Davis Grant LLP: Top Tips From The Tech Accountant
From my work with tech start-ups, I've noticed that while every situation is different, there are still some best practices that apply across the board. Here are my top 5.
1. Do as much as you have time to and outsource the rest
Time is important to start-ups. You need time to develop your prototype, time to market, time to seek investment and if you are lucky, time to sleep. However, in those early months and certainly in the first year, there is bound to be an even more pressing matter – cash. For founders, evaluating what to pay for and what to do in-house themselves can be a steep learning curve – especially if they have not previously run a business. Being able to distinguish between what is considered an investment of time/money and what is considered a cost of time/money is crucial to the success of the business.
2. Think slightly longer than short-term
I have lost count of how many entrepreneurs have gone for the cheap option because they thought they couldn't justify higher expenditure, only to find it bites them in their backside later on. The more good people you are paying to look out for you rather than just concerned about their fees the better. My advice would be to follow John Ruskin's Common Law of Business Balance - "there is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person's lawful prey"
3. Get everything in writing
Although building relationships is crucial, when money is involved, friendship and handshakes only go so far. Shareholders agreements, share option contracts, employee contracts and developer agreements are all seriously important documents and start-ups would be foolish in the extreme to park them for now and worry about it "in the future". Ensure you instruct professional advisors, whether they be lawyers, share scheme specialists or accountants who will ensure that your best interests are looked after when it really matters.
4. Don't just measure the easy or the obvious
It goes without saying that as an accountant I love numbers, graphs, tables – in general, anything you can measure. However, one of the areas we stress to all our clients, and especially start-ups, is to measure information that they may not have first thought should be captured. Do not just measure user numbers but active participation by those users. Do not just measure employee costs but also employee satisfaction. Do not just measure the number of sales but also the rates of conversion. In our firm we have condense the important measurements to us into just a one page document that focus' our attention each month.
5. Build relationships
I read an excellent book years ago called The Luck Factor by Professor Richard Wiseman. In the book, one of the key determinants of "good luck" in life was the number of people you were connected with. Connect in a positive way with as many people who will be useful to you in your business and it is amazing how coincidentally lucky you become. Connect with suppliers, customers, investors and banks. Mix in similar circles and events. This is an area that the Tech world has grasped more than other sector I have come into contact with. The sense of community is phenomenal with individuals helping each other whether for altruistic reasons or for increasing their "luck" when they subsequently require help. Locations and hubs such as Google Campus and TechHub have been at the forefront of creating community spirit. For a fledgling start-up, the importance of embracing this community spirit cannot be underestimated.
Steven Sandford is a Partner at DGIT, Davis Grant LLP, incorporating DGIT, are accountants, tax and business advisors based in East London. www.davisgrant.co.uk.