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Accounting and Financial Statements 101
For everyone but bean counters (especially rogue startup badasses)
Peter Kos @peterkosjr
linkedin.com/in/peterkosjr !!
#DENStartupWeek
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Discussion• Financial Statements
• Forecasting, Business Planning & Cash Flow
• Capex and Depreciation
• Accounting Software and Charts of Accounts
• Other considerations
• Valuation and cost of capital4
Broad Arcs• You as the CEO are where Finance, Operations,
Planning/Forecasting, and Marketing converge
• All business plans are always wrong.
• 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
Period!
Financial Statements
• Income Statement
• Balance Sheet
• Statement of Cash Flows
• Statement of Shareholder’s Equity
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Balance Sheet September 30, 2014
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Balance Sheet September 30, 2014
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Chart of Accounts
• Income Statement Accounts
• Balance Sheet Accounts
• Trial Balance
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Working Capital
Current Assets - Current Liabilities
Current: within 12 months(Is this accessible money?)
Working Capital
Current Assets - Current Liabilities
Inventory Tax Payments Payable
Accounts Receivable Accounts Payable
Note Receivable Note Payable
Cash !
Cash Flow Statement
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Real Cash Flow Statement
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
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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
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CapexCapex = 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 Months36
Monthly Depreciation Expense 81.94
Capex Risk / ReturnCost: $10,000
Profit: 2,500 yearly
Cost: $5,000
Profit: $1,250 yearly
Cost: $5,000
Profit: $1,250 yearly
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Debt vs. EquityThe cost of capital
$ $$$$
Debt Equity
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Read this book before looking for equity money:
Venture Capital Private Equity
ESOPs
Valuation
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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
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CPM Churn
COA
ChannelKPIs
Competitive Moat
Conversion Rate
Sales Pipeline
Ratios
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A/B testing
• Xero
• Zoho Books
• Freshbooks.com
• Account Edge
Accounting Software
• Quickbooks
• Peachtree / Sage
• Less Accounting
• Intaact, NetSuite, etc.
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A Shameless Plug
!
!
!
@peterkosjr
Come spend the weekend with me
No, I didn’t mean it that way
Well, ok…if you really want to
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Thanks Swiftpage !slideshare.net/PeterKosJr/acct101denstartupweek2014
!!
@peterkosjr !
linkedin.com/in/peterkosjr !
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