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If you’re a tech entrepreneur, you’re well aware of the “sink or swim” environment within which your company operates. The fact is that only 3% of startups make it into their 5th year[1], which translates into an important truth: the decisions you make during the first few years of your business have an enormous impact on your company’s long-term success.
While each business is unique, in our experience there are three main challenges that the majority of tech companies struggle with in their early years. Today on the blog, we’ll explore the challenges of being a tech entrepreneur, and also examine the ways in which our trusted business technology & startups advisors can help.
1) Balancing capital with growth needs
CB Insights has found that Nearly 30%[2] of start-ups fail because they “ran out of cash”. In many cases, funding dries up right on the heels of a big success. How does that happen? With an unexpected or sudden surge in business comes increased expenses. For entrepreneurs with little understanding of their daily, weekly, and monthly cash flow, it can be nearly impossible to balance the use of capital with their growth needs.
Having a trusted business advisor already on board when you hit the home run enables you to keep, and better utilize, the profits you make. A Zeifmans business advisor builds an in-depth relationship with you, and your business. Having an understanding of your goals and objectives allows us to plan for the future, while also educating you about the different categories of financial capital you’ll require: Equity Capital, Debt Capital, and Specialty Capital. We gain an understanding of your cash flow, including receivables, payables, loan payments and burn rate, and use our proprietary templates and processes to develop a plan.
2) Structural and process challenges
As a business grows, so too must the infrastructure to support it. Some of the most common growing pains we see involve:
Employment contracts
It’s crucial to review all the terms and clauses, and gain a full understanding of the consequences that the intricacies of an employment contract could have on your family and your business. For a busy entrepreneur, a business advisor’s input here is priceless.
Corporate structure
Setting a foundation for favourable tax scenarios can produce immense long term savings. This is especially important when a company is preparing for a potential merger or acquisition.
Shareholder agreements
Dealing with minority shareholders is a frequent source of stress for entrepreneurs, especially if the relationship is not working. The most common mistakes we see in shareholders agreements are:
a) Not having an agreement at all
b) Not considering the impacts of future events such as death and disability
c) Buy-outs of involuntary succession (buy-sell provisions)
d) Additional funding and key business decisions
e) Failing to protect intellectual property
Zeifmans relieves that stress by acting as a mediator, so that the business can continue during negotiation stages.
3) Time management
Growing a tech startup is incredibly time-consuming. As with any small business, it’s easy for the founder to feel the urge to control all the business decisions. But ironically, a study by Gallup recently proved that delegation was the “key to business growth and expansion”. In fact, CEO’s who effectively delegated tasks produced 33%[3] higher revenue than those who failed to delegate.
Zeifmans business advisors provide multifaceted support across multiple areas of your business. When you delegate some of the financial decision-making for your company to an experienced team, you open yourself up to do what you do best, overseeing the company’s trajectory, and identifying opportunities.
To learn more about Zeifmans, call us today at 416.256.4000, or send is an email at info@zeifmans.ca.
[1] Small Business Trends, “Start-up statistics: The numbers you need to know”, https://smallbiztrends.com/2016/11/startup-statistics-small-business.html
[2] Fortune, “Why start-ups fail, according to their founders”, http://fortune.com/2014/09/25/why-startups-fail-according-to-their-founders/
[3] Gallup, “Delegating: A huge management challenge for entrepreneurs”, https://news.gallup.com/businessjournal/182414/delegating-huge-management-challenge-entrepreneurs.aspx
