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Working with startup companies and entrepreneurs is a unique specialty and creates interesting and challenging work for a consultant. Not only do you have to define what is a startup (which is not a “one-size-fits-all” template), but it is also important to address startups’ ever-changing diverse needs due to rapid growth, changing directions and frequent priority switches at a moment’s notice. But as they say, if you love your job you never work a day in your life, and that is the best approach to startup consulting work.
Future growth opportunities aside, there are inherent challenges startup companies tend to face. Here are five lessons startups and entrepreneurs can glean from a veteran startup consultant:
1/ Make sound and timely bookkeeping a high priority.
When an entrepreneur is busy getting a startup off the ground, accounting and bookkeeping are often back-burner considerations. The day-to-day focus is consumed by operational tasks but there should be allotted time for managing the financial reporting process. Sound bookkeeping provides the clearest picture of a business’ health and lays the groundwork for the reliable financial information lenders and investors rely upon to gauge a loan or investment. It also sets the business up for proper tax filing. Unfortunately, too many startup companies do not have accurate financial data to file income tax returns or prepare financial statements. Without contemporaneous and accurate information, the resulting cost for these services is much higher than it needs to be.
2/ Appreciate the power of a valuation and its impact on maximizing investment dollars.
Potential investors want to know what your startup is worth, but startup companies don’t typically fit the traditional valuation framework. Formal valuations are incredibly expensive, comparable companies to use in the valuation study are difficult to find, and many startups don’t have any earnings history. Due to this disconnect, alternate methods may achieve better valuations that affect investors’ demands….