Accounting 101 for Entrepreneurs - Denver Startup Week 2014
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Accounting and Financial Statements 101 for Entrepreneurs Denver Startup Week 2014
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Accounting 101 for Entrepreneurs - Denver Startup Week 2014
- 1. Accounting and Financial Statements 101 For everyone but bean counters (especially rogue startup badasses) Peter Kos @peterkosjr linkedin.com/in/peterkosjr ! ! #DENStartupWeek 1
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- 4. Discussion • Financial Statements • Forecasting, Business Planning & Cash Flow • Capex and Depreciation • Accounting Software and Charts of Accounts • Other considerations • Valuation and cost of capital 4
- 5. Broad Arcs • You as the CEO are where Finance, Operations, Planning/Forecasting, and Marketing converge • All business plans are always wrong. Per io d! • Have some idea of your exit before hiring a CFO • Be candid about your skills in these areas • Plan top-down and bottom-up • It’s about execution, not an idea - focus on the hard stuff
- 6. Financial Statements • Income Statement • Balance Sheet • Statement of Cash Flows • Statement of Shareholder’s Equity 6
- 7. 7
- 8. 8
- 9. Balance Sheet September 30, 2014 9
- 10. Balance Sheet September 30, 2014 10
- 11. Chart of Accounts • Income Statement Accounts • Balance Sheet Accounts • Trial Balance 11
- 12. Working Capital Current Assets - Current Liabilities Current: within 12 months (Is this accessible money?) 12
- 13. Working Capital Current Assets - Current Liabilities Inventory Tax Payments Payable Accounts Receivable Accounts Payable Note Receivable Note Payable Cash !
- 14. Cash Flow Statement 14
- 15. Real Cash Flow Statement
- 16. Forecasting • All forecasts are always wrong • Tests fundamental assumptions about the business model • Consider your revenue model - if you are buying every customer, you’re dead • Balance Sheet Forecasts essential, but painful 16
- 17. Breakeven Analysis • The break-even number is less important than the “minimum viable business” • Manufacturing business often think in terms of “cost plus” and then attempt to minimize costs / improve margin • Cost base (fixed costs) divided by gross margin = break-even sales • Caution: this is not = cash flow positive 17
- 18. Capex Capex = Capital Expenditure = Fixed Asset Depreciation = Cost of fixed asset / life expectancy Depreciation Expense = not a cash outlay Makerbot Replicator Cost $2,950 Life Expectancy (Useful Life) in Months 36 Monthly Depreciation Expense 81.94
- 19. Capex Risk / Return Cost: $10,000 Profit: 2,500 yearly Cost: $5,000 Profit: $1,250 yearly Cost: $5,000 Profit: $1,250 yearly 19
- 20. Debt vs. Equity The cost of capital $ $$$$ Debt Equity 20
- 21. Read this book before looking for equity money: Venture Capital Private Equity ESOPs
- 22. Valuation 22
- 23. Pitfalls • Don’t plan “downhill, with a tailwind” • Growth is rarely exponential or even linear after the “honeymoon” • Beware step costs • Manufacturing, service, software, and distribution businesses all have different growth drivers • Selling more to your customers vs selling to more customers • Plan for availability of capital before you need it • Factoring = Bad 23
- 24. A/B testing CPM Churn COA Ratios Competitive Moat Conversion Rate Sales Pipeline Channel KPIs 24
- 25. Accounting Software • Xero • Zoho Books • Freshbooks.com • Account Edge • Quickbooks • Peachtree / Sage • Less Accounting • Intaact, NetSuite, etc. 25
- 26. A Shameless Plug Come spend the weekend with me ! No, I didn’t mean it that way ! Well, ok…if you really want to ! @peterkosjr pkos@netpositiveco.org 26
- 27. Thanks Swiftpage ! slideshare.net/PeterKosJr/acct101denstartupweek2014 ! ! @peterkosjr ! linkedin.com/in/peterkosjr ! peterkosjr@gmail.com ! ! 27