Get Your Financials in Shape

I suppose it seems obvious to say that every entrepreneur should have a top notch set of financials, but I'm surprised how many don't. Of course everyone puts some numbers down on a spreadsheet, but to really move your financials from good to great, you have to spend a lot of time on them, and sometimes a lot of money.

I am not a financial person, I am the strategist and the implementer. I couldn't create a set of financials from scratch, so I decided to do what I do best - write. I actually wrote out my financials in words, one expense on each line of a spreadsheet. Things like:
Rent - first 2 years, $500 per month in a business incubator; year 3, 14 employees, rent $3800 per month; year 4, 17 employees, rent $4300 per month; year 5, 21 employees, rent $5500 per month

and I wrote several pages out like that. Every expense I could anticipate, I wrote it out. It took a long time, several weeks. I had to research everything (I didn't make the numbers up) and I had to talk to people in my industry to get a sense of how much I could sell and how fast I would grow. Of course I did a ton of market research, and made estimates about my company's size and growth rate. I made a lot of phone calls, for example I called three web companies to get an estimate on how much it would cost to create my website, then I chose a median figure from those estimates. I researched salary figures for future employees, and product development costs for similar products in my field.

Then I gave the whole thing to an accountant, and paid her $150 per hour to create the financials. It took her about 4 hours, $600. It was a lot of money at the time, but I ended up with a professional looking, accurate set of financials that I was proud to show to any banker or investor. My financials have gotten a lot more detailed since then, but I am still using the originals she created. It was worth the time and the expense, and it impressed the people and the government agencies I was looking to for funding. And best of all, I could explain every single line item on there, because I had done all the original research and I knew where every figure came from.