4 Ways Finance & Administration Can Increase Your Company’s Valuation

ValuationYou’ve launched your venture, survived due diligence and raised initial start-up funding.

Congratulations!

Now what? In the short-term, you should follow this checklist from Nextview’s David Beisel (note the part about getting finance support and ditching QuickBooks!).

A longer-term view would entail building out the infrastructure of the business to support your future growth as you scale up. If you’re successful, you’ll most likely be raising another round within the next few years. To give yourself a chance at achieving the best possible valuation, it’s not too early to pay some attention to this critical component of your business.

Be Able to Provide Financial Reports
Any business must be ready to provide investors with a mix of basic and highly detailed financial statements, including income statements, balance sheets and cash flow projections.  More detailed P&Ls, for example, might compare current budgets and prior periods, gross profit by product, and various spending breakdowns.

Additionally, your investors may ask for details on sales performance reports; the burn rate of spending, customer acquisition costs and churn, monthly recurring revenues, growth-oriented metrics, and other key performance indicators. Reporting is the window through which investors assess your organization. Are your reports timely and accurate, future-oriented, and detailed, yet easy to digest? As with systems, integration is the key to high quality reporting.

Then, there is tax compliance with possible audits; tax planning and deadlines; and the specifics of equity-related governance, stock transactions and SEC reporting.

Most small- and mid-sized businesses don’t realize the amount of work involved to render these reports, even if they remain simple and straightforward. Furthermore, you must demonstrate the fundamental realities of your enterprise, and to do that, you need systems, processes and people.

Implementing Best-in-Class Systems
To be able to get any insight into your company’s performance, you first need good systems. Unfortunately, when infrastructure applications are separated into poorly connected silos, the result can be wasted employee productivity, added complexity and cost, and greater customer churn. Well-integrated systems solve those issues and highlight opportunities for growth.

That kind of visibility starts with mission-critical applications, including finance and general ledger software, CRM databases, and lead generation systems. Depending on the scope of the business, other key systems might include order entry and payment processing systems. The good news is that most of these systems are cloud-based and increasingly affordable.

A modernized, integrated infrastructure enables your company to drive process efficiency, innovation and growth – all good things in the eyes of your investors.

Implementing and Documenting Financial Processes
Employee turnover is a given in today’s economy and for a small business this can be crippling. To minimize the loss of a key person, especially a financial person, you need to have a documented workflow (with software navigation instructions and approval matrix) for how you manage order to cash, accounts payable, payroll and other critical financial processes.

Having the Right People
As you expand your team, you are looking for the best people money can buy. Employee compensation is the single largest expense for start-ups and growing firms, and investors may want to see how and how much you pay key personnel. Long-term commitments are critical, so be prepared to talk about your processes for handling employee stock options or equity grants. Fortunately, you have levels of add personnel including part-time, contract, freelance and outsourcing solutions.

Spending on your financial management team while incredibly important, can take up a good chunk of your budget, as you consider adding Chief Financial Officers, Controllers, Financial Directors and Bookkeepers. The importance of these positions, and their costs, will vary depending on the size, complexity and maturity of the business. You might only need 20% of a CFO or 50% of a Controller with back office support. Hiring a firm that specializes in building a your financial team that is customized for your business is an efficient way to fill the role of an entire finance department.

Conclusion
Your focus should now be 100% on delivering the results that just got your business funded. To that end, you should ask yourself do you have financial visibility of your business to confidently decide whether to invest in a new product, service or partnership? Do you have a financial solution that can quickly generate all necessary reports for your investors and tax entities? If you lose a key person, what does that do to your business? Are you efficiently spending on your financial reporting team and can that team scale with your business? Like it or not, your credibility is always on the line with your team and your investors. Having a real-time financial dashboard gives you all of your pertinent financial information which increases visibility, the potential for growth and overall improved business decisions for your company.

Jason PulsiferAbout the Author
Jason Pulsifer is director of Northeast Development for Consero Global. If you believe that you don’t have a financial solution that efficiently creates understanding and certainty to drive your business forward, then we have a financial solution for you. Contact Jason at Jason@conseroglobal.com.