This document discusses the importance of financial management for startups and how poor financial management can lead to 95% of startups failing within their first 5 years. It emphasizes tracking cash flow, burn rate, and other key metrics in order to properly gauge operational performance. The document provides advice on topics like outsourcing parts of the financial process, tracking expenses and revenue, managing accounts receivable, and understanding customer economics and return on spending. Overall, it stresses the importance of having a financial process in place and focusing on cash flow over profits alone.

1. FINANCIAL MANAGEMENT | STARTUPS
14 OCT 2020
KAMEN BANKOVSKI

2. STARTUPS FAIL
WITHIN THEIR FIRST 5 YEARS DUE TO
POOR MANAGEMENT OF FINANCE
95%
(SOURCE: https://www.statisticbrain.com/startup-failure-by-industry/)
FINANCE

3. WHAT IS
?
FINANCE

4. FINANCE
?
THE SCIENCE & ART
OF MANAGING MONEY

5. ABOUT KAMEN
PRINCIPAL | INVESTMENT MANAGER
VITOSHA VENTURE PARTNERS (VC FIRM)
DEPARTMENT HEAD | ADVISORY BOARD
INDEAVR (SOFTWARE COMPANY)
MENTOR | ADVISOR
MULTIPLE STARTUPS & SMES IN BG

6. |A TIME TRAVEL MACHINE
PAST PRESENT FUTURE
KEY INSIGHTS FROM
PAST DATA ANALYSIS
& BENCHMARKING
GAUGE OPERATIONAL
PERFORMANCE
THROUGH KEY METRICS
TACTICS AND PLAN
FOR FUTURE
MILESTONES
FINANCE

7. TODAY’S FOCUS:
PAST PRESENT
KEY INSIGHTS FROM
PAST DATA ANALYSIS
& BENCHMARKING
GAUGE OPERATIONAL
PERFORMANCE
THROUGH KEY METRICS

8. BOOKS &
ACCOUNTING
AGENDA
TRACKING &
PROCESS

9. WHO RECORDS AND REPORTS WHAT
AND WHEN?
BOOKS & ACCOUNTING

10. TRANSACTIONS
DATA COLLECTION
FINANCE FOUNDATIONS
BOOKKEEPING ACCOUNTING FINANCIAL
MANAGEMENT
REPORTING
ANALYSIS
STRATEGY
DECISIONS

11. OUTSOURCE?
CONSIDER YOUR TIME’S VALUE, COST
& OPPORTUNITY COST

12. OUTSOURCE?
TRANSACTIONS
DATA COLLECTION
BOOKKEEPING ACCOUNTING FINANCIAL
MANAGEMENT
REPORTING
ANALYSIS
STRATEGY
DECISIONS

13. OUTSOURCE?
TRANSACTIONS
DATA COLLECTION
BOOKKEEPING ACCOUNTING FINANCIAL
MANAGEMENT
REPORTING
ANALYSIS
STRATEGY
DECISIONS

14. HOWEVER!
KEEP RECEIPTS
MAKE A NOTE ON IT WITH RELEVANT
INFORMATION
PHOTO (CLOUD OR APP)
STORE RIGOROUSLY
REPEAT...

15. BOOKS &
ACCOUNTING
AGENDA
TRACKING &
PROCESS

16. TRACKING & MONITORING
WHAT SHOULD BE LOOKED AT,
TRACKED, AND ANALYSED?

17. CASHLIFELINE OF
ANY COMPANY!

18. CASH IS
NOT
PROFIT

19. ACCRUAL ACCOUNTING
REVENUE VS CASH INFLOW
COST VS CASH OUTFLOW
REPORTING WHEN SOMETHING IS EARNED OR
EXPENSED, NOT WHEN INCOME OR PAYMENT HAS
ACTUALLY HAPPENED

20. HOW
?
TRACK & CALCULATE:
1. CASH BALANCE
2. CASH INFLOWS
3. CASH OUTFLOWS
4. BURN RATE
5. RUNWAY
6. GROWTH

21. CASH FLOW
21
BURN RATE
RATE PER MONTH, AT WHICH CASH IS
SPENT BEFORE REACHING POSITIVE CASH
FLOW
RUNWAY
AMOUNT OF TIME A VENTURE HAS BEFORE
IT RUNS OUT OF CASH
MONTHLY EXPENSES – MONTLY
REVENUE
CASH RESERVES
BURN RATE

22. Demo...

23. BASED ON YOUR BUSINESS MODEL
I.E.
HOW DO YOU CREATE AND EXTRACT VALUE TO
AND FROM CUSTOMERS
REVENUE & COST
PERFORMANCE

24. OPERATIONAL PERFORMANCE
RETURN ON
SPENDING
REVENUE GENERATED PER DOLLAR SPENT
ON MARKETING OR SALES ACTIVITIES
MEASURES OF PROFITABILITY
GROSS PROFIT | OPERATING PROFIT
| NET INCOME
REVENUE
MARGIN
METRICS
CHANNEL SPEND
REVENUE GENERATED FROM
CHANNEL

25. CUSTOMER ECONOMICS
CUSTOMER ACQUISITION
COST
HOW MUCH DOES EACH NEW COSTUMER
COST
AVERAGE INCOME ATTRIBUTED TO THE
ENTIRE RELATIONSHIP WITH A CUSTOMER
AVERAGE NUMBER OF PRODUCTS /
SUBSCRIPTION TIME PER CUSTOMER
PRICE PER SUBSCRIPTION /
PRODUCT
CUSTOMER LIFETIME
VALUE
MARKETING SPEND
NUMBER OF NEW CUSTOMERS
X

26. Demo...

27. TAKE AWAYS
START SMALL
FOCUS ON CASH FLOW, RATHER THAN PROFIT
STRUCTURE A PROCESS

28. CASHLIFELINE OF
ANY COMPANY!

29. CASH IS
NOT
PROFIT

30. ACCOUNTS RECEIVABLE
A SALE WITH A DELAYED PAYMENT
DANGEROUS:
1. DELAYS CASH FLOW
2. RISKS LOSING THE SALE ALL TOGETHER

31. MANAGING AR
DEVELOP & COMMUNICATE POLICY
BALANCE PAYMENTS | ACCOUNTS PAYABLE
HAVE A PROCESS

32. DON’T CHEAT!
GUAGE THE TRUTH ABOUT YOUR
PERFORMANCE AND MTRICS AND ACT
ACCORDINGLY

33. OUTSOURCING?
1. BOOKKEEPING
2. ACCOUNTING
3. PAYROLL

34. QUESTIONS?

35. THANK YOU!

36. KAMEN BANKOVSKI
KAMEN.BANKOVSKI@GMAIL.COM