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Founders: Reduce your start-up costs

When I meet with start-ups, I always ask about the future of the company. I always learn amazing things about the app, technology, or innovation and how it is going to change the world. My response always is that this is the future of the product, not the company. The future of their company is growth, and the focus needs to be on expanding into new markets, hiring new employees, and taking the company public.

So, if the future of your company is growth, are you looking at the risks to product success? The product’s success depends on the company. Founders risk everything if they are poorly managing a company and not investing in their future growth plans at the beginning.

Why invest now?

Company management and governance is considered by most founders to be an expense, and this is detrimental to the future growth of the product. Some of these companies have few, if any, employees, and the day-to-day management is limited to those who are actively building the product itself.

The goal is to get it done so that the product can go to market and start generating revenue on behalf of their investors. The problem is that the immediate term delivery misses the medium and long-term outlooks. As the company grows, investors will want to see their investment is safe and management is using funds correctly. This is the role of internal control and implementing it early as part of corporate governance will save a start-up significant expenditure in the future.

What to invest in?

Internal control is a process which confirms integrity of financials and prevent fraud. Implementing these controls early reduces the expenditure of change management. Changing processes later is more difficult and expensive than implementing them the at the beginning because it requires change in the architecture of the product, the company, and the staff involved.

There are two areas where internal controls should be implemented at the beginning:

Customer onboarding and collections

Company growth will increase revenue, but also require more resources to monitor the income ensuring it is collected. When the company goes public, there are further requirements the company needs to implement to stay compliant. While these controls are simple, changing the process later may require significant architecture changes to the product.

Vendor and tax payments

The highest risks of fraud or misspending are where payments are made. Bank transfers or credit cards are easy areas for employees to steal. Early internal control with robust reconciliations are easy to implement at the beginning, but to change an ERP or CRM system later will come with significant costs.

How much can the company save?

Start-ups that wait until later to review their corporate processes will incur additional expenditure. Here are some areas where significant expenditure will be needed what will areas spending will be needed:

  • A financial consulting firm to review your app, your company, and your policies and processes to determine where they are not compliant with regulations (i.e. SOX).

  • Resources to implement the improvements identified. This could come from reduction to your team improving the app for customer use or bringing on new staff to implement and document. In either case, the company will have to bring on staff which will not assist in revenue generating activities.

  • New resources to monitor and report deviations from the internal control process and areas which need improvement.

  • Changes to your non-app systems, such as your ERP and CRM systems to implement controls such as separation of duties and document types.

  • Training your staff to the new rules to comply with the controls implemented.

What can be done today?

Your company can reduce these future charges by programming them in today. Chayim Messer Consulting can, and will, guide you in saving future money by working through your app today. I’m offering founders a free 30-minute consultation to the first 10 respondents where we’ll talk about your app and your business and start to identify the areas where you can save by implementing today. Click here to book a time!


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