Brad Feld: While creating a growth business can be exhilarating, many entrepreneurs – especially those starting a company for the first time – don’t pay enough attention to some core issues surrounding the financial management of their businesses.
Often, founders don’t have formal training in finance – they’re “techies” launching the next Apple Computer or Netscape, professionals putting together advertising, management consulting, or human resources agencies, or super-salesmen types who’ve figured out how to sell a pizza or deliver a package faster, better and cheaper. Always, they’re intimately involved with their core product or service. Often, they are too busy to burrow into the details of some of the company’s functions, of which finance is the most critical.
These entrepreneurs are savvy enough to know they must work with financial professionals, such as their CFO and outside auditors or CPAs. However, no matter what their background or inclination about finance, founders need to have a working understanding of the basics. An elementary level of financial literacy means they’ll work more intelligently with their financial advisors and become the first line of defense for spotting potential problems in the young company.
What follows are some fundamental financial tenets that all early-stage entrepreneurs should be aware of, understand, and heed.