Day 14: Make your startup run like a Swiss watch
Startups often place the bulk of their attention on their product — defining it, building it, validating it, getting traction, scaling. But you can’t get very far as a business if your company is not set-up properly and running like a Swiss watch.
Running a business is more complicated than just building a great product. Mark Macleod (a.k.a StartupCFO), Chief Corporate Development Officer at FreshBooks, gave the companies a run down of all the super important back office stuff you need to be taking care of.
As you grow over time you’ll start organizing your team into different buckets. Mark went over the different back office areas that need to be taken care of, and offered the companies practical tips and tools for doing is efficiently.
The pillars of back office are the financial and administrative support of your company. You cannot scale without these. The technical reason why all startups die is running out cash. Cash is to a business like blood is to you and I. If a business is bleeding it will die. That’s how important back office is to your startup.
As a startup, you may be tempted to hack your accounting — a quick Excel sheet or a Google doc, and BAM! you’re set. In the long run, this is just going to bring you headaches when you’re ready to hire an accountant. Suck it up and use a standard solution.
1- When you need to incur expenses out of pocket, using cash, you need to pay extra attention to keeping your receipts in order. Try these tools to make your life easier: Shoeboxed or Expensify, which offer an elegant and fast way to capture cash transactions.
2- Try to use a credit card whenever possible.
3- Schedule your vendor payments for the 15th and the end of every month.
4- Outsource and batch – find a competent bookkeeper. You won’t need to see your bookkeeper more than twice per month.
Payroll HR benefits
Mark highly encouraged the companies to not do payroll in house, this can get tricky for tax compliance reasons. It’s best – and most efficient – to outsource as soon as possible. Look at ADP or Ceridian. A great tool for startups is Payment Evolution, check it out.
The life of a startup boils down to a few key events, each of which needs a legal agreement. This is serious stuff, so make sure your agreements are rock solid and you have all your legal ducks in order.
There are a number of agreements you’ll be signing over and over, it’s good to have a good template. You can find standard agreements on Biztree. Some must-have agreements include IP assignment, confidentiality, and work for hire.
1- Scan and archive everything, a useful tool is neat the fastest scanner ever.
2- Maintain an NDA list that keeps track of basic details such as who signed, if it is a one- or two-way NDA, and when it expires.
3- NDA is a standard agreement, you don’t need to your lawyer every time you sign one, it that would cost you too much money. Use a lawyer only for making templates and key documents.
4- NDAs are common practice to share information that is not public: marketing plans, product roadmap, usually information that is necessary to share for a transaction.
Note that investors don’t sign NDAs — they talk to too many people, it’s not realistic for them to keep track of what they can or can’t discuss.
Nothing will make investors more nervous than feeling like you are withholding information from them. Avoid that at all costs by providing them with accurate, consistent and timely information. Show them that you understand your key metrics and that you know where your money is being spent.
Your CEO should be communicating with investors on a regular basis. Updates should go out to investors on a weekly basis if your startup is at the incubator stage, bi-weekly at the seed stage, and monthly at Series A and beyond. Also provide your investors with monthly financials and your dashboard, and make sure to schedule an one-on-one call with each of your investors before a board meeting to gage how
Board and Governance
This is not relevant at seed level, but definitely at round A and beyond.
Hiring a CFO
For most startups, it is generally way too early to hire a CFO. At the startup stage, your company needs someone to take care of the books and to help with your business model.
At Series A, it makes sense to hire a part-time CFO. Hold out until Series B and beyond to hire a full-time CFO.
When the time comes to hire a CFO, get a superman. Aside from your CEO, your CFO will be the only one in your company who has a 360 degree view — definitely a key role.