By Douglas Zeisel, TCV Growth Partner-
Whether an entrepreneur (or as I like to say – Business Builder) knows it or not, there is an ecosystem in which they operate. That ecosystem supports their business and the growth of their business. No, I’m not talking about the obvious and much discussed “market” factors or the economic environment. I’m talking about the people and organizations that provide support to the success of your company. So what are they?
Let’s start with your CPA firm.
All business owners know they should have a CPA to file their tax returns, and many entrepreneurs often regard bookkeeping and accounting as a necessary evil. But your CPA firm can be an essential element of your business ecosystem. You will need to rely on accurate, timely reporting. And when you apply for funding of any sort, the funder will want to know that the financial statements you provide are accurate and represent the true financial condition of your company. Just as important, you will want a firm that is responsive to requests and can provide information without waiting for days for a response. You may need more than one firm also, particularly if you will need audited financials required by an investor. Although this does not happen often, in this case the CPA firm that provides your monthly financial statements cannot be the same firm that provides audited financials – so keep that in mind as you grow. How to pick your CPA? Consider these factors:
Experience – Foremost should be whether the CPA firm you choose has deep experience in your industry. Are you a GovCon, a construction company, or a MSP? Each type of industry will have different priorities and requirements as to reporting. Your company may need help with the specific reporting and cost accounting requirements that contractors need such as proper overhead allocation to contracts. Be careful that your CPA firm knows your industry. Also, your lender may ask you who is your CPA, and they want a reputable firm supplying information whether it be audited, reviewed or compiled financial statements.
Connections – Once again, if you might need an audit in your future, does your CPA firm even perform audits? Many small firms do not. And is yours a cost efficient and knowledgeable firm for this? And if you need other outside advice, can you rely on your CPA firm to make the right connection?
What are other business ecosystem elements?
Banking - I hope you are banking with an organization where personal relationships matter. Where you can lift the phone and talk to someone who knows your business. Smaller regional banks are much better at proving hands on help than are the larger national banks. Do they understand your business and your growth plans? Do they know and respect your choice of a CPA firm? Can they make recommendations for next steps in funding? Does your banker have a network of other service providers who can help when needed?
Your attorney – Fees matter and so does access. Are you charged $250 for a quick 15 minute phone call? Can you get a response to a question within 24 hours? If you are developing Intellectual Property, does the firm have at least one attorney with IP experience? Does your attorney know others in your ecosystem? And again, industry experience is a critical component.
Your financial advisor – No, I’m not trying to overtly promote TCV Growth partners (yet). I’m talking about a personal financial advisor who can help you grow your personal wealth while you are growing the value of your business. All too often entrepreneurs ignore tax implications of actions they take. They also forget that at some point they will want to retire – are they taking advantage of all the ways to build personal wealth that their business can afford? A Financial Advisor (AKA Private Wealth Manager) should have deep experience and connections in helping people just like you. Are they able to make sound recommendations on investment strategies or are they an insurance agent trying to break into Private Wealth Management? Are they backstopped by a reputable firm and can they connect you to others in their ecosystem such investment bankers when you want to sell your business or make that Series B or C investment round, or specialty finance lenders if you get stuck with your bank?
Support groups and business incubators are another great business ecosystem asset, especially for startups and technology based businesses. There are over 20 incubators in Maryland (see Maryland Business Innovation Association for a list of Incubators near you). Many incubators provide educational programs for their residents that are focused on developing pitch decks and raising capital for early stage businesses. Established companies that want to grow have access to fewer programs but one that stands out is the SCALEUP Maryland program hosted by bwtech@UMBC.
Mentors and coaches can be another significant element of an entrepreneur’s ecosystem. Mentors are often the successful owners of a business where you had once worked, or someone who was introduced to you and took an interest in your business. Mentors are can also be found at organizations such as TEDCO’s Network Advisors program and the Maryland Tech Council’s VMS Mentor program. Coaches, on the other hand, are paid contractors who bring an unbiased thought process to you in one on one sessions where the coach acts as a sounding board for your thoughts on the challenges and opportunities you face. They can add an element of accountability for goals you set and help you think thru problems that need to be overcome. Many of the most successful CEO’s I have known always maintained a relationship with a coach. As always when seeking a coach, experience matters as well as connectivity.
Last, consider outsourced services as part of your business ecosystem. Outsourcing can bring efficiency, cost savings and better service. For example, most growing companies now use IT Managed Service Providers (MSP) such as InfoPathways. After all, unless you are crazy enough to manage all your data and security “in house” on your own computer system server, you will need a great IT MSP who you can trust to not only keep you up and running but also provide network security for your data either on their server or on a cloud server. Again, reputation, depth of experience and responsiveness are key factors in choosing an IT MSP.
Another function that many companies are outsourcing is the HR function. The days where an office manager could take care of phone calls, bookkeeping and managing the complex world of employee benefits, handbooks, and federal and state regulations are pretty much over. Consider outsourcing your HR function to an organization such as Berger HR Solutions or maybe even an automated SaaS service such as HR Geckos.
Other outsourced providers can help in areas such as financial operations (CFO), marketing strategies (CMO), strategic planning and operations (CMO). These services are valuable for growing companies that are not yet at the point where they need a full time executive, nor can they afford a full time executive salary. If you are considering outsourcing any of these functions, contact us for further information. Doug@TCV-Growth.Partners