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The Importance of Bookkeeping for a Startup Business

The Importance of Bookkeeping for a Startup Business

Bookkeeping, by definition, is the process of recording a company’s financial transactions and history.

It is the first step in the broader accounting process which involves reporting and analyzing data to make business decisions.

Many entrepreneurs find that they are wearing too many hats as it is and they just
don’t have time to dedicate towards proper bookkeeping.

However, bookkeeping is crucial for any startup for several reasons:
First and foremost, it helps companies make better financial and management decisions. Proper bookkeeping can help you understanding the key financial benchmarks that determine whether your company is operating successfully or not. Bookkeeping also helps with managing cash flow and answering questions such as: who owes you money, who do you owe money to, when should you send an invoice, when are your bills due, etc.

Second, consistent bookkeeping will help minimize the headaches when it comes to preparing your annual taxes. If you can provide your accountant with a well maintained balance sheet, cash flow statement, and profit and loss statement he/she will be able to dedicate their time towards making sound tax decisions rather than fixing problems with the financial statements.

Third, sound books will help you with planning your business’ next steps. By understanding key benchmarks such as cost to acquire a new customer and cost of goods sold you can begin to make educated decision about the best way to grow your business.

Fourth, investors require solid books. The frequency of which you report financial records will be determined by you and your investors. In any case, the more automated and uniform your financial reporting systems are for reporting crucial financial information the happier your investors will be. It will show to them that you understand your cash flow needs and the business key performing indicators that will allow the business to scale.

Furthermore, when raising capital, sound records will instill confidence in your investor and significantly increase your likelihood of receiving a check.

Now that you are on-board with the important of bookkeeping for a startup, let’s look at 10 of the most common types of bookkeeping accounts for a startup or any business for that matter:

Cash:

This is your most basic account and it tells you exactly how much cash you have in your
bank. Many businesses will monitor their cash account by separating cash receipts and cash
disbursements.

Accounts Receivable:

Not all companies will have accounts receivables. Receivables represent
money that is due from customers and is therefore only applicable to companies that sell
products or services prior to collecting payment or a portion of the payment upon the time of
sale. Tracking receivables will help you understand cash flow and keeping a detailed list of your various receivable accounts will help you stay on top of billing and invoices.

Sales:

The sales account is closely tied to cash and accounts payable but provides slightly
different insight. Sales is where you track anticipated incoming revenues from what you sell.
Tracking sales accurately will help you understand whether your business is on track to meet
predetermined metrics and benchmarks.

Accounts Payable:

Similar to accounts receivable, accounts payable represent money that you
owe to your suppliers and vendors for products and services that you did not pay for entirely
upfront. Tracking your payables will help you with managing cash flow, ensuring that you don’t
pay your bills twice, and may even make you eligible for discounts if you are able to pay early.

Inventory:

While inventory is not equivalent to cash or accounts payable it is certainly an asset on your balance sheet that needs to be carefully accounted for and tracked. Properly managing your inventory will help with understanding cash flow and anticipated production runs.

Loans Payable:

You loans payable account tracks the amount of capital that you’ve borrowed, how much you still owe, and how much is due in the next billing cycle.

Purchases or Cost of Goods Sold:

This account helps you understand the cost of delivering your product and service and when subtracted from your Sales account you end up with gross profit.

Payroll:

Payroll is the biggest expense for most businesses and should be monitored closely. Maintaining an accurate payroll account will pay dividends when it comes to tax and
government reporting requirements not to mention understanding your personnel expenses.

Retained Earnings:

Retained earnings are simply profits that are not paid out to owners or shareholders. Retained earnings are cumulative, or a running total, and demonstrate the profits that are reinvested back into the business.

Owner’s Equity:

This account simply tracks the capital investment that the owners’ have put into the business. This account is particularly pertinent if there are multiple owners who have put in disparate amounts of capital.

If you have a question about your Startup business idea or you’d like to discuss our Book Keeping Management Services, feel free to contact us for a free consultation!

7 Lessons Learned From A Vegas Tech Startup Conference

Collision Con From The Startup Garage

7 Lessons Learned From A Vegas Tech Startup Conference

“ It’s A different kind of Vegas.”

Collision Conference invaded and innovated downtown Las Vegas, Nevada Cinco De May and 6th.

The 48 hour “crash course” included 7500 attendees representing 89 different countries, with a legendary guest-list that included: 200 WorldClass Speakers, 1000 Startup Businesses, 451 Tech Investors, and countless “smart” entrepreneurs.

Equally as interesting to the individuals that attended the conference, was where the event took place, “The Downtown Project” (Psst..If you haven’t heard this name get familiar with it, you’ll be hearing a lot about it.)

It’s there, just 6 miles from the infamous Las Vegas Strip, a small Startup town is brewing. The cutting edge urban revival project was heavily invested ($350million) in by Zappos frontman and startup cultural icon, Tony Hsieh.

His business model; to create a community of happiness, in an other wise depressed and dilapidated city centre… which leads us into lesson #1.

Lesson #1 Recognize potential and invest in it’s possibilities.

Startups Entrepreneurs are familiar with taking risks and getting comfortable in the uncomfortable. Tony Hsieh didn’t see the “Fremont Experience” and think let’s avoid this rundown area at all costs. Instead he said let’s immerse our company, culture and entrepreneurial energy into the infrastructure, and make old bones dance.

Lesson #2 Conferences, especially tech. conferences, need female minds in attendance.

Collision Conference acknowledged the fact that tech conferences tend to be sausage fests, and did something Different. They invited the top 150 females in technology to attend the conference complimentary, there by subtly shifting the dynamics of a male centric space.

Lesson #3 There’s an organic type of networking, it’s called Collision.

A Collision with another person, moves away from the hunt and gather mentality of standard networking events, and allows for the natural serendipity of individuals paths to cross.
Colliding with the right people at right place, and the right time, can become a natural and common occurrence.

Lesson #4 Never underestimate the power of food and lasting impressions.

Each morning upon entering the “event” attendees were treated to freshly baked blueberry muffins. The DoubleTree may have started this trend with freshly baked chocolate chip cookies, but the result remains the same… A feeling of being welcomed, comforted, and wanting to return for more.

Lesson #5 Collaboration is the easiest way to breed successful innovations.

In the chaotic sea of 1000+ Startup Businesses prepping and pitching to investors and want to be investors for funding and mentorship. I found myself wondering, how many of the Startup entrepreneurs conversed and collided with one another to exchange ideas and information? (please tweet us @startup_garage if you have a great Startup to Startup Collision story)

It seems that Collision Conference was the perfect landscape for new startup business ideas to emerge, and preexisting ones to flourish with new insights. However, my experience was everyone was there with laser focus in the hopes swooning the VC or Angel.

Lesson #6 You can’t talk Marketing without the other M word… Millennials.

#Millennials isn’t just a trending hashtag, they’re a population of 77 million people, 1/4 of the American population, who are socially and economically savvy. Millennials have big brands via-ing for their attention and approval. As a generation with an insatiable appetite for quality content and the Tinder mindset (swipe left and move onto the next) marketing power is shifting into the hands of the consumer.

Lesson #7 Innovation never sleeps.

Innovative ideas and solutions have no On and Off switch, they’re a constant switching in the mind of Startup entrepreneurs. It’s not enough that there’s a solution, the questions remains whether it’s the smartest and most effective solution possible.

There’s Startup towns brewing, do you hear it percolating?

A Tech Startup conference shifted my perception of Vegas from an epicenter of gambling, strippers, and intentional debauchery to a sustainable community of like-minded entrepreneurs, that when colliding together, have ability to transform even the most unsuspecting places.

The Correlation between A Startups Seed Round and Series A Round

The Correlation between Your Seed Round and Your Series A Round from The Startup Garage

The Correlation between A Startups Seed Round and Series A Round

Here at The Startup Garage we are often asked, “Has it become harder to raise capital for Startups nowadays?”

 

The answer is, yes and no.

On the one hand, the total dollars invested in U.S. startups in 2014 reached its highest point since the dot-com boom in 2000, according to Bloomberg. On the other hand, there are more startups competing for these dollars than ever before.

One of the hardest rounds to raise, and subsequently one of the biggest hurdles to startup success, is the Seed round. This round is potentially the riskiest round for an investor as most startups raising Seed capital have yet to accomplish any significant milestones that prove the concept.

The technology or product development is usually in its infancy,
The team is lacking,Traction is nominal if present at all, and The key benchmarks for success have yet to be proven. As a result, many good ideas never make it out of the gate.

Those that successfully navigate the Seed round significantly increase their chance at entrepreneurial success and at raising their next round of capital, the Series A round.

When raising a Seed round the question becomes, “How large of a seed round should I raise to maximize my chances of raising a Series A round?”

Smaller Seed rounds seem like a quick fix because they are simpler and faster to raise as they typically require less investors.

However, in order to raise a significant Series A round, the startup needs sufficient capital to accomplish enough milestones that will attract Series A investors. As a result, we see a direct correlation between the amount of capital raised in the Seed round and the amount of capital raised in the subsequent Series A round.

According to data from CB Insights, companies that raised both a Seed round and a Series A round can be categorized as follows:

  • Small – Below the 25th percentile (<$360K for Seed, <$2M for Series A)
  • Average – Between 25th and 75th percentile (between $260K and $1.5M for Seed, between $2M and $7M for Series A)
  • Large – Above 75th percentile (>$1,5M for Seed, >$7M for Series A)As depicted in the chart below, nearly half of all large Seed deals became large Series A deals. Most of the other large Seed deals went on to raise average Series A rounds with a small number raising a small Series A round.

For companies that raised small Seed rounds, 57% went on to raise an average Series A round, and only 13% raised Series A rounds of $7M+. Lastly, 63.8% of companies that raised an average Seed round went on to raise an average Series A round.

Moral of the story: if you plan on raising a Series A round, don’t cut yourself short during your Seed round.

Seed Funding From the Startup Garage

If you have a question about your Startup business idea or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Building Online Brand Presence as a Startup

How to Build Your Online Brand From The Startup Garage

Building Online Brand Presence as a Startup

Launching a new high growth startup is a way to build a business from the ground up.

Whether you are providing content, products or even services to potential customers.

Knowing how to build an online brand presence when getting a startup up and running is essential.

Especially when working in competitive fields and making a professional name and reputation for your brand.

Build a Creative Team

One of the most important factors to keep in mind when building an online presence for a startup company is the ability to cultivate a creative team to work with each day. Having a creative group of individuals who are dedicated to the vision you have for your startup helps with streamlining plans and moving forward in the right direction in any industry or field.

Get Engaged With Social Media

In order to ensure customer retention putting social media and social media marketing to use effectively is essential. Not only is it important to share updates on various platforms but it is also vital to communicate and get engaged with users who are also potential customers. Ask questions, request input and be sure to speak directly to those who want to know more about your startup to build a proper reputation while getting noticed in the industry you represent.

Use the Power of Influence

Using the power of influence both online and off is another way to spread the word regarding your startup business. When you have team members who engage with their online fans and followers it is much easier to share news, information and even product releases with hundreds and thousands of users simultaneously. Utilizing the power of influence is also a way to establish a professional reputation, helping others to gain trust in your business and brand, boosting sales and increasing generated revenue and profit.

Host Contests and Giveaways

One way to help build an online brand presence for a startup you are launching is to do so by hosting contests and giveaways. Giving away free branded merchandise and relevant gifts gives you the ability to spread your company’s name to promote loyalty and to keep customers coming back for more.

Using social media to host contests and giveaways is another way to build momentum for your brand with the use of sharing and spreading the word with other family members and friends of the current fans, followers and customer base you have. Giveaways and contests also showcase your dedication to delivering high-quality products and services to those who want to know more about your brand and business model, ultimately generating sales and additional income.

Consider Fundraisers and Crowdfunding

Getting a startup company off and running with success requires a bit of capital, which is not always easy to obtain based on your history as an entrepreneur and any experience you have in the field you represent.

Consider the option of launching an online fundraiser or working to create a crowdfunding campaign to spread the idea of your startup while gaining loyal fans and supporters of your business and its plan altogether.

Crowdfunding could be an option if you are not familiar with taking out business loans or seeking additional assistance from venture capitalists. Using a crowdfunding campaign is often free of charge and provides you with total control of the amount you need to raise and what the money invested is likely to be used for in order to continuously build the products you want to sell and share with the world. It also acts as a source for social validation. If consumers are unwilling to buy into your big idea then it may be a sign to rethink your business plan.

Get Creative with Press Releases

Any time you have a startup you want to promote gathering the interest of the media and press is stressful and at times, nearly impossible. Crafting creative press releases gives you the ability to appeal to local news, international news stations and even online blogs and communities who follow startups and products that are relevant to your own.

Understanding all aspects of building a brand presence for a startup is a way for you to get more out of the potential exposure required to continue experiencing success. With the use of the right tools, marketing and communication it has never been easier to garnish interest while attracting potential customers who are genuinely interested in what you have to offer.

Guest Blogger
Cameron Johnson is a business consultant and entrepreneur.
Over the course of his career he has conducted case studies on both social media optimization and non-profit marketing. Cameron has also had the opportunity to speak at international business conferences and was recently recognized as one of the world’s top 100 advertising experts to follow on social media.

Avoidable Legal Dilemmas Every Entrepreneur Should Know

Avoidable Legal Dilemmas Every Entrepreneur Should Know

Although the verdict is still out whether or not entrepreneurship can be taught there are a few legal problems that all entrepreneurs can avoid with some proper foresight.

8 Startup Situations Every Entrepreneur Wants to Consider

1) Founder’s Agreement: Most co-founders will have some simple planning conversations at the beginning of the venture. However, it is important to take these conversations one step further by developing a Founder’s Agreement. The agreement should outline what each partner brings to the business, his/her roles, and how the business and its assets is distributed when the agreement is terminated. It should also demonstrate how and when the business will be terminated as well as methods for resolving disagreements among the founders. A Founder’s Agreement formalizes the initial planning conversations to ensure that there isn’t any confusion down the road when one party remembers the conversations differently than the other.

2) Non-Compete: It is important that you check your contract with your current employer for any non-compete clauses prior to transitioning full time in your startup, especially if your startup is in the same industry. Similarly, be sure to place a non-compete clause in your employees contracts to ensure that they cannot steal your trade secrets and become your competition.

3) Incorporation: Be sure to incorporate prior to raising capital as it will reduce the amount of tax that you pay when issuing yourself shares. If you delay incorporation until after you’ve raised a seed round your business will very likely have a much higher valuation and thereby holding you accountable for the increased value of those shares.

4) Social Media: Social media can be a business’ best friend or worst enemy. Remember that all posts on social media are public and permanent, so be careful what you post. Create a company social media policy to help ensure the proper use of social media among your personnel. Always handle online criticism with positivity, transparency, and professionalism.


5) Crowdfunding: Crowdfunding is becoming a rapidly growing method for raising capital. As a result, there are a lot of schemes that the government is trying to crack down on. Don’t put yourself at risk by overpromising and under delivering. Be sure to deliver on exactly what you promise. Also, be sure to read the terms and conditions for each site that you start a campaign on as they might be different from site to site.

6) Website: If you sell products on your website there are a few very simple compliance issues that you need to be aware of. For example, you are required to list your terms of service, terms of use, terms and conditions, and privacy policy on the bottom of the page. Don’t catch yourself in a legal quandary because you didn’t take the time or money to consult with a lawyer upfront.


7) Provisional Patent: Don’t wait until you start selling your product to protect your intellectual property. File for a provisional patent (or better yet, a utility patent) and protect yourself from day 1. Be cautions when speaking about your product to anyone outside of the company and do not share any trade secrets. Use non-disclosure agreements when appropriate, but realize that many parties, such as investors, will not sign them. Lastly, it is important to realize that, in most cases, you can discuss your startup/product/service without giving away anything that is truly proprietary.

8) Unpaid Interns: State and federal guidelines dictate whether an intern should be paid. Should they determine that you hired an unpaid intern that should be paid you could be liable t pay back pay, back taxes, and penalties. Be sure to learn your local laws and abide by them.

If you have a question about your Startup Funding or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Startup Business Funding Report 2014

Startup Business Funding Report 2014

The past year has been an eventful one for Startup Businesses in their quest to raise capital.

Venture Capitalists, Angel Investors, and Peer-to-Peer Crowdfunding soared in 2014, breathing new life into uncertain economy.

    Venture Capital Roundup

According to the PitchBook Platform 88 billion dollars in venture capital was infused into the global economy in 2014. Beating out any other single year ever, including the dot.com era.

Silicon Valley continues to reign supreme as the most competitive market to raise VC funding in, while hometown hero Uber took the largest 2 VC deals at 1.2 billion each.

On the east coast, the city that never sleeps, NYC is also thriving in the innovation economy, coming in 2nd in United States venture capital hubs. With the biggest VC backed deal going to coworking space, WeWork, with $355million dollars in funding.

It’s fair to say the venture capital ecosystem had an incredible run in 2014, transforming software startups into “unicorns” and providing hope and opportunity in the face of aversion. Whether or not all the risk will bring sustainable long-term rewards will become more evident in years to come.

    Angel Investment Roundup

2014 found Angel investors and groups becoming more prominent on and offline for early stage startups. At this time the Halo Reports Q4 report for 2014 is still being compiled, however we anticipate a steady increase in investments similar to previous quarters.

In Q2 alone 206 deals were funded totally $594million.
Pre-money valuation continued to rise jumping to $3 million in Q2, while Healthcare and Internet funding continues to be the most heavily funded industries.

Across the board opportunities to #GetFunded are abundant amongst individual Angels and Angel Groups globally. While with in the US, California, New England, and Texas have the most active investment networks.

    Crowdfunding Roundup

Crowdfunding is rapidly changing the landscape of Startup funding, and doesn’t appear to be slowing down. At the close of 2014, crowdfunding is estimated to add at least 270,000 jobs and inject more than $65 billion into the global economy, according to estimates from crowdfunding platform Fundable. 2014 turned platforms like Kickstarter and IndieGogo into household names. On Kickstarter alone 3.3 million people globally pledged more than ½ billion dollars last year, which is equivalent to $1,000 per minute. The funding brought to life 22,252 creative projects, exploding the alternative-funding platform.

Its clear Crowdfunding is disrupting how investors find opportunity and where entrepreneurs fuel their startup ideas. For the first time in history anyone can be an entrepreneur, investor, or both and the trend has yet to reach its tipping point.

    2015 & The Future of Capital Raising

2015 is sure to be a year of that will go down in history for innovative Startups and investment opportunities. The Startup Garage anticipates the following achievements in the next year: more women in the tech and the venture capital spotlight, emphasis on entrepreneurship and education with in academic institutions, and a rapidly expanding Startup Ecosystem.

If you have a question about your Startup Funding or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

How To Name Your Startup?

How to Name your Business from The Startup Garage

How To Name Your Startup?

Welcome to video Fridays from The Start Up Garage


A place where The Startup Garage’s team, answers questions directly from viewers

Key Take Aways From Video:

1) What do you want your Startup to be remembered for?

2) A lot of companies make their name very descriptive, and get pigeon-holed in that one niche, and then in the future want to expand into different markets because they’re stuck with that name.

3) The best name you could come up with is one where people want to wear it and people want to put it on a sticker somewhere and people want to do the advertising for you. If you can get people to do your advertising for you then you have a really great name.

4) One thing to really consider in the digital age is the URL and what the .com is going to look like, creating an effective online presence

5) Is this business name going to fit the mold of the company as I’d like to see it in the future?

Complete transcript below:

Question= “How do I go about naming my startup?”

I like to start with a couple of pretty basic questions. Really what do you want to be remembered by? Is it something that is really going to make you stand out? Or is it to blend in? A lot of financial institution types give themselves very descriptive, by the book names to get that initial market share. And then once they do they kind of achieve that first step, and then they go “Oh we wish we positioned ourselves a little bit more edgy, you know make it stand out a little bit”.

Standing out, going that route often once you get there is a good way to go, so something to think about. A lot of companies make their name very descriptive, and get pigeon-holed in that one niche, and then in the future want to expand into different markets because they’re stuck with that name. You know a lot of companies think “Oh we have this name and this brand, and if we change it they won’t know who we are”. And that is the case you have to be careful about it, but really don’t be afraid to re-brand yourself.

The name doesn’t carry as much weight as you think it does. The best name you could come up with is one where people want to wear it and people want to put it on a sticker somewhere and people want to do the advertising for you. If you can get people to do your advertising for you then you have a really great name. There’s definitely some routes you can go with how to name it. The Startup Garage for example we named our space, our virtual space as the Startup Garage, which was really brilliant if you ask me.

Another route to go is sort of creating a new name with the sounds that your market can relate to. A good example of that is Nike. And then one thing to really consider in the digital age is the URL and what’s going to look like. Te dot com credibility has carried a long way. The perception of having a dot-com is that you’re established, you know you have that space so that’s something to consider, Although don’t be afraid to get a little bit adventurous with your URL because the truth is that of they want to find you they will.

But one thing to really be concerned with the URL is the spelling. A lot of times misspellings direct traffic to the wrong space so you have to be pretty careful about that and make sure it’s well thought out before executing, so keep those questions in mind when choosing a name for your business and just think longevity. Is this business name going to fit the mold of the company as I’d like to see it in the future?

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

How Long Does It Take to Raise Capital?

How Long Does It Take to Raise Capital? from The Startup Garage

How Long Does It Take to Raise Capital?

Welcome to video Fridays
from The Start Up Garage

A place where Tyler Jensen, The Startup Garage’s founder, answers questions directly from viewers

Key Take Aways From Video:

1) The average time is somewhere between three to six months for both you Angel round and your Series A round.

2) It really breaks down into three major steps. There’s preparation is step one. Pitching and due diligence is step two. Negotiating and closing the deal is step 3.

3) Preparation, this can take anywhere from one to three months on average

4)Pitch your potential investment opportunity to them. If they’re interested they’ll move into due diligence, which means they want to find out a lot more information out about you and your business. This step two can take 1-3 months as well.

5) Negotiation and closing the deal. Getting all the terms down that you and the investor will agree upon into some legal documentation. This can be done anywhere from one week to one month.

Complete Transcript below:

Question= “How long does it take to raise capital?”

Tyler Jensen: That’s a great question, one that I get all the time. The answer is that it varies. The average time is somewhere between three to six months for both you Angel round and your Series A round. It really breaks down into three major steps. There’s preparation is step one. Pitching and due diligence is step two. Negotiating and closing the deal is step 3.

In step one preparation, this can take anywhere from one to three months on average. This is where you put together your business plan, your pitch deck, your capital strategy, and achieve any business milestones that investors are going to want to see before you raise capital.

Once that is all done you go into pitching and due diligence. This is where you identify the potential investors, contact them, and then pitch your potential investment opportunity to them. If they’re interested they’ll move into due diligence, which means they want to find out a lot more information out about you and your business. This step two can take 1-3 months as well.

And then if you get through that process and they’re still interested, then you move into negotiation and closing the deal. This si simply getting all the terms down that you and the investor will agree upon into some legal documentation. This can be done anywhere from one week to one month.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

HBO Show Silicon Valley Shines The Spotlight on Business Planning

Silicon Valley Show On Business Plans from The Startup Garage

HBO Show Silicon Valley Shines The Spotlight on Business Planning

The clip below provides accurate yet comical insights into a typical angel investor meeting.

Key Take Aways From Video:

  • Investors are in the business to invest in companies, not just products.
  • Investors are not guidance counselors for your Startup.
  • Investors are smart and sophisticated, they want you to be prepared.
  • There are key Milestones investors care about.
  • One thing you want to never hear in an investor meeting
    “He doesn’t seem to know what he’s doing.”
  • Are you prepared to #Getfunded?

     

    Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!