The Finance Leader Podcast

090: Become a Startup Company CFO

June 14, 2022 Stephen McLain Season 10 Episode 10
The Finance Leader Podcast
090: Become a Startup Company CFO
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Show Notes Transcript

If you own a start-up or will be founding one soon, consider adding a finance leader to your team as soon as possible. You will have a teammate who can help you understand cash-flow and profitability from Day 1. They can help you instill financial discipline immediately and provide legitimacy for potential investors. A finance or accounting professional gives your team someone who can provide key advice on tax implications, cash burn rates, corporate structure, and adding value as you navigate a challenging marketplace and economy. 

Episode outline:

  1. Provide important finance leadership from Day 1,
  2. Develop finance information systems that make sense,
  3. Understand cash flow, measuring profitability, and publishing financial statements, and
  4. Establishes more legitimacy for key stakeholders.



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Stephen McLain:

If you own a startup or will be founding one soon, consider adding a finance leader to your team as soon as possible. You will have a teammate who can help you understand cash flow and profitability from day one. They can help you instill financial discipline immediately and provide legitimacy for potential investors. A finance or accounting professional gives your team someone who can provide key advice on tax implications, cash burn rates, corporate structure, and adding value as you navigate a challenging marketplace and economy. Please enjoy the episode. Welcome to the finance leader podcast where leadership is bigger than the numbers. I am your host, Stephen McLean. This is the podcast for developing leaders in finance and accounting. Please consider following me on Twitter, Facebook, Instagram, and LinkedIn. My usernames and the links are in this episode's show notes. And also, please join the Facebook group I have for this podcast community. Thank you. This is episode number 90. And I'll be talking about why you need to add a finance leader or even a team to your startup company. And I will highlight the following topics. Number one, provide important finance leadership from day one. Number two, develop finance information systems that make sense. Number three, understand cash flow measuring profitability and publishing financial statements. And four establishes more legitimacy for key stakeholders, marketing specialist and venture capitalists Guy Kawasaki said ideas are easy implementation is hard. This week I will be talking about finance leadership and startup environments. These can be very challenging due to unknown expectations, a list and clear cut strategy, funding roller coasters and miss deadlines. startups need leadership and I want you the finance and accounting professional to be prepared to step into the role as startup CFO. And if you're a founder, I want to convince you that it is very smart to have someone on your team who understands Strategic Finance and Accounting from day one. So they can help you navigate complexities of the market and economy plus, who can advise you about the resources you have. Now before I get into this week's subject further, I want to mention that this episode concludes season 10 And we talked about many amazing topics. In episode 81. I talked about the importance of leadership in finance and accounting, followed up by an encore episode The next week that supported the same principle. I want you all to become leaders in this field, and episode 83 The topic was about key business social skills. For episode 84 I discussed if you needed to earn a graduate degree. The next week in Episode 85. I talked about the importance of inspiring your team to win, which was followed by Episode 86, where I showed the benefits of working on a project team. The following week and episode 87 I discussed your self worth. And for Episode 88, the topic was earning that promotion to manager. And last week in Episode 89. I talked about the importance of checking your bias so you become a better leader. Thank you for the incredible support and for listening to the podcast, we are making a difference by becoming leaders instead of only showing up to do the job. You are making a difference by leading with the numbers keep it up. Thank you very much. Now I have a question for you How many founders of startups love to talk about how much capital they raised, but leave up key details about where their business is today? I want to hear how profitable they are, if not profitable. Now when will they be profitable? And what is the strategy a real strategy? How are you using the resources you are raising to create value and to offer an amazing product for your market. startups need sound financial leadership from the beginning, a startup can be chaotic for years. They are trying to communicate the vision of their product to investors and to their future customers. If they even have a product and know who the customer will be. They may not even have a finished product or even a clearly defined market. Their product may only be an idea or a concept right now. Startups are famous for burning through cash and then needing more cash all with the promise of delivering on that remarkable concept. Now I love startups because they represent the possible they represent the future and they represent opportunity. A startup is an incredible opportunity for the right finance or accounting professional. It's a risk for sure. But what an opportunity to shape a company's for financial future, to develop systems and to build out a team to lead that team to become a startup CFO. Now, what do you do on day one as a startup CFO? First, take the checkbook away from the founder, and I'm serious. We need discipline and accountability, especially in a startup, you need a finance system integrated with the business bank account that helps you track where the money is going. Next, you have to develop systems to track transactions and other key data so you can do the analysis. You will live cash flow every day, so you stay afloat, published monthly financial statements and ensure you are discussing them every month, discuss cash flow all the time, every meeting so everyone understands. You must also be monitoring the economy and the marketplace. Stay ahead and aware of global economic indicators which will affect the company's ability to raise capital and to enter the market. Know if investment capital will become scarce. So know those indicators. The finance leader in a start up must be okay with taking risk and making edge of your seat financial decisions, but we can be the mature risk taker in the room. To do this, you have to know your numbers and know when you are close to breaching risk models, so you can advise better, this requires a financial system that can provide a near real time financial status, to help you make key decisions, and to provide critical advice to the other senior leaders. This episode has also been an opportunity for a finance or accounting professional, to be part of a startup who can provide key finance leadership that helps to build a better understanding and discipline for the resources. You can advise founders about how to best build the startup, but you have to know expectations and they will be different for each startup, and different based on the source of the capital. Some investors focus on the product, some on how higher headcount will be. Job creation is actually a goal for many venture capitalists. So don't necessarily highlight low headcount as a major goal, but know where your funding is coming from. Now let's talk about adding a finance leader to a startup company. Number one, provide important finance leadership. From day one. Startups are complicated, chaotic environments that seem to change his strategy from day to day. So a leader who specializes in finance and accounting is needed to provide some grounded framework to its financial resources. startup founders and CEOs may be great at raising money and talking about their product, but they may be lacking an understanding what profitability is, or even know how much cash they are burning through. So this is where a financial professional can help. They can build systems to track cash flow, and how and what to measure to determine their financial status. A startup CEO needs a set of advisors who can help them devise and achieve the strategy and to stay focused. There are a lot of different directions a startup can go, can you properly advise a founder on where they should focus when many distractions will come into play? A startup CEO can be distracted by fancy bells and whistles and maybe the glamour if the product promises to change the world. So stay focused. Another question, where's the economy going? Do you know stay up to date on how investors are acting and how willing they are to commit their money depending upon where the economy is going on a global scale. Number two, develop finance information systems that make sense. A startup needs to track data, not just any data, but the right data. It will need sales and operational data plus manufacturing data if they are developing a physical product. But also they need to track key financial transactional data, plus data on his customers and costs. So that real time decisions can be made, you will need accurate and real research and development costs. As the company develops its concept r&d can be a sinkhole often, so you need to know how it's being spent and what returns you're getting. You will need an accounting system that can scale to the transactions that the founder has for their vision. How big will this company be? What scale are we talking about? We're talking to local, regional global. What do you need in a financial system as close to real time possible that helps feed in quick decision making. If you're going to spend money, then spend money on a finance system where you can look at a real time dashboard on your phone. A startups budget can be non existent and often just a guess in the first few years but develop one anyway and track the variances. As you get more data you will be able to develop a more accurate budget. Number three understand cash flow, measuring profitability and publishing financial statements. A startup lives and dies by their cash flow. How much cash are you burning through and how many days do you have left before operations will hold? Hold. Ideally as a team, cash will be spent with a plan to minimize waste and sunk costs that add value. We know that startups can burn cash in a concept development, but we can be more prudent. If we are tracking our costs and know what metrics to monitor. We need a finance professional who is fearless. When talking about liquidity and staying afloat. We need real financial leadership in these situations, and accounting system is necessary to track where the money is going, and to publish monthly financial statements. Number four, establishes more legitimacy for key stakeholders. Most investors want to know that their resources will be used wisely, that what the founder said will actually happen with the resources they're committing to the project. a finance professional adds that legitimacy to the team. So that systems are created funds are managed properly, key metrics and data are being analyzed, and accurate financial statements are being developed and published for decision making. Investors and startups all may have a different purpose for committing their resources to the company. Some love to be first in on an idea. Some may be committed to helping deliver an idea because they believe in it with much passion, other investors want to create jobs. So headcount will always be important. They definitely want to return on capital that may be more willing than most to take the risk to see the idea work and go to market. Now for action today. For the finance and accounting professionals don't overlook startups, they are a great opportunity to be the lead advisor and senior finance leader who can set the path for financial success for a new company. It's an amazing chance if you don't mind the risk. For the founders out there you need a finance professional who could oversee the company's finances. Add this person to the team soon. Find someone who with experience who can manage complex projects on their own, who is knowledgeable about organizational structure, strategy, tax advising related to the business decisions you will make and financial systems plus, who can manage cash flow for you daily and tell you about it so that it makes sense as it is related to daily operations. Don't forget to grab my free guide for you called the leadership growth blueprint for finance and accounting managers. Are you a finance or accounting professional who is also leading people? To have questions about how to lead more effectively. I know you are expected to be the technical expert in our field. Learning leadership can set you apart from your peers, which can then lead you to more opportunities. In the free guide I talk about three leadership areas communication, team development, and empowerment. Plus a few recommendations around challenges with the financial systems you are using to complete your work. The link to this free guide is in the post or the bio. You can also go to Finance leader academy.com to download it. Please use the guide to help you with a few leadership wins today. Thank you. Now today I talked about startups adding a finance leader to the team and I highlighted the following points number one, provide important finance leadership from day one. Number two develop finance information systems that make sense. Number three, understand cash flow measuring profitability, and publishing financial statements and four establishes more legitimacy for key stakeholders. Startups are great opportunities for your career, you get to create the finance plan the systems and the team. A startup needs a finance leader on day one to navigate the complexities of cost, tax implications cash flow, profitability, financial analysis and projections, budgeting and many more areas is complex and time consuming, and you have to be accurate. There's too much for a CEO alone to manage founders. Bring on a finance leader as soon as you can to help you with strategy formulation, and execution. Now as a reminder, don't forget to update your individual development plan. We are in the summer now and it's vacation time for many. But don't forget about your goals. We are almost halfway through 2022 You should have made some tremendous progress so far. Keep up the good work and also enjoy the special people in your life. And next week I will be sharing an encore episode, season 11 will debut on July 26. And now we'll be talking extensively about the financial planning and analysis function and their responsibilities. I can't wait to share. I hope you enjoyed the finance leader podcast I am dedicated to helping you grow your leadership skills to change your mindset and to clarify your goals so you advance your career. You can find this episode wherever you listen to podcasts. If this episode helped you today, please share it with others. And please leave a quick review so that others may find the podcast. Until next time, you can check out more resources at Finance leader academy.com and sign up for my weekly updates so you don't miss an episode of the show and now the lead your team and I'll see you next time

Unknown:

thank you