Common Startup Mistakes: Tips for Avoiding Common Legal, Financial, Banking and HR Mistakes
There are many questions founders have as they get started and making mistakes early on can impede you just as you are ready to take off and fly. To lend insight into what you need to know we sat down with our knowledgeable professional Sirk Roh.
Sirk is a Consultant CFO at Early Growth Financial Services, who has lent his expertise to a vast majority of startups in how to get their books in order, where to seek investment from and how to do it all as painlessly and profitably as possible.
Check out our video chat with him at https://youtu.be/I6dAOt-tz00
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Areas of expertise
“We are an outsource accounting and financial services company and we provide four types of services. We do corporate and individual tax returns, we do company evaluations and then the bulk of our work is in the consulting area where we provide two levels of services.
One is on the accounting and bookkeeping side and then we also provide CFO level services. Our typical sweet spot is a small or medium sized company who is either too early or too small to be hiring people full time or even half time and it makes a lot more sense for them to hire people like us to come in and help them on an as-needed basis as opposed to full time.”
Questions for Looking Forward
“We may have a good idea, we may be starting to work on an idea, and you know we think that there’s a lot of potential value there. But this is really the time for us to kind of think about not only the joy of developing something new, but also think towards the future about what this means.
What kind of a business is it going to be? What kind of resources am I going to need? What kind of fundraising am I going to have to have in order to be successful? Because if we don’t do that kind of business planning initially then it’s going to be very difficult for us to react, and we may end up running out of resources, running out of time”
Before Seeking Investors
“Initially you’re going to want to do everything that you can to make as much progress as you can by yourself, with the funds and the investment that you’re able to garner before you actually go out and talk to these seasoned angel investors, and even crowd funders. For example, the more progress you can make and show before asking others for money the better off you’re going to be on the funding structure and the funding objectives.
What kind of revenue, what kind of revenue model you can show, the ability to support the product development, the product development that you have had to date and any kind of data that you can show to convince people that you’re going to be successful and you’re already on your way to success. That is going to determine what the structure is going to look like”
Taking Stock of Cash
“At the early stages cash management is going to be the most important thing. Where are you spending your money, how much money do you have to spend? First, where you are spending your money, is it the best to be spending your money? Can you do things cheaply, does it make more sense to invest?
Building Books Right
“Here are a couple of things that you might do right now. Get yourself set up properly with the right thing, don’t commingle your personal expenses with business expenses. Set up a separate bank account.
Don’t worry too much about a lot of accounting principles, but if you know that you’re going to be around for awhile and you know at some point you’re going to need to capture accounting data use something like QuickBooks Online. Xero with an X is another online accounting service that’s gaining popularity, although as financial people we much prefer QuickBooks just because it is more robust.
1:38 Companies worked with
3:25 Presentation Overview
4:22 Lack of Preparation: Planning, Legal Formation & IP
14:20 Fundraising Blunders: VC, Angels and raising funds
22:20 Financial Issues: Cash Management, Cash Burn
30:00 Lack of Infrastructure
37:00 Hiring Mistakes
50:00 Final Thoughts/Book Recommendations