Startup entrepreneurs face a daunting challenge in forecasting cash flow, profitability, and return on investment. It can be so overwhelming that many just ignore the numbers and jump right into developing a product or service. Certainly, a refined product or service is a critical early step in launching the entrepreneurial venture; however, understanding the financial aspects of the business, including the inputs to the product or service development is paramount to forecasting cash flow and business profitability, is equally important.
In business, particularly in the start-up phase, “pro forma” financial statements provide a way for the entrepreneur and potential investors to see the financial forecast of a business given a set of assumptions. The pro forma financials will include a set of assumptions on which the numbers were based, a cash flow statement, an income statement, and a balance sheet statement. Together, these statements provide an approximation of business performance considering the assumptions. Most investors place little value on the numbers a start-up provides because the core assumptions may be inaccurate (Rogers, 2014). And if the assumptions are inaccurate, the financial performance will change. One of the best ways to understand how assumptions change the financial performance of a business is to build an interactive pro forma.
The interactive pro forma will allow an entrepreneur to quickly change assumptions and easily see the possible financial impact on the business as those assumption flow through the other financial statements. Once set up, it allows an entrepreneur to play a “What-if” game with assumption inputs and watch how those changes affect the business performance. The interactive pro forma is also a great tool to use when seeking outside investment. If the assumptions are challenged by an investor, they can be modified in real-time, and those modifications flow out to the other statements. This provides an instant view of the new business financials once new assumptions are in place.
Spreadsheet tools make building an interactive pro forma easy, although it does take some knowledge of the tools and a few hours to set up the...
For many of us, the word "entrepreneur" conjures a vision of an individual working tirelessly to grow an idea into a business. This is certainly one type of entrepreneur, but there are other types of entrepreneurs, too. There are those who serve an entrepreneurial function in corporations, those who chose to buy a franchise, those who acquire established businesses, and those we mentioned earlier who start a business from nothing (Rogers, 2014). Each of these individuals is an entrepreneur, albeit with different skill sets and arguably a different level of tolerance for the financial risk in entrepreneurship. Understanding basic financial principles and the role these principles play in entrepreneurial ventures might help entrepreneurs balance their risk-reward tolerance when considering new opportunities.
Financial management is a valuable discipline for entrepreneurship, regardless of the entrepreneurial type. It is the single most useful toolset for mitigating business risk. Unfortunately, many entrepreneurs cite financial management as their weakest skill (Rogers, 2014). Why? It may be that some entrepreneurs see their strength as creating their venture's product or service. In these situations, they may abdicate the responsibility of the venture's finances. It is likely that the type of entrepreneurial activity factors into the value an entrepreneur places on the need to understand the underlying financial aspects of the venture.
Let's look at each entrepreneurial type in a little more detail from the lowest to the highest financial risk related to entrepreneurial activity:
Corporate entrepreneurs, or intrapreneurs, are those who perform entrepreneurial functions within an organization. The work these individuals do can range from creating new lines of business and developing new opportunities from within an organization (as I did for the Boy Scouts of America's National retail operations) to starting a separate venture with funding and direction from an organization. In both cases, the greatest challenge for the entrepreneur is walking the line between organizational culture and the entrepreneurial mindset needed to grow and develop the new venture (Gavin & Levesque, 2006). The business culture often does not allow for the level of out-of-the-box thinking...
I was first asked to speak publicly sometime in the early 90’s for a broadcasting trade association meeting. I had a small media-buying business, and my model was a little different than the local agencies. The association believed my thoughts on media buying would be useful to those who were trying to sell media. I was part of a panel, but I cannot recall what I talked about or how helpful my comments might have been to those in attendance. I do remember I was quite anxious about participation but managed to get through it because I understand how important public speaking opportunities were to help build credibility for my business and my entrepreneurial endeavors.
Public speaking does not come naturally to me.
It makes me uncomfortable in all sorts of ways, none the least of which is feeling unprepared regardless of how much preparation time I put into the talk. There are other challenges, too. I want everyone to find something of value in my talk, I want to be entertaining as well as informative, so those listening don’t get bored. I want those in the audience to have at least one “ah-ha” moment or walk away with one piece of information that is useful. And I don’t want to hang around afterward to talk to people—the introvert in me needs to recharge—but I do. Public speaking, even for the most experienced, can be exhausting.
I am sure I fail at more than one of the things I noted above every time I speak publicly. That doesn’t stop me from continuing to do so. Practice breeds improvement, not perfection. Improvement should be the goal.
Six things I have learned that make me a better speaker.
Perhaps these learnings from my experiences speaking might be helpful to you:
You will not be perfect. You shouldn’t strive for that in your talk. You will forget critical points you wanted to make, and you may lose a thought or two. Usually, no one will know unless you tell them. Everyone listening expects you to be human, so imperfection is expected and allowed.