Business Technology

Sunday 20 October 2019

Startups are hard going: make it easier with these four lessons

Startup Diary

Numbers game: the biggest practical tip is to use accounting software – the first payment you make should be for an accounting package which will force you to take record-keeping seriously. Stock image
Numbers game: the biggest practical tip is to use accounting software – the first payment you make should be for an accounting package which will force you to take record-keeping seriously. Stock image

Richard Rodger, founder of Voxgig

This week I'm going to look at how you can run a business when you're too busy to run a business.

Startups are hard. It's not just that you have no revenue and no product and everyone thinks you're crazy. It's that you also have to run your startup as a business. The happiest day in the life of a startup is the day you get to hire someone to run operations. We've been to lucky to do that in the last two months, and it has made a huge difference to all of our stress levels.

Unless you're very fortunate to start a business with someone who already has operational or financial experience, you're going to have to cope with the paperwork side of the business by yourself for the first year or two. It's going to be painful. Herewith a short survival guide in four lessons.

Lesson 1 : Take it seriously

A startup is not a business that can be run by dumping all your paperwork into a shoebox and handing it over to your accountant at the end of the year.

You need to be able to know what is going on in your business on a monthly basis. You need to know, and so do your investors. And they need to know that you knew what was going on, and had the discipline to find out, before you had investors.

It is true that many startups have to up their game when investors come along. But you can get just a little bit ahead if you take it seriously from the start.

If you're founding a business, or thinking of founding one, it is not because you delight in all the paperwork you'll have to do. You have a great vision of the way the world needs to be, and a set of skills that can help you get there. The classic founder trap is to stay in your comfort zone doing what you do best. Engineers tinker, sales people sell, marketers tweet and product people design. And nobody does the accounts.

And yet this is the hard truth of running a new business - a great deal of it is just drudgery and very boring. When you hear people talking about "execution", and how important it is to a startup, what they mean is the day-by-day, week-by-week, and month-by-month operation of the grand strategy. That turns out to be pretty boring. As an entrepreneur, you are naturally attracted to the new and shiny, to the embracing great new strategies and tactics you've read about in a new LinkedIn post. Instead, you should just be getting on with the daily work of making the business work. To avoid running into problems later, and to give yourself the energy and drive you'll need to get through the boring bits, you must decide to embrace them first. You can't plan to be so successful that all the money will sort things out for you down the road. Even if it does, it won't be pleasant. And you won't make money that fast.

Lesson 2: Use accounting software

This is the biggest practical tip I can give you. It doesn't really matter what software you use - there are lots of choices these days.

I've run businesses from spreadsheets. It's not fun. I'm a coder, and I can write Excel macros, so I've got myself into some really sticky accounting messes over the years. Just don't do it. The first cloud payment you make on your credit card should be for an accounting package. If I'm ever an angel investor this will be the first line item on my due diligence report.

By paying for an accounting package up front you force yourself to take the job of record-keeping seriously (and it is a serious official duty). Ask your accountant (you do have an accountant, right?) which one they prefer. You can usually give them access and that makes everything a lot easier.

Lesson 3: Design a filing system

You'll have to store records and files. And not just hard copies - you'll have digital documents as well. Lots and lots of documents.

It's worth spending a bit of time designing a system for storing everything. Don't just create a mess of folders on your computer. Absolutely sign up for cloud storage so you have proper backups - this is essential. It also means you can easily share documents. With your accountant, and with others.

This is not a hard job, but it's very easy to procrastinate. I did a great job of this in my last company, and a terrible job this time around. I guess there's a danger to having done something before, and assuming it'll just happen this time around. You do not want to end up surrounded by piles of printouts and multiple online folders all called 'Invoices' (That totally did not happen to me...).

Lesson 4: Follow a routine

Even if you chose a great accounting package, and have the cleanest internal business ontology expressed in a concise set of cloud folders, it's all useless if you don't use them. In a startup a million fires are burning and there is always something more important than paperwork. I sit here writing this article literally staring at unopened bank statements in my inbox container.

The best technique that I introduced in this business to keep the paperwork moving was to introduce a fairly strict weekly routine. No matter what else it happening, here are certain times on certain days where I sweep out the shop and polish the door handles. We do this on a weekly basis as that works better for startups - a week is a lifetime in politics, but several generations in a startup.

The only hitch is travel. That really messes things up, because you aren't in the office. As with all things startup, you'll never achieve perfection. You aim should be that you are only somewhat embarrassed when you finally hand over to your operations person. At very least try not to re-implement half an accounting package in Excel macros - they'll let you live that one down.

I write these lessons from the benefit of hindsight, not because I have followed them all that well myself. I've run several different kinds of business, and this one, a pure startup, without early revenue has definitely been the hardest.

When you're a freelance consultant, things never really get that complicated. You just have to remember to save your taxes properly so you can pay them at the end of the year (there's no PAYE to do that for you).

When you have a more traditional business that generates cash, it's easier to allocate time for paperwork, because you aren't under as much pressure to get the business working - it already works.

When you run a large company, you have an operations team and accounts team that runs things professionally. Startups, on the other hand, are just hard.

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  • Richard Rodger is the founder of Voxgig. He is a former co-founder of Nearform, a technology consultancy firm based in Waterford.

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