Are Customers Taking Longer To Pay?

Add comment June 22nd, 2010 04:17pm tshafer

Attendees have remarked at a number of recent breakfasts that in many cases  their customers are taking longer to pay than they did last year. Are you experiencing this?

Rick Kadet on Good Cash Management Practices

Add comment June 21st, 2010 05:04pm skmurphy

At last week’s breakfast in Sunnyvale Rick Kadet offered a list of good cash management practices:

  • Really know your current cash balance. Reconcile your accounts and always consider outstanding payments.
  • Centralize and pre-approve any spending. Keep records of authorized spending:  purchase orders, travel, offer letters, expense re-imbursement, outside consultants.
  • This also minimizes mis-understandings with your co-founders
  • Have clear “not to exceed” limits on outside projects: break them into phases with clear deliverables, tie payments to results.
  • Once a month close the books and do an income statement and balance sheet.
  • Pay close attention to sales compensation and commission plans to ensure you are incentivizing the right behaviors.
  • The founders’ actions set the tone with employees and vendors:  stress frugality but don’t micro-manage or unintentionally communicate a lack of trust.

Bootstrappers Benefit From a Simple Financial Model

4 comments June 14th, 2010 02:16pm skmurphy

The following is a guest blog by Rick Kadet, our featured guest at tomorrow’s Bootstrapper Breakfast in Sunnyvale. Rick is a Senior CFO Consultant with The Brenner Group and works with a number of early stage entrepreneurs, many of whom are bootstrapping their startups.

As a financial guy, I worry a lot about the failure of entrepreneurs to adequately plan for unforeseen contingencies and have adequate funding to realize the potential in their firm. Regardless of whether one is bootstrapping or working off of investor dollars, the problem is the same, how to keep resources and cash in front of your business so that you can be around long enough to succeed. If you are a true bootstrapper, here are a few key issues to keep in mind.

Bootstrappers have generally raised some funding from savings or friends and family. Getting by with small funding can be a matter of balancing. Some expenditure may be needed for equipment, software, rent and communications. But bootstrappers seldom pay their employees, their most key resource. For many bootstrappers, the main difference in risk when compared with a funded company is holding their team together. When employees are not paid, there can be spouse pressure on participants to find a paying job; personal saving are depleted. How do you protect your key employee intellectual property from jumping ship? Keeping the team together is a powerful reason to raise money if you are able. The best tactical thing absent money is to keep the product development and revenue generation on schedule. This way, employees can see their accomplishments and keep the vision of the company clearly in focus. There is nothing worse than discouraged unpaid employees that are not seeing the results of their efforts or when the situation might change.

A key tool for effective cash management is the financial model that reflects the company’s actual revenue and spending plan including realistic prospects for meeting the targets set. Compare notes with other entrepreneurs or advisors who understand modeling to ensure that you haven’t overlooked a  key cash element that might affect your plan. The amount of cash needed will be influenced significantly by delays in the plan schedule, whether in completing the new product or in the time needed to bring in the revenues that will provide positive cash flow. In my experience, entrepreneurs nearly always believe (and plan) that the best possible scenario will be what happens for them. In just about every client over my nearly 13 years in working with startups, the schedule for new products will slip or customer revenues will be delayed. Spending plans laid too optimistically deplete cash that will not be there when revenues are delayed. Unrealistic forecasting (or no forecast at all) are common reasons firms run out of money.

Bootstrappers need to worry about the management of accounts receivable and customer credit. It is true that customers with their own cash flow problems may slow pay their vendors for free financing (example: GE takes six months to pay a lawyer on contract). Slow pay occurs with giant companies as well as underfinanced mom and pop business. Very dangerous are the firms that are on the brink of collapse financially but are buying on credit anyway without the vendor knowing. Regardless of size, bootstrappers need to do credit investigation and approval for their customers. Get help if you don’t know how to do credit checks. Knowing the actual payment habits of your customers will help you to have cash on hand when you need it and avoid selling to those that will not have the resources to pay.

Cash Management For Bootstrappers Tue-Jun-15

Add comment June 13th, 2010 08:27pm skmurphy

The Silicon Valley economy continues to test bootstrapping entrepreneurs cash management skills. Rick Kadet of The Brenner Group, Inc will be our guest at the Bootstrapppers Breakfast meeting, Tuesday, June 15 in Sunnvale to discuss Effective Cash Flow Financial Strategies for early stage entrepreneurs.  Rick will provide a five minute overview of key principles that will be followed by our regular round the table discussion.

Rick is Vice President and Senior CFO Management Consultant with The Brenner Group, Inc., where, since 1998, he has engaged with over 60 valley firms as part-time CFO or financial advisor. Rick works with client firms on executive staff level financial management, financial reporting to boards of directors, financial and business planning, raising venture and debt capital, facilities, business infrastructure, business systems and risk management.

Whether you are actively bootstrapping a startup, considering entrepreneurship, or keeping a weather eye on the possibility of involuntary entrepreneurship as your next career stage, you are welcome to join us. Please bring your questions and lessons learned.

Bootstrappers Breakfast meetings bring together entrepreneurs who are serious about growing their business and gives them a chance to compare notes on operational, development, and business issues with peers.

Why We Meet So Early

Add comment June 12th, 2010 06:20pm skmurphy

“Were all men equal tonight, some would get the start by rising an hour earlier tomorrow.” Elizabeth Gaskell

One reason to get out of bed to get to a 7:30am breakfast.

Public Transit Tips for Mountain View Meetings

1 comment June 11th, 2010 11:05am tshafer

Take caltrain to Mountain View Station.  201 Castro Street is a 4 minutes walk from the caltrain station.

Public Transport for Dublin/Pleasanton Meeting

Add comment June 11th, 2010 11:03am tshafer

Take the BART to the Dublin/Pleasanton station. The location is a 20 minute walk from the  station.

The Pleasanton/Dublin transit (“Wheels” its called) line #10 runs from the
Dublin/Pleasanton BART station right past the restaurant.

If you call 510 441-2278 (BART), the public transit folks will make a
personalized transit plan to the restaurant.

Public Transit Tips to San Francisco Meetings

Add comment June 11th, 2010 10:54am tshafer

Boudin Bakery — Embarcadero Center
4 Embarcadero Center
San Francisco, CA

(a) Take the BART to Embarcadero station.

(b) From the Caltrain Station: Take Muni lightrail K from 4th and king and exit Embarcadero

Boudin Bakery faces Justin Herman Plaza (also the Ferry Building)

On-line tools

Add comment June 11th, 2010 10:30am tshafer

At Friday’s breakfast, we had a great discussion about useful on-line tools. Here is our list:

Round-up of Co-founding Events

Add comment June 2nd, 2010 12:03am tshafer

Finding partners and co-founders is a very hard problem. We don’t know of a single type of event or match making that works well by itself. Especially if you don’t know the other people, we suggest you starting slow, working together on a small project and increasing the level of mutual commitment over time.

We are always on the hunt for looking for good events to help match up co-founders. Here’s a list of ones we know about. Order is alphabetical.

Please let us know if we have overlooked any that are worthwhile.

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