I had a meeting the other day with a very talented musician. He’s been preparing a brand new album and he wants to begin operating as a real business.
So, we talked a little about how much money he grosses. What is his net?, Does he plan to have employees, contractors, partners? What vehicles will he be using to publicize and market his music?
Then, the concept of trademarks also came up. To ensure that his band’s name is his alone. Copywriting his music arrangements.
As you can see, some of these questions are among those any new business must address. Yet, every single business has its own special needs- and the trick is to make sure we address those needs- before they become big problems.
(It’s the sort of thing we do all the time. It helps that we’ve been involved with- or ran ourselves- a wide swath of enterprises over the decades.)
We also spoke about record-keeping and documentation. This person already has a mileage recording device (so many folks need them, so few actually have them) so he can easily document his automotive (truck and van) expenses to satisfy the IRS demands.
In this case, a lot of his business income involves cash. As such, many of those automatic bookkeeping programs won’t be of much use. Because cash transactions require copious data entry. (In his case, I’ve suggested a phone capture app into which one can talk, so at least the data entry is somewhat eased.)
If the business were less cash-based (by that, I mean “real dollar bills”, not cash-accounting versus accrual), I would have recommended he use Xero or QuickBooks. His inventory needs (tracking the discs for sale) are not going to be very intensive, so either program would work well for him. And, by designating us as his accountant (these choices are both online apps) we can keep tabs on the entries and make sure everything is perfectly in order- before tax crunch time.
I know some folks are nervous having their accounting records on line. If that’s the case, they can rely on QuickBooks (the conventional, desktop kind). Or, if a firm weree a personnel and not a widget based business, the choice could be PCLaw ( a desktop choice, with Clio or Wave- for cloud based choices), which is a great accounting/time tracking/billing/office management solution.
The trick is that the bookkeeping/accounting should never be a full-time drag on operations or creativity. (Note that this functionality could become a full-time need, but that also means the firm has crossed the line from startup to a well-established entity.)
Once there is a system to track bills, invoices, payments (we consider bills what vendors provide us and invoices what we send out to clients/customers), then developing a viable cash-flow projection is critical.
And, to steal the thunder from the now-defunct GM commercials, we are not looking for “your father’s Oldsmobile”, those historic cash flow statements.
No, startups today need forward-seeking projections. How long will the cash last and what is the burn rate, so we know how far we must go to stoke the sales and marketing function, how much capital we may need to raise. And, the cash flow statements need to be easily produced to provide the entrepreneurial team the information they need- NOW.
Because the goal of every new business is to become a thriving success- today, if not by tomorrow.