Building a Finance Roadmap

A quick look for each stage of growth

­­­­­According to CB Insights, the top 2 reasons startups fail are lack of product market fit and running out of cash. Probably not the most shocking piece of information, but incredibly important to those starting their businesses now or in the future. It makes sense that if there is no market for the product that the business would likely run out of cash. Early on, the product side gets more attention, and that should be the case. However, the finance piece is often pushed to the back burner, which can result in a failure even if there is a market fit.

In the last few years, many founding teams have realized that a core competency of survival is financial acumen. So there has been a strong movement in the finance and accounting space to support startups with outsourced, automated, and fractional service models. These models vary depending on the provider as well as the services being offered to the startup. It is not a one size fits all scenario, so understanding what you need as the business evolves is crucial. We like to think about it like a finance roadmap.

• Early stage: It may make sense to have a project engagement for business model, pricing and projections created. Day to day there is not much needed, but as revenue starts to grow, it is probably time to hire an accounting service

• Pre-VC Funding: Having a financial resource to analyze current and future position, cash flow and hiring decisions is valuable. This will also support the diligence and modeling for angel or friends and family funding rounds.

• Growth phase: Before a Seed or Post-Seed round, it may make sense to hire fractional CFO to ensure all records and reporting is in order prior to due diligence. This fractional model is ideal as you get an experienced, C-Suite executive for an affordable price and just the amount of service you need.

• Pre-IPO or Exit: Once a Series B is closed it is typically time to a full-time finance leader to manage the day-to-day financial operations, investor relations and additional reporting and audit support needs. This individual may come from the fractional firm, but if not it’s good to have some overlap time to ensure the transition goes well and the historical knowledge is transferred.

As mentioned, there is not a standard template that works for every startup. That being said, the key phases outlined should provide a guide to know when engaging a firm to assist your company with its financial needs and avoid becoming another statistic.