When is a Company No Longer a Start-Up

At Entreflow Consulting we help businesses get past the start-up phase and guide them through the proper financial and management practices necessary to building a real lasting business. We know that 75% of start-ups fail. But we firmly believe that with the right processes and systems in place, a start-up is that much more likely to be in the 25% of businesses that see it through to the end.

Furthermore, a team at Stanford set out to prove that having Management Control Systems in place, including financial management systems and processes, can have a positive effect on the overall valuation of companies in various industries: their results suggest full adoption of such systems can have a 33% impact on valuation!

Being out of ‘start-up’ mode isn’t about investors or market traction. It goes deeper. It’s about how your company runs.

Below are a few signs that you are out of start-up mode and well on your way to stability. If you aren’t quite sure and just want to skip to the results, take our financial management self-assessment to see where you stand.

Either you or someone on your team has taken charge to ensure that the books are closed monthly and that you and your team are looking at the results, getting guidance when needed, and making changes in response. You see the value in timely data for being agile.

Pro tip: “Investors need to see these practices in place before they will be willing to part with their cash”, says Sam Kawtharani. Learn more in his Seedify piece.

Excel is not an accounting software! Every business needs a proper accounting software in place. They are increasingly cheaper and easier to use, and there are many apps and add-ons to get them to do what your business specifically needs. So implement something now if you haven’t got around to it yet. For a more in-depth reasoning on why to switch off of Excel, check out our blog. Rant done.

Your annual budget is a representation of your financial objectives this year, line by line. You’ve taken into account the additional expenses that are necessary to support the additional revenue you expect to earn. No magic, please.

Your forecast is a prediction of where you are actually heading and is updated monthly with real data from closed books. This keeps you laser focused on where you need to make improvements. It also creates accountability for your team to get real about (1) how things are really going, and (2) who needs to jump in to fix things. For example, if revenues are forecasted to be lower than budget, you might bring in a sales or marketing consultant for some fresh ideas. Or if production costs are forecasted to be lower than budget, you might have some extra cash to spend on growth in the coming months.

​Investors don’t care about revenue, they care about making money. You could grow to operate a 100 million dollar company poorly and operate at a loss each year. It does nothing for your yacht dreams.

Back to the first point above. You make use of accounting software and use it correctly to track the revenue and expenses related to your major offerings. With that, you are then able to calculate your Gross Margin for these offerings and determine which products and services are killing it and which are killing you. You can then adjust as needed. Armed with this information, you can review your pricing strategy and ensure that you don’t make knee jerk decisions when the competition makes unenlightened decisions that send them to bankruptcy. Suckers.

You can reasonably rely on a stream of revenue that is above your Breakeven Point. So you’re sure to make a profit each month, no problemo. This presupposes that you know your Breakeven Point. Which also presupposes that you have an understanding of your fixed and variable expenses.

Got that? Now you have some decisions to make about expansion and how you decide what are fixed, semi-fixed and variable expenses. If you aren’t 100% clear on this stuff get help, this is important.

Get into Action

If your business is guilty of neglecting any of the above and you still don’t know where you want to be with your business, it is time to break through the shackles of start-up mode and take your business to the next level! Check out out CFO services to see what business needs for long term success and efficient growth.

Want our help? Take the self-assessment to book a consultation.

“Every entrepreneur learns at some point that you don’t know what you don’t know.”

Jamie Kern Lima, Cofounder of IT Cosmetics