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Eleven Essentials To Fiscal Excellence for Entrepreneurs
The document outlines eleven essential principles for fiscal excellence aimed at entrepreneurs, emphasizing the importance of adaptability, understanding customer needs, and the difference between value selling and traditional pricing. It also highlights critical financial management practices like cash flow awareness, proper funding strategies, and operational efficiency. The author, Stephen King, encourages entrepreneurship that focuses on generating revenue while maintaining compliance and effective accounting practices.
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Eleven Essentials To Fiscal Excellence for Entrepreneurs
- 1. ELEVEN ESSENTIALS TOFISCAL EXCELLENCE FOR ENTREPRENEURS Stephen King @stephdokin © 2014 Stephdokin Inc. All rights reserved. Duplication or distribution is encouraged, with proper attribution.
- 2. I am notTHAT Stephen King I’m this one
- 3. 30 years of“Shipping Bits” and great teams Computer Scientist + Marketing + Creative + Entrepreneur
- 4. Established 2008 Established2012 Entrepreneur-in-Residence Co-Founder Founder
- 6. Or a guitarhero? Do you want to be a guitar player?
- 7. A business withoutrevenue is just a hobby. Money is the reason we get to continue to do what we do.
- 8. Essential 1 Adaptto Embrace change. Change creates challenge. Without challenge, there is no opportunity for success. Where does change come from? Industry. Technology. Economic. Political. Biological. Government. Cultural. Geographical. What change occurred? How does it impact your customer? How do you take advantage of it? My Samsung S5 is 2,500,000% faster than my old Atari 400
- 9. Essential 2 Knowwho you do it for “Are you talking to me?” Who is your customer? Understand your customer personas, organizational roles and what drives their buying and usage behaviour. B2C? B2B? Both? What was your customer doing before you? What alternatives are there? Why should they choose you?
- 10. 3 Essential Knowwhat you do Only two types of businesses. Which are you? 1) Vitamin: Create opportunity for your customers 2) Pain pill: Reduce time or expenses for your customers
- 11. Value Selling* Priceis important. Value is more important. * “Solution selling is dead. Long live value selling.” Stephdokin’s ½ day Value Selling Workshop for your sales & marketing teams.
- 12. Value Messaging Aligningyour Brand Message to the Value you provide • Feature statement: “Our spinach is full of iron.” • Benefit statement: “Spinach makes you stronger.” • Value statement: “Spinach lets you kick Bluto’s ass, makes you a hero and gets you the girl.” Feature statements are about “us.” Primary brand messaging should have customer Benefit and Value statements that are about “you.” Thanks to: http://www.disruptiveadvertising.com/conversion-rate-optimization/features-vs-benefits-a-cartoon-case-study/
- 13. $0.50 Coffee From: Feature statements about “What we offer”
- 14. To: $5 Coffee Customer Value and Benefit statements, supported by our Feature statements.
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- 19. 4How much canyou charge for it? THE MOST IMPORTANT QUESTION TO ANSWER What cash transaction will occur so that your company can make revenue? Essential
- 20. Essential How BIGis the 5 revenue opportunity? How many potential customers? What % can you REALLY address? What is you realistic market share %?
- 21. You can’t controlrevenue, you CAN control expenses. Your formula for success? Income – Expenses = Profitability
- 22. 6 Essential Doyou really need to hire that person? There are 2 major decisions we make that can quickly escalate staff costs: the products we launch and the marketing channels we manage.
- 23. 7 Essential Theimportance of sales and marketing “It will take twice as long to make half as much revenue.” #haha Digital marketing is a product unto itself; it must be designed and developed. And measured. Use an operational dashboard!
- 24. 8 Essential CashFlow is King Income - Expenses ( $$$ per Transaction X # of Customers ) - ( Salaries + Marketing + Operating Costs ) We need money to RUN the business, to WORK ON the business to make it better, to SAVE for a rainy day and deliver an ROI for shareholders.
- 25. 9 Essential Howmuch funding do you need?
- 26. 9 Essential Howmuch funding do you need?* Income - Expenses Operating Cash Flow Forecast FY2014-15 FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20 ( $$$ per Transaction X # of Customers ) - ( Salaries + Marketing + Operating Costs ) Revenue (Direct SaaS) 18,672 273,038 1,071,737 1,958,062 2,633,285 3,723,879 Revenue (Professional Channel & Institutions) 123,636 561,772 816,285 1,985,062 3,779,015 6,419,944 142,308 834,810 1,888,021 3,943,124 6,412,300 10,143,824 Cost of sales 1,423 8,348 18,880 39,431 64,123 101,438 Gross margin 140,885 826,462 1,869,141 3,903,693 6,348,177 10,042,385 Salaries and benefits 527,296 897,396 1,292,527 1,577,565 1,755,142 1,971,191 Professional fees 51,000 54,000 60,750 68,344 76,887 86,498 Marketing costs 336,500 446,000 503,688 542,648 586,408 635,561 Operating costs 33,015 46,272 69,348 107,290 154,674 222,639 IT hardware and software 6,660 28,680 18,100 15,550 16,250 18,450 Profit sharing bonus - - 12,835 104,318 340,106 290,001 Cash flow before taxes (813,586) (645,885) (88,106) 1,487,978 3,418,709 6,818,046 Income Tax - - - 416,634 957,239 1,909,053 Cash flow from operations (813,586) (645,885) (88,106) 1,071,344 2,461,471 4,908,993 A $1.55M investment for 40% of this company could be worth $15.7M in year 6 (A 10x return on investment based on a valuation of 8x multiple of $4.9M Cash Flow in 2020) CAGR (Compound Annual Growth Rate) = 47.09% * Those who fail to plan, plan to fail. Build and maintain a financial forecast.
- 27. 9 Essential Is47.09% good? - Expenses Compare to these 4 year CAGRs and Risk Profile (Year 0 of investment shows the companies had already established revenue when getting funding from RCCF) From: River Cities Capital Funds RCCF 2011 SaaS Operating Metrics & Valuation Benchmarking Study http://rccf.com/wp-content/ uploads/2012/12/2011-SaaS-Operating- Metrics-Valuation- Benchmarking-Study1.pdf
- 28. 9 Essential Whatdoes it take to become fundable?* Better ROI (Return on Investment) than alternatives available to the investor. The lowest RISK imaginable. * The best source of funding? Revenue from customers!
- 29. 10“Gotchyas” Essential Avoidthese • If you’re raising money, raise more than you need. • Don’t let your share cap table become updated or in dispute. • Don’t let your accounting slide; get it set up and faithfully attend to it monthly. • Don’t mix personal and business expenses. Separate bank accounts and credit cards. • Don’t fool around with Government compliance! (GST, Federal and provincial corporate tax. Employee EI and CPP payroll remittances. Personal tax.) File on time. Pay on time. Pay in full.
- 30. Essential Be lucky 11 “I am a great believer in luck, and I find the harder I work the more I have of it.” ~ Thomas Jefferson
- 31. Enjoy these “ElevenEssentials” at slideshare.com/stebankag What will you create? Stephen King President, Stephdokin.com CEO, TCELab.com EIR, AcceleratorYYC.ca @stephdokin @TCELab stephen@stephdokin.com Thanks! Questions? Thoughts?
Editor's Notes
- #9 Processor: Quad core 2.5 GHz Krait 400 (Qualcomme Snapdragon 801 chipset) vs. “single core” 6502 1.79MHz Screen: 1080 x 1920 screen HDMI vs TV w 320 pixels per line x 192 scan lines RAM size: 32 GBytes vs 48K RAM accessibility: 32 bit memory bus vs. 8 bit memory bus The internet vs. cassette tape drive
- #13 http://www.thekitchn.com/why-did-popeye-eat-so-much-spinach-the-surprising-answer-191802 In 1870 German chemist Erich von Wolf correctly ascertained the amount of iron in spinach, but while transcribing his notes, he accidentally misplaced a decimal point: instead of recording that spinach had 3.5 milligrams of iron per 100-gram serving (as is the case), he wrote that it had 35 milligrams. This is a huge amount. As Samuel Arbesman notes in his book The Half-life of Facts: Why Everything We Know Has an Expiration Date, if that calculation were actually correct, "a 100-gram serving would be like eating a small piece of a paper clip." But this was the "fact" that went out into the world, and as it wasn't corrected until almost seventy years later, in 1937, spinach enjoyed a long tenure as the most vaunted of vegetables. Because it was full of iron, it was forced upon children as a miracle vegetable. Who hated it. Soggy. Leafy. Chewy. Strained. Ugh. It was being sold for it’s features … Popeye got hold of the “iron” concept and one of the original super-heros were born, that paved the way for books like Superman. Spurred on by the hopes of similar super powers, Spinach sales increased by 33%. Benefits talk about the customer. Features talk about you / your product / your service / your event. Benefits include an ROI. Features do not. Vitamin or a Pain Pill? Features are reasons to believe that the benefits promised are true. Inspire, don’t tell. Benefits should create strong emotions: “Spinach is full of iron” is a feature. “Spinach lets you kick Bluto’s ass” is a benefit.