘get your pricing right’. The gross profit margin is the difference between the price you sell your product for and the price you paid for it. Increasing the margin between the two will increase your profit and your cash flow. There are two ways to increase your gross profit margin: increase your price (as discussed in strategy 1) and/or decrease the cost of goods sold. The cost of goods sold is the cost of the product to you that was sold to your customers.
Examples of ways to reduce your costs of goods sold:
• Negotiate with your suppliers for a better price if you buy in bulk. Only use this strategy if you can turn over the stock quickly.
• Negotiate with your suppliers for a discount if you pay early if there isn’t a discount already in place.
• Shop around with other suppliers to ensure you are getting the best value (this is not
necessarily the best price).
• Purchase new equipment or implement new processes to produce the goods more efficiently.
Strategy 3: Control your expenses
Regularly review your expenses by comparing them against your budget and prior periods. If an expense is greater than budgeted or than the previous year then investigate the reason for the increase.
Examples of how to control your expenses:
• Compare expenses against your budget.
• Compare expenses against the previous year or period.
• Compare expenses as a percentage of sales.
• Train your employees to be thinking about how expenses can be reduced. Reward them for ideas that reduce expenses. Rewards don’t have to always be monetary. Be creative with the reward system.
• Review the transaction listing to understand each expense.
• Prepare regular financial reports.
• Require quotes from various suppliers.
• Rearrange annual payments into small payments. This generally costs more and should only be used when needed. Revert back to annual payments once you are able.
• Implement performance measures to monitor your expenses. For example, measure the costs of vehicles on a cents per mile basis.
Strategy 4: Manage your debtors
A sale isn’t a sale until the money is in the bank. A well managed debtors system is critical for a successful business. Ensure your debtors system has preventative measures as well as a step by step plan to recover overdue accounts.
Some examples of how to improve the debtors system:
• Credit checks for all new customers.
• Receiving deposits on signing of contract.
• Discounts offered for early payment.
• Make it as easy to pay as possible. Offer to take credit card details to move the risk to the credit card company.
• Send out invoices immediately.
• Bank regularly.
• Regularly review aged receivable report and consistently follow a step by step plan to follow up overdue accounts.
• If the customer cannot pay the whole amount, be flexible and arrange a payment plan. Take the first payment straight away while on the phone by asking them to pay by credit card.
Strategy 5: Manage the stock
Controlling how much stock is on hand can be both an art and a science. Not enough stock will lead to lost revenue. Too much stock can impact on cash flow. I have seen how both can have a major impact on profit and cash flow. For example, a retailer increased the amount of stock on hand and sales increased dramatically when customers saw the availability of products. This is more the exception than the norm. Generally, businesses have too much stock that is tying up valuable resources. One possible reason is that the owner doesn’t want to realize a loss on the sale of the stock. However, they have not considered the hidden costs by holding onto old stock such as missed opportunities due to poor cash flow and shelf space that could be used by a fast moving product. Knowing what the right stock level for your business may require some trial and error. However, with a good accounting program you will be able to make an educated guess about how much stock to carry.
Examples of how to improve stock control:
• Monitor stock regularly. Use ratios such as inventory turnover and days inventory to compare to previous periods and industry standards.
• Clear old and outdated stock by packaging together or discounting.
• Don’t buy too much stock even if a discount is offered if it will take an extended time to sell.
• Conversely, for fast moving stock, buy in bulk to receive a discount.
• Focus on a ‘just in time’ ordering system to save build up of stock.
• Set minimum and maximum levels of stock and stay within these levels.
Strategy 6: Don’t pay too much or too early
Ensure you have a step by step purchasing procedure that is followed and monitored. Lack of proper procedures and monitoring may lead to purchasing too much, paying for undelivered goods or overpayments. For example, it is common for payments to be made on a statement and yet not have an invoice to verify the purchase. In my experience this can be the cause of overpayments.
Examples of how to improve purchasing and creditor payments include:
• A purchase order system that has two signatures for accountability.
• A system for requesting quotes for new products or for previously purchased products every six months.
• A procedure for receiving goods.
• A procedure for payment of goods that requires the purchase order, delivery docket, invoice and statement. The level of paperwork required may vary depending on the size of your business.
• Always pay your creditors on the day the invoice is due. Do not pay early or late.
• Negotiate longer payment terms or a payment plan if the business is struggling.
• Negotiate discount for early or up-front payment.
Strategy 7: Prepare 3 months cash flow plans
Cash flow is all about timing. A business can be profitable and still have cash flow problems. For example, ABC bought stock for $5,000 in February. They paid for the stock at the end of March. The stock was sold to XYZ for $10,000 in April and they received the money for the sale in June. In April ABC has recorded a profit of $5,000. However, the profit doesn’t hit the bank till two months later.
Prepare a three month cash flow budget. A cash flow budget includes all the expected cash inflows for the month less all the expected outflows for the month. I prefer to prepare 3 month cash flow budgets as opposed to yearly cash flow budgets which I found needed updating within a couple of months of preparing them. Any excess cash should be transferred to a high interest bank account that can be easily accessed when it is needed. See below for an example of a cash flow budget.
Strategy 8: Get the most out of your assets
Assets that are not producing a reasonable return on investment and do not have any foreseeable benefit in the future should be sold. These assets are tying up valuable capital that could be used elsewhere in the business. You may have to pass on a great opportunity because your cash is tied up in an unproductive asset.
Review your assets for the need to upgrade. If there is a more efficient option available and it makes economic sense then upgrade to the more productive asset.
When purchasing an asset weigh up the benefits and costs of both purchasing and leasing. The better option may not be the same each time. Seek independent professional advice.
Strategy 9: Tax problem or cash flow problem?
Legitimately reduce your tax until the benefits no longer outweigh the costs. Don’t use all your energy on reducing tax, instead focus on improving your business. Always seek advice from your tax accountant before the end of the financial year to minimize your tax. It’s usually too late after the year has ended.
Sometimes there is the belief by business owners that they have a tax problem when they in fact have a cash flow problem. Work out how much tax you paid in the previous year as a percentage of sales. If the tax paid was 10% of your sales then put 10% of your sales into a separate account that returns high interest. If your business has had a significant increase or decrease in its profit then adjust the percentage up or down depending on the change.
Strategy 10: Reduce owner’s salary or draw
One common problem in small businesses, especially those with poor financial reporting, is the owners withdrawing more cash than the business is generating. The owners may be taking a wage that is in excess of the business’s profit or may withdraw money out of the business bank account for personal expenses without consideration for future business cash outflows. This can destroy a business very quickly.
As the business owner you need to find the balance between reinvesting the profits to grow your business and enjoying the rewards of your hard work now. This balance will depend on your individual circumstances. A new business will need to reinvest more of its profits to grow compared to a mature business. I would recommend that a regular wage that is less than the expected profit is withdrawn and that the business account is not used for personal expenses. The regular wage should be based on a personal budget.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
Friday, May 6, 2011
Financial Model for your startup and half the going rate: the Rogue CFO Weekend Special
I've got a hankering to help out an aspiring startup with their financial model. Either building a model from scratch, or taking your existing one and refining it.
Obviously I am but one man, so the first company to act on this gets my time at half the normal rate. Send an email letting me know more about your business and needs and I can give you a quote, with samples and references as well.
Looking forward to working with a great startup over the next few days and bringing you that much closer to funding!
Chris Benjamin, Rogue CFO
www.RogueCFO.com
chrisb@roguecfo.com
Obviously I am but one man, so the first company to act on this gets my time at half the normal rate. Send an email letting me know more about your business and needs and I can give you a quote, with samples and references as well.
Looking forward to working with a great startup over the next few days and bringing you that much closer to funding!
Chris Benjamin, Rogue CFO
www.RogueCFO.com
chrisb@roguecfo.com
Tuesday, May 3, 2011
Why You Don't Need A Full Time CFO
Why You Don't Need A Full Time CFO
By Chris Benjamin, Rogue CFO (www.roguecfo.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 CFO. Why would you NOT want a full time, devoted professional to guide your growing venture? Well, there are good reasons.
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.
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.
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.
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.
Learn more about what a Rogue CFO does, and see if there's a synergy.
www.RogueCFO.com
By Chris Benjamin, Rogue CFO (www.roguecfo.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 CFO. Why would you NOT want a full time, devoted professional to guide your growing venture? Well, there are good reasons.
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.
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.
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.
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.
Learn more about what a Rogue CFO does, and see if there's a synergy.
www.RogueCFO.com
Institutional Venture Capital
Institutional Venture Capital
VC funding isn't always easy to obtain and and you'll have to give up equity, but when you're a high-growth company with high-financing needs, it can be your best bet.
Definition or Explanation: This type of funding includes venture capital from professionally managed funds that have between $25 million and $1 billion to invest in emerging growth companies.
Appropriate For: High-growth companies that are capable of reaching at least $25 million in sales in five years.
Supply: Limited. According to recent surveys from the National Venture Capital Association, U.S. venture capital firms annually invest between $5 billion and $10 billion. Many of these investment dollars go to companies already in the institutional venture capitalist's portfolio.
Best Use: Varied. May be used for everything from financing product development to expansion of a proven and profitable product or service.
Cost: Expensive. Institutional venture capitalists demand significant equity in a business. The earlier the investment stage, the more equity is required to convince an institutional venture capitalist to invest.
Ease of Acquisition: Difficult. Institutional venture capitalists are choosy. Compounding the degree of difficulty is the fact that institutional venture capital is an appropriate source of funding for a limited number of companies.
Range of Funds Typically Available: $500,000 to $10 million.
First Steps
Using a shotgun approach means you send your business plan or some derivative thereof to as many venture capitalists as possible and hope that the numbers alone will strike one that has been looking for a deal such as yours.
The shotgun approach has its proponents and its critics. For instance, Gordon Baty, a partner with Cambridge, Massachusetts-based venture outfit Zero Stage Capital, says, "Of every 100 plans that we get, 90 are completely irrelevant because they do not match our investment criteria regarding the industry, stage of development, geographic location, or the amount of capital we typically invest." Of this misguided bunch, Baty says, "our receptionist can weed out their business plans."
Fair comment. But the shotgun approach has one significant advantage over the rifle method. The latter relies on intensive research that is based on a venture fund's past investment patterns. What your research will fail to turn up is all the available venture capital funds that have now decided to focus their energies on restaurant deals, business service companies, publishing companies or Internet-content businesses.
In many cases, your mail will be well off the mark, and your letter will be weeded out by the receptionist-or the college intern sorting the mail. For instance, some venture capital firms might specialize in wireless communications companies from the so-called first stage on, while your company, which makes disposable medical devices, is in the development stage.
A more reasonable approach might be to take at least one pass through your institutional venture capital sources and weed out the obvious misses for your particular line of business. Even a quick screen prevents many obvious misses. Of course, such an effort, while seemingly logical, undermines one of the chief benefits of the shotgun approach to begin with. That is, it lets you reach investors who may have changed their historical investment criteria and are now looking for companies like yours.
If you can mail your letter, business plan summary and business reply card for 50 cents each, it's worth going after the 1,200 to 1,800 traditional sources of institutional venture capital.
The rifle approach, which favors limiting your search to 15 to 20 well-researched targets, is the one favored by most attorneys, accountants, consultants and other assorted experts. Venture capitalists seem to favor it because a highly targeted approach by entrepreneurs replaces an abundance of irrelevant opportunities with a manageable number of interesting ones.
The rifle approach is simple but time consuming. Basically, you search by five variables and then rank your candidates by how well they meet these criteria.
The five key search variables are:
• Searching by line of business: Most venture capitalists specialize in one or more industries. It's the focus on a particular technology, industry or business that supposedly lets them pick winners in their formative stages. This specialization is good news because it allows you to easily identify venture capitalists who should be interested and those who probably won't be.
• Searching by geographic preference: The very hands-on approach of institutional venture capital investing makes distance a factor. That is, to be a board member, and perhaps be intimately involved in a company's development, a venture capitalist would find it difficult to invest in companies that are 2,000 or 3,000 miles away. Many do, mind you. But more venture capitalists stick to well-defined geographic regions such as the mid-Atlantic region, the Northwest, the Southeast or a particular state. Search your source material and weed out venture capital investors who do not look at deals in your area.
• Searching by stage of development: In the same way that venture capital investors specialize in one industry or another, they also specialize in different stages of development. That is, some companies invest in early-stage companies, while others invest in more mature companies. This intuitively make sense. After all, from a venture capitalist's standpoint, a company that is trying to make a better mousetrap requires much different care and feeding than one that has already figured this out and is on the brink of national distribution.
• Searching by leadership status: In the world of venture capital investing there are leaders and there are followers. The leaders, also known as "lead" firms, are those that have recognized expertise and who conduct extensive due diligence on their prospective portfolio companies. The followers, known as "follow-on" investors, are more passive. They simply invest alongside the lead firms. Lead firms can be helpful when you are trying to raise your second, third or fourth round of venture capital because their presence alone can attract other investors for these later rounds. They are no help when you are trying to raise your first round of venture capital, however. Review your source material and weed out the firms that do not act as the lead investors in deals.
• Searching by deal size: Institutional venture capitalists generally place upper and lower limits on the sizes of their investments. These limits are closely related to the overall size of the fund the venture capitalist is managing. VCs with $250 million to invest typically don't want to look at your $500,000 deal. Why? Because to invest the entire fund in $500,000 increments means the firm would have to invest in 1,000 deals. Consider this number in the context of venture capitalist John Martinson's experience. Specifically, Martinson looks at 2,000 business plans each year to invest in an average of 10 companies. To do 1,000 deals, he would have to look at 200,000 business plans.
If you follow the above methodology, your list of prospective venture capitalists should be short-perhaps 15 or fewer.
VC funding isn't always easy to obtain and and you'll have to give up equity, but when you're a high-growth company with high-financing needs, it can be your best bet.
Definition or Explanation: This type of funding includes venture capital from professionally managed funds that have between $25 million and $1 billion to invest in emerging growth companies.
Appropriate For: High-growth companies that are capable of reaching at least $25 million in sales in five years.
Supply: Limited. According to recent surveys from the National Venture Capital Association, U.S. venture capital firms annually invest between $5 billion and $10 billion. Many of these investment dollars go to companies already in the institutional venture capitalist's portfolio.
Best Use: Varied. May be used for everything from financing product development to expansion of a proven and profitable product or service.
Cost: Expensive. Institutional venture capitalists demand significant equity in a business. The earlier the investment stage, the more equity is required to convince an institutional venture capitalist to invest.
Ease of Acquisition: Difficult. Institutional venture capitalists are choosy. Compounding the degree of difficulty is the fact that institutional venture capital is an appropriate source of funding for a limited number of companies.
Range of Funds Typically Available: $500,000 to $10 million.
First Steps
Using a shotgun approach means you send your business plan or some derivative thereof to as many venture capitalists as possible and hope that the numbers alone will strike one that has been looking for a deal such as yours.
The shotgun approach has its proponents and its critics. For instance, Gordon Baty, a partner with Cambridge, Massachusetts-based venture outfit Zero Stage Capital, says, "Of every 100 plans that we get, 90 are completely irrelevant because they do not match our investment criteria regarding the industry, stage of development, geographic location, or the amount of capital we typically invest." Of this misguided bunch, Baty says, "our receptionist can weed out their business plans."
Fair comment. But the shotgun approach has one significant advantage over the rifle method. The latter relies on intensive research that is based on a venture fund's past investment patterns. What your research will fail to turn up is all the available venture capital funds that have now decided to focus their energies on restaurant deals, business service companies, publishing companies or Internet-content businesses.
In many cases, your mail will be well off the mark, and your letter will be weeded out by the receptionist-or the college intern sorting the mail. For instance, some venture capital firms might specialize in wireless communications companies from the so-called first stage on, while your company, which makes disposable medical devices, is in the development stage.
A more reasonable approach might be to take at least one pass through your institutional venture capital sources and weed out the obvious misses for your particular line of business. Even a quick screen prevents many obvious misses. Of course, such an effort, while seemingly logical, undermines one of the chief benefits of the shotgun approach to begin with. That is, it lets you reach investors who may have changed their historical investment criteria and are now looking for companies like yours.
If you can mail your letter, business plan summary and business reply card for 50 cents each, it's worth going after the 1,200 to 1,800 traditional sources of institutional venture capital.
The rifle approach, which favors limiting your search to 15 to 20 well-researched targets, is the one favored by most attorneys, accountants, consultants and other assorted experts. Venture capitalists seem to favor it because a highly targeted approach by entrepreneurs replaces an abundance of irrelevant opportunities with a manageable number of interesting ones.
The rifle approach is simple but time consuming. Basically, you search by five variables and then rank your candidates by how well they meet these criteria.
The five key search variables are:
• Searching by line of business: Most venture capitalists specialize in one or more industries. It's the focus on a particular technology, industry or business that supposedly lets them pick winners in their formative stages. This specialization is good news because it allows you to easily identify venture capitalists who should be interested and those who probably won't be.
• Searching by geographic preference: The very hands-on approach of institutional venture capital investing makes distance a factor. That is, to be a board member, and perhaps be intimately involved in a company's development, a venture capitalist would find it difficult to invest in companies that are 2,000 or 3,000 miles away. Many do, mind you. But more venture capitalists stick to well-defined geographic regions such as the mid-Atlantic region, the Northwest, the Southeast or a particular state. Search your source material and weed out venture capital investors who do not look at deals in your area.
• Searching by stage of development: In the same way that venture capital investors specialize in one industry or another, they also specialize in different stages of development. That is, some companies invest in early-stage companies, while others invest in more mature companies. This intuitively make sense. After all, from a venture capitalist's standpoint, a company that is trying to make a better mousetrap requires much different care and feeding than one that has already figured this out and is on the brink of national distribution.
• Searching by leadership status: In the world of venture capital investing there are leaders and there are followers. The leaders, also known as "lead" firms, are those that have recognized expertise and who conduct extensive due diligence on their prospective portfolio companies. The followers, known as "follow-on" investors, are more passive. They simply invest alongside the lead firms. Lead firms can be helpful when you are trying to raise your second, third or fourth round of venture capital because their presence alone can attract other investors for these later rounds. They are no help when you are trying to raise your first round of venture capital, however. Review your source material and weed out the firms that do not act as the lead investors in deals.
• Searching by deal size: Institutional venture capitalists generally place upper and lower limits on the sizes of their investments. These limits are closely related to the overall size of the fund the venture capitalist is managing. VCs with $250 million to invest typically don't want to look at your $500,000 deal. Why? Because to invest the entire fund in $500,000 increments means the firm would have to invest in 1,000 deals. Consider this number in the context of venture capitalist John Martinson's experience. Specifically, Martinson looks at 2,000 business plans each year to invest in an average of 10 companies. To do 1,000 deals, he would have to look at 200,000 business plans.
If you follow the above methodology, your list of prospective venture capitalists should be short-perhaps 15 or fewer.
Sunday, May 1, 2011
Make Your VC Presentation Shine
Make Your VC Presentation Shine
You only get one chance to make a good impression. These tips will give you a better shot at success.
Here's a quick primer on how to go about the presentation process, no matter what industry you're in:
Find someone to work with, to coach and to advise you on the presentation's look and feel, as well as to rehearse and critique your delivery style. This person should be outside your core team. She should act as an unbiased third party, someone who can ask the difficult and/or annoying questions. This is a great way to avoid a messy presentation that falls flat with potential investors.
Prepare and critique presentation slides and supporting materials. Then leave them for a day or two, and edit everything
Prepare two presentations, one that is 10 minutes long and one that takes 15 minutes. Depending on the environment, the mood of the venture capitalist/investor or the contest rules, you should be ready for both.
Schedule at least five two-hour sessions for rehearsals to prepare for the 10-minute presentation and longer for the 15-minute session. I don't care how good your technology/idea/patents are; if you can't interest investors with your story, they will be less than impressed.
Follow up with at least three one-hour question-and-answer practice sessions. Be ready for their questions, think of the question you would dread the most, and then prepare to answer it and others like it.
Have someone outside your team attend one live presentation to critique it and provide feedback. After all that practice, it's a good idea for someone to tell you how you did during the "live" session.
Polish your elevator speech until it shines. You never know when you'll have the opportunity or the blind luck to impress the right investor with your idea.
Make a targeted list of specific venture capitalists and angels, including names of senior partners and junior partners as well as previous deals and current board-level positions held by each. Don't take a shotgun approach with VCs. They specialize by industry and even by verticals within an industry. Even within the health-care sector, most VCs have separate practices for biopharma, biotech and medical devices. Be sure you're going after the right person.
Here are some do's and don'ts:
Do:
• Let your passion shine through. Investors often bank more on the people than on the technology or patents since it's really about getting people to work together to bring the product/service to market.
• Be confident and sure-spoken about your topic.
• Be yourself.
Don't:
• Pretend you know the answer to something when you don't. If you don't know the answer, say so, then work like heck to get back to the potential investor with an answer in a relatively short amount of time.
• Overhype your credentials or experience. VCs are investing their money and will take the time to investigate your claims with rigor. Be aware of this.
You only get one shot at a first impression, and this one can cost you dearly if you don't get it right.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
You only get one chance to make a good impression. These tips will give you a better shot at success.
Here's a quick primer on how to go about the presentation process, no matter what industry you're in:
Find someone to work with, to coach and to advise you on the presentation's look and feel, as well as to rehearse and critique your delivery style. This person should be outside your core team. She should act as an unbiased third party, someone who can ask the difficult and/or annoying questions. This is a great way to avoid a messy presentation that falls flat with potential investors.
Prepare and critique presentation slides and supporting materials. Then leave them for a day or two, and edit everything
Prepare two presentations, one that is 10 minutes long and one that takes 15 minutes. Depending on the environment, the mood of the venture capitalist/investor or the contest rules, you should be ready for both.
Schedule at least five two-hour sessions for rehearsals to prepare for the 10-minute presentation and longer for the 15-minute session. I don't care how good your technology/idea/patents are; if you can't interest investors with your story, they will be less than impressed.
Follow up with at least three one-hour question-and-answer practice sessions. Be ready for their questions, think of the question you would dread the most, and then prepare to answer it and others like it.
Have someone outside your team attend one live presentation to critique it and provide feedback. After all that practice, it's a good idea for someone to tell you how you did during the "live" session.
Polish your elevator speech until it shines. You never know when you'll have the opportunity or the blind luck to impress the right investor with your idea.
Make a targeted list of specific venture capitalists and angels, including names of senior partners and junior partners as well as previous deals and current board-level positions held by each. Don't take a shotgun approach with VCs. They specialize by industry and even by verticals within an industry. Even within the health-care sector, most VCs have separate practices for biopharma, biotech and medical devices. Be sure you're going after the right person.
Here are some do's and don'ts:
Do:
• Let your passion shine through. Investors often bank more on the people than on the technology or patents since it's really about getting people to work together to bring the product/service to market.
• Be confident and sure-spoken about your topic.
• Be yourself.
Don't:
• Pretend you know the answer to something when you don't. If you don't know the answer, say so, then work like heck to get back to the potential investor with an answer in a relatively short amount of time.
• Overhype your credentials or experience. VCs are investing their money and will take the time to investigate your claims with rigor. Be aware of this.
You only get one shot at a first impression, and this one can cost you dearly if you don't get it right.
Chris Benjamin, Rogue CFO
chrisb@roguecfo.com
www.RogueCFO.com
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