Unless you are running a NGO, the financials behind your startup look like pretty much closer to the one’s of a big corporation rather than the ones behind a group of flatmates who split payments. Well… in real early stage your financials may look like a group of college flatmates paying for their costs at the same time they ask parents for more money every month!
First thing you should make clear before trying to grow a business-to-be is to find out if there is a real business opportunity behind your flashy edgy idea. Let’s say in other words: is people willing to PAY for your stuff?
If your have already found out that what is said above os true, then you need to ask a very serious question: am I building a viable business model on the costs I’m running into and over the forecasted revenue I want to generate?
Quicl test for CEOs: if you aren’t able to understand and make a decision on almost all of these financial metrics about your startup particular case then you should talk and listen more to the finance memeber of your team… seriously.
In a recent survey among CFOs from EY in the US, these are the priorities assigned to CFOs:
Managing costs and profitability 43%
Setting budgets/costs 39%
Measuring performance 27%
Building the business case for new initiatives 23%
Resourcing and human capital 22%
Determining the level of ambition and risk appetite for new initiatives 21%
Setting the agenda for change 21%
Ensuring value realization 20%
Change management 17%
Guess what? The main role of a CFO is not keeping the business that you already have running, but to forecast every financial aspect of the growth for YOU to make the right decision!
As a reminder, here are a few reasons every entrepreneur realizes of AFTER failing somehow at any point:
- Poor or outdated business plan (a definition of your business model, not a hundred-page nonsense).
- Pricing strategy is not working.
- Investing in a ton of technology that is actually not producing revenue (time devoted to delevope is money invested, my friend!)
- Avoiding tough decisions… and the toughest ones always depends on money.
- Conversion rates are too low: people is interested but they’re not paying as you expected
- Dependence on Do-It-Yourself everything = you are a bottleneck in your own company.
You will notice many of them are ultimately related with how you spend money in order to make a revenue… so talk to your finance guy or girl as soon as you can!