Boris Goldstein - I don’t know about you, but finances aren’t really my strength. I’m an entrepreneur -- a big picture guy. I like to tackle big problems and develop big visions. I don’t like to sit around staring at a financial spreadsheet while I spend hours upon hours entering expenses by hand.
But whether we like them or not, finances are a necessary part of running a small business. To get some insight on effective procedures that entrepreneurs can adopt to improve their own accounting practices, I sat down for a quick chat with LessAccounting founder Allan Branch.
Here’s what he had to say on this critically important subject:
1. Don’t procrastinate
One of the biggest mistakes Branch sees new entrepreneurs make is that they put off their bookkeeping needs. If you aren’t financially-minded, programs such as Quickbooks can make small-business accounting seem completely unmanageable, especially if all you need to do is send out a few invoices and track a few expenses.
2. Understand your seasonal cash flow
Another cautionary tip Branch gives to young startups is to understand seasonal cash flow -- and that pointer comes directly from his personal experience. LessAccounting, for example, has major seasonal spikes that occur during tax season, followed by a slowing of conversions from April to October. It wasn’t an easy lesson to learn, but Branch eventually realized that he needed to maintain a three- to four-month cash cushion to help get the company through these slower periods.
You need to know your sales cycles as well. If you’re a business-to-consumer retailer that sells $20 items, your sales cycle is likely fast enough that having a cash buffer on hand is less of a concern. But if you’re a business-to-business company whose sales cycles last months, or even years, having extra capital in the bank can mean the difference between being able to weather the long periods before revenue from past sales manifests and having to fold early because your cash has dried up.
3. Focus on your core strengths
One issue that both Branch and I see far too much is startup owners, particularly software-as-a-service providers, believing that they need to create everything from scratch. I get it. If you’ve already got a coder on your team, it can be seriously tempting to have him or her build internal apps and products rather than investing in existing solutions.
The problem with this approach is that it wastes your time. It might save you a few pennies at the end of the day, but the cash you’ll save is peanuts compared to what it cost you to take a key employee away from those activities that drive revenue for your business. Instead, it’s far more cost-effective to work with existing providers and use the tools that they’ve already perfected, rather than trying to reinvent the wheel on your own.
4. If you have to work 80 hours a week, you’re not profitable
This lesson from Branch was an interesting one for me. I’m big on growth hacking (I don’t run a website called Growth Everywhere for nothing!), but Branch’s approach to business has been much more moderate. Of particular interest to me was his assertion that, if you have to work 80 hours a week to keep your business afloat, you’re not profitable.
5. Ask for discounts
Finally, here’s a fun tip from Branch: if you’re seriously tight on available funds but you want to take advantage of existing solutions, try emailing the founder and asking for a discount. It won’t work in every case, but you’ll be surprised by how often you can get free stuff just by asking.
Rad More : entrepreneur.com
But whether we like them or not, finances are a necessary part of running a small business. To get some insight on effective procedures that entrepreneurs can adopt to improve their own accounting practices, I sat down for a quick chat with LessAccounting founder Allan Branch.
Here’s what he had to say on this critically important subject:
1. Don’t procrastinate
One of the biggest mistakes Branch sees new entrepreneurs make is that they put off their bookkeeping needs. If you aren’t financially-minded, programs such as Quickbooks can make small-business accounting seem completely unmanageable, especially if all you need to do is send out a few invoices and track a few expenses.
2. Understand your seasonal cash flow
Another cautionary tip Branch gives to young startups is to understand seasonal cash flow -- and that pointer comes directly from his personal experience. LessAccounting, for example, has major seasonal spikes that occur during tax season, followed by a slowing of conversions from April to October. It wasn’t an easy lesson to learn, but Branch eventually realized that he needed to maintain a three- to four-month cash cushion to help get the company through these slower periods.
You need to know your sales cycles as well. If you’re a business-to-consumer retailer that sells $20 items, your sales cycle is likely fast enough that having a cash buffer on hand is less of a concern. But if you’re a business-to-business company whose sales cycles last months, or even years, having extra capital in the bank can mean the difference between being able to weather the long periods before revenue from past sales manifests and having to fold early because your cash has dried up.
3. Focus on your core strengths
One issue that both Branch and I see far too much is startup owners, particularly software-as-a-service providers, believing that they need to create everything from scratch. I get it. If you’ve already got a coder on your team, it can be seriously tempting to have him or her build internal apps and products rather than investing in existing solutions.
The problem with this approach is that it wastes your time. It might save you a few pennies at the end of the day, but the cash you’ll save is peanuts compared to what it cost you to take a key employee away from those activities that drive revenue for your business. Instead, it’s far more cost-effective to work with existing providers and use the tools that they’ve already perfected, rather than trying to reinvent the wheel on your own.
4. If you have to work 80 hours a week, you’re not profitable
This lesson from Branch was an interesting one for me. I’m big on growth hacking (I don’t run a website called Growth Everywhere for nothing!), but Branch’s approach to business has been much more moderate. Of particular interest to me was his assertion that, if you have to work 80 hours a week to keep your business afloat, you’re not profitable.
5. Ask for discounts
Finally, here’s a fun tip from Branch: if you’re seriously tight on available funds but you want to take advantage of existing solutions, try emailing the founder and asking for a discount. It won’t work in every case, but you’ll be surprised by how often you can get free stuff just by asking.
Rad More : entrepreneur.com
Great for business owners-thanks for sharing!
ReplyDeleteGreat for business owners-thanks for sharing!
ReplyDelete