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Business Finance 101 for Start-Ups

Overview

There are brilliant technologists and business leaders in today’s tech world, but while start-ups have their own, great talents, there is repeatedly one common weakness which is a lack of understanding of fundamental financial concepts.

This can impact long term financial strategy as well as the ability to negotiate and set up basic cost structures within the company.

Start-ups forgo hiring a controller to manage the books and create financial reports because of lean principles- or to save money. However, it is every chief executive’s responsibility to understand basic finance principles and how they can affect your business’ bottom line.

To help get all you new and soon-to-be CEOs started on the right financial footing to ensure confidence from your team and your investors, here are nine basic finance topics that this workshop will ensure you understand and why they matter by the day’s end.

Who will this course benefit?

For all participants who are interested in starting up a business and to understand the fundamental financial concepts for their new business.

Course Outline/Modules

  • Jargon Buster

Finance often confuses outsiders with its specific and seemingly incomprehensible language. The day starts with a quiz and discussion to set you right for the discussions and concepts that follow.

  • Bottom Line:

You may hear people talk about “affecting the bottom line” of the company and this is simply any action that may increase or decrease the company’s net earnings, or overall profit. The term “bottom” is in reference to the typical location of the number on a company’s income statement, below both revenues (top line) and expenses.

  • Gross Margin:

The higher the percentage, the more the company keeps on each euro of sales (that will eventually go toward paying its other costs and obligations). In simple terms, if a company’s gross margins are 25 per cent, for every euro of revenue that is generated, the company will retain 25 cents before paying its overheads

  • Fixed versus Variable Costs:

A fixed cost is exactly what it sounds like, a cost that does not change with increases or decreases in the volume of goods or services that are produced by your company. These costs are obviously the easiest to predict and plan for. Rent, salaries, and utilities all usually fall into this category.

Variable costs are just the opposite. They can vary depending on what a company is producing (such as Amazon Web Services usage), and as a result are much harder to forecast.

  • Know your Capital structure: While most organisations understand the need to develop a capitalisation table spreadsheet to track “who owns what,” it’s critical to continue to manage the cap table as investment and ownership changes occur. Issuing shares, you don’t have or miscalculating one shareholder’s equity can leave you with unhappy investors and an expensive fix.
  • Understand the Impact of Your Decisions to Revenues and Expenses: Is that recent affiliate agreement actually paying off as you had hoped? When presented with two product development opportunities to meet customer needs, have you carefully run the numbers and made sound assumptions to know which is the better investment of your team’s time? Are you considering the hidden costs when signing a new lease, or hiring that next employee? These are all important financial decisions, and many times, the future of your business can hinge upon even just one of them.
  • KPIs: Take the time to establish, and live, your Key Performance Indicators.  KPIs should certainly evolve over the life of the company, but always have stakes in the ground to give you context for how you are performing now vs. where you need to be.  Early KPIs may be as simple as cash burn or hiring metrics, or website metrics. As the company engages with the market, the KPIs will evolve to become more customer or market-centric.
  • Create a practical set of Accounts: Creating a well-structured set of accounts – a list of accounts in your accounting system – that you are going to use to account for the financial performance of the business is imperative. Your set of accounts will feed into everything from managing the books to budgeting and forecasting.
  • Connected Financial Tools: Over the last 10 years there’s been an emergence of financial management tools that are helping organisations with everything from financial reporting to billing to payroll. Save yourself time, resources, and headaches by working with tools that play well together and are managed from the cloud. Tools like Gusto for payroll, Bill.com and QuickBooks for billing and invoicing, & Fathom for financial reporting can be cost-effective and help you scale for a while.

Duration:

1 day

Maximum numbers:

9

Posted in Management & Leadership