Fiscal Excellence for Entrepreneurs is all about keeping it simple. It's about Cash Flow. Forecasting. Accounting. Funding. Fundability. Luck. And some other stuff. But you DO need to pay attention to it. This is a presentation I did for "Finance for Startups" presented by Startup Canada and Startup Calgary and supported by Bank of Montreal.

1. ELEVEN ESSENTIALS
TO FISCAL EXCELLENCE
FOR ENTREPRENEURS
Stephen King
@stephdokin
© 2014 Stephdokin Inc. All rights reserved. Duplication or distribution is encouraged, with proper attribution.

2. I am not THAT Stephen King
I’m this one

3. 30 years of “Shipping Bits” and great teams
Computer Scientist + Marketing + Creative + Entrepreneur

4. Established 2008 Established 2012
Entrepreneur-in-Residence
Co-Founder Founder

6. Or a guitar hero?
Do you want to
be a guitar
player?

7. A business without revenue is just a hobby.
Money is the reason we get to continue to do what we do.

8. Essential
1
Adapt to Embrace
change.
Change creates challenge. Without challenge,
there is no opportunity for success.
Where does change come from?
Industry. Technology. Economic. Political. Biological.
Government. Cultural. Geographical.
What change occurred? How does it impact your
customer? How do you take advantage of it?
My Samsung S5 is
2,500,000% faster than
my old Atari 400

9. Essential
2
Know who
you do it for
“Are you talking to me?”
Who is your customer?
Understand your customer
personas, organizational roles and
what drives their buying
and usage behaviour.
B2C? B2B? Both?
What was your customer doing before you?
What alternatives are there?
Why should they choose you?

10. 3 Essential
Know what you do
Only two types of businesses.
Which are you?
1) Vitamin:
Create opportunity for your customers
2) Pain pill:
Reduce time or expenses for your
customers

11. Value Selling*
Price is important. Value is more important.
* “Solution selling is dead. Long live value selling.” Stephdokin’s ½ day Value Selling Workshop for your sales & marketing teams.

12. Value Messaging
Aligning your Brand Message to the Value you provide
• Feature statement: “Our spinach is full of iron.”
• Benefit statement: “Spinach makes you stronger.”
• Value statement: “Spinach lets you kick Bluto’s ass,
makes you a hero and gets you the girl.”
Feature statements are about “us.” Primary brand messaging should
have customer Benefit and Value statements that are about “you.”
Thanks to: http://www.disruptiveadvertising.com/conversion-rate-optimization/features-vs-benefits-a-cartoon-case-study/

13. $0.50 Coffee
From:
Feature
statements
about
“What we
offer”

14. To: $5 Coffee
Customer
Value and
Benefit
statements,
supported
by our
Feature
statements.

15. 15
$1.50 Salt

16. $30 Salt

17. 17
$0.50 Coffee

18. $5 Coffee
18

19. 4How much can you
charge for it?
THE MOST IMPORTANT
QUESTION TO ANSWER
What cash transaction will
occur so that your company
can make revenue?
Essential

20. Essential How BIG is the
5
revenue opportunity?
How many potential customers?
What % can you REALLY address?
What is you realistic market share %?

21. You can’t control revenue, you CAN control expenses.
Your formula for success? Income – Expenses = Profitability

22. 6 Essential
Do you really need
to hire that person?
There are 2 major decisions we make that can quickly escalate staff costs:
the products we launch and the marketing channels we manage.

23. 7 Essential The importance of
sales and marketing
“It will take
twice as long to
make half as
much revenue.”
#haha
Digital
marketing is a
product unto
itself; it must be
designed and
developed.
And measured.
Use an
operational
dashboard!

24. 8 Essential
Cash Flow is King
Income - Expenses
( $$$ per Transaction X # of Customers ) - ( Salaries + Marketing + Operating Costs )
We need money to RUN the business, to WORK ON the business to make
it better, to SAVE for a rainy day and deliver an ROI for shareholders.

25. 9 Essential
How much funding
do you need?

26. 9 Essential
How much funding
do you need?*
Income - Expenses
Operating Cash Flow Forecast
FY2014-15 FY2015-16 FY2016-17 FY2017-18 FY2018-19 FY2019-20
( $$$ per Transaction X # of Customers ) - ( Salaries + Marketing + Operating Costs )
Revenue (Direct SaaS) 18,672 273,038 1,071,737 1,958,062 2,633,285 3,723,879
Revenue (Professional Channel & Institutions) 123,636 561,772 816,285 1,985,062 3,779,015 6,419,944
142,308 834,810 1,888,021 3,943,124 6,412,300 10,143,824
Cost of sales 1,423 8,348 18,880 39,431 64,123 101,438
Gross margin 140,885 826,462 1,869,141 3,903,693 6,348,177 10,042,385
Salaries and benefits 527,296 897,396 1,292,527 1,577,565 1,755,142 1,971,191
Professional fees 51,000 54,000 60,750 68,344 76,887 86,498
Marketing costs 336,500 446,000 503,688 542,648 586,408 635,561
Operating costs 33,015 46,272 69,348 107,290 154,674 222,639
IT hardware and software 6,660 28,680 18,100 15,550 16,250 18,450
Profit sharing bonus - - 12,835 104,318 340,106 290,001
Cash flow before taxes (813,586) (645,885) (88,106) 1,487,978 3,418,709 6,818,046
Income Tax - - - 416,634 957,239 1,909,053
Cash flow from operations (813,586) (645,885) (88,106) 1,071,344 2,461,471 4,908,993
A $1.55M investment for 40% of this company could be worth $15.7M in year 6
(A 10x return on investment based on a valuation of 8x multiple of $4.9M Cash Flow in 2020)
CAGR (Compound Annual Growth Rate) = 47.09%
* Those who fail to plan, plan to fail. Build and maintain a financial forecast.

27. 9 Essential
Is 47.09%
good?
- Expenses
Compare to these 4 year CAGRs
and Risk Profile (Year 0 of
investment shows the companies
had already established revenue
when getting funding from RCCF)
From: River Cities Capital Funds RCCF
2011 SaaS Operating Metrics &
Valuation Benchmarking Study
http://rccf.com/wp-content/
uploads/2012/12/2011-SaaS-Operating-
Metrics-Valuation-
Benchmarking-Study1.pdf

28. 9 Essential
What does it take to
become fundable?*
Better ROI (Return on Investment)
than alternatives available to the investor.
The lowest RISK imaginable.
* The best source of funding? Revenue from customers!

29. 10“Gotchyas” Essential
Avoid these
• If you’re raising money, raise
more than you need.
• Don’t let your share cap table
become updated or in dispute.
• Don’t let your accounting slide;
get it set up and faithfully attend
to it monthly.
• Don’t mix personal and business
expenses. Separate bank
accounts and credit cards.
• Don’t fool around with
Government compliance!
(GST, Federal and provincial
corporate tax. Employee EI and
CPP payroll remittances.
Personal tax.) File on time.
Pay on time. Pay in full.

30. Essential
Be lucky
11
“I am a great believer
in luck, and I find the
harder I work the
more I have of it.”
~ Thomas Jefferson

31. Enjoy these “Eleven Essentials” at slideshare.com/stebankag
What will you create?
Stephen King
President, Stephdokin.com
CEO, TCELab.com
EIR, AcceleratorYYC.ca
@stephdokin @TCELab
stephen@stephdokin.com
Thanks!
Questions?
Thoughts?