Category Archives: Finance

Forecasting for Entrepreneurs – How to Develop Assumptions

Joel Schwarzbart gave a great talk on forecasting for the CSUF Startup Incubator

Joel Schwarzbart gave a great talk on forecasting for the CSUF Startup Incubator

Joel Schwarzbart describes himself as half a CFO. What does that mean? Well, basically it means that Joel is a consultant who does many (if not most) of the financial activities that a full time CFO normally does but he does them for multiple clients.

Earlier this week, Joel gave a talk at the CSUF Startup Incubator in Placentia (by the way, we  bring in experts all the time to give talks and to have office hours, you can see all of our planned events by going to our Eventbrite page) about how to do forecasting if you are an entrepreneur working on a startup. While he talked at great length on a number of subjects that are important for forecasting there was one thing that I want to focus on here: Assumptions.

The accuracy of your forecast, which is the combination of all of your projections for your business, is in large part determined by the accuracy of your assumptions. Some things you have to assume:

  • How much you will spend on marketing efforts
  • The costs of the raw materials that go into making your products
  • Variable employee costs
  • Conversion rates on your ads
  • Your effective tax rates
  • Travel expenses
  • How many new customers you will bring online
  • And the list goes on and on and on….

Many of the entrepreneurs and students I work with do not give nearly enough consideration to their financial assumptions and yet it is from these assumptions that all forecasts come from. Fortunately, there are some easy ways to develop your financial assumptions and here are some of them:

Company Financial History

If your company has been around for a couple of years you will have to assume less than you would if your business is a startup. Simply use your actual history and financial statements to inform your assumptions. You will still have to take into consideration some other data points that I will cover presently.

Industry Norms

For our students, I always recommend them to look up the industry norm financial ratios in the library. In our library there is a database of financial ratios that is broken up by industry and by company size (there might be a huge difference in quick ratio for a small company versus a large company after all). With these kinds of industry and company-size financial ratios you can compare them to the financial ratios that you have developed for your pro forma (forecasted) financial documents; if the financial ratios you have aren’t even close to the industry norms then you might have an issue.

Besides financial ratios, there are many other kinds of industry norms that you can find out if you look hard enough or ask the right people about (industry magazines are usually a good source for this kind of information as are people who currently work in a given industry). For example, if you are opening a restaurant it would be a good idea to figure out your turnover rate (how many times a table is used over a period of time by a party).

Other Secondary Data

Besides industry norms, there are a lot of good sources of secondary data, which are nothing more than other sources of relevant information. For example, knowing the general strength of the economy is a good thing to know; knowing the strength of the economy for your area of operations is even better. Maybe the weather plays a part in the success of your business or maybe new regulations will play a more significant role in your business. There are many different fields to look into for secondary data.

(Yes, industry norms are a kind of secondary data but I think they’re important enough to have been covered separately.)

Observed Data

Now that I think of it, this might be the best kind of data that there is. If you directly observe something then that’s data that others do not have. For example, I remember reading about a startup a number of years back that was making some pretty good money taking pictures of department displays. Why? Competitors and companies that make items that go into department stores really wanted to know what was popular at that moment.

I have counseled students to get a head count on how many people went into a restaurant. Municipalities put out those strips on the road to get a count of how many vehicles pass by. Doing A/B (or multivariate) testing is another awesome source of observable data. Your company’s history is a form of observed data and, please, keep good metrics on your business; that will help you immensely.

So What?

I’m sure that there are other broad sources of data that I missed but I think you get the picture about assumptions. They are important because, like food, if you put good stuff in you will get good results and vice versa. And you need to have quality forecasts for your business so that you:

  • Make sure you have positive cash flow
  • Can plan to produce the right amount of product
  • Know where to spend money to get a good ROI on marketing
  • etc.

Forecasting is a fundamental part of any business and we were lucky to have Joel give a great talk on forecasts. But forecasting is just a part of growing a business. There are a lot of things to consider and to do it right you should have mentors to help guide you. You can find them on your own or you can work with mentors that you can find at CSUF Consulting or the CSUF Startup Incubator.

CSUF Consulting is great for clients that already have a business who are looking to improve in some fundamental way (i.e. marketing, operations, leadership, etc.). Each client is paired with a student team and a mentor who, as part of their classes, work with clients over the course of a semester to develop a comprehensive strategic plan that directly addresses some of the toughest issues or most promising opportunities that their client has.

The CSUF Startup Incubator, on the other hand, is built off of decades of entrepreneurial experience to help entrepreneurs go from concept to launch. At the beginning of a six month residency, entrepreneurs at the CSUF Startup Incubator sit down with Incubator staff and their dedicated startup coach to develop a startup plan that will position the entrepreneur for success. From that point on the team gets to work implementing that plan with the help of the entire CSUF Entrepreneurship community, which includes more than 500 subject matter experts who can be called upon to help. Oh, and residents at the CSUF Startup Incubator also get one of our CSUF Consulting teams attached to their startup to help them develop their startup plan by focusing their efforts on a critical part of the entrepreneur’s startup.

Give us a call today if you are interested in working with us, our number is (657) 278-3930. And to learn more about how to become a successful entrepreneur make sure to check out our Knowledge @ CSUF Entrepreneurship series where we have published posts and videos on topics that are important to entrepreneurs.


#CSUF

For more details on CSUF Entrepreneurship:
http://business.fullerton.edu/Center/Entrepreneurship/

For more details on how we help people become entrepreneurs:
http://business.fullerton.edu/Center/Entrepreneurship/Incubator

For more details on how CSUF Consulting can help businesses thrive:
http://business.fullerton.edu/Center/Entrepreneurship/Consulting

Attend one of our events for entrepreneurs or sign up for a free mentoring session:
http://bit.ly/CSUFEntrepreneurEvents

Knowledge @ CSUF Entrepreneurship video series:
http://bit.ly/CSUF_Knowledge

Startup Funding Option: Family and Friends

Jim Cooper is an expert on startup funding and at this talk he will go through some of the lesser known funding options for entrepreneurs.

Jim Cooper is an expert on startup funding

I am sitting here watching a great presentation by startup expert Jim Cooper, co-founder of Braid Theory, and he is talking about funding. It’s a complicated subject, or at least it can get that way, but I think one of the main complications is that people make it more complicated than it needs to be.

Many of the entrepreneurs that I talk with think that they should be looking for funding from an Angel group or VCs. Basically, to these entrepreneurs, that’s the only way they can think of to raise money for what they are doing. Starting a business is tough and oftentimes expensive so I understand why people, especially first time entrepreneurs, think that in order to raise funds they have to go through professional investors.

But that’s not the case. Not only is that not the case, the vast majority of startups do not get their first funds from professional investors. Ideas are great but they just don’t make for great investments all that frequently.

So, how do most startups get, well, started?

Self funding is one way. And raising funds from family and friends is another popular way for early stage companies. And the reason why is simple: you, your family, and your friends are the people most likely to believe in you. They are willing to take that chance… and it is a very big risk because most startups don’t end up making much, if any, money.

Jim did provide a couple of great tips for entrepreneurs who are approaching family and friends for investment funds:

  • Get it in writing!
    • Any agreement involving money and equity must be documented. Future investors will want to see who owns what and getting agreements written down will help to curtail any disagreements in the future.
  • If you don’t want your family and friends controlling your business sell them shares that do not include voting rights.
    • Selling equity that doesn’t come with voting rights is a normal thing in the startup world but most non-professional investors probably haven’t heard about this and might become offended if one of their family members or friends tries to sell them shares that don’t come with voting rights. Entrepreneurs should tread carefully here but the entrepreneur needs to be the leader and making the argument for why they need to maintain control of their business, especially during the earliest stages of a venture’s life.
  • Don’t raise more than $500,000 from family and friends
    • I think this is more a rule of thumb for Jim but I can see his reasoning here. Startups aren’t worth a lot in the beginning and $500,000 would probably represent a sizable chunk of the business’ equity. Sure, if an entrepreneur could convince a rich uncle to invest that amount of money and not require voting rights then the entrepreneur would still have control of his business but would probably only have a fraction of the equity.

Jim’s talk contained a lot more information than what I’ve been writing about. I hope that we will be able to publish some of the more important segments from Jim’s talk in the future as part of our Knowledge @ CSUF Entrepreneurship series. And to work with mentors like Jim and those that you can find at the CSUF Startup Incubator get in touch with us by sending us an email at csufentrepreneurship@fullerton.edu.


#CSUF

For more details on CSUF Entrepreneurship:
http://business.fullerton.edu/Center/Entrepreneurship/

For more details on how we help people become entrepreneurs:
http://business.fullerton.edu/Center/Entrepreneurship/Incubator

For more details on how CSUF Consulting can help businesses thrive:
http://business.fullerton.edu/Center/Entrepreneurship/Consulting

Attend one of our events for entrepreneurs or sign up for a free mentoring session:
http://bit.ly/CSUFEntrepreneurEvents

Knowledge @ CSUF Entrepreneurship video series:
http://bit.ly/csufknowledge

CSUF Entrepreneurship Professor Sorrell on How to Charge Higher Prices

Scott Sorrell

Scott Sorrell, CSUF Entrepreneurship Professor

Scott Sorrell has been working with clients for decades helping them market their products and services better as a consultant and speaker. His clients include some of the largest companies in America and he is also one of our Entrepreneurship Professors at Cal State Fullerton. And the story of how he has arrived at this point in his life is as interesting as his presentation style, which was on full display last night during his talk last night at the CSUF Irvine campus.

If you don’t know Scott then you should make the effort to meet him. He’s energetic and bright and is one of those kinds of people who makes life more interesting.

I would never have believed it, but Scott didn’t start out his life as a business major or really very interested in business. He seems to have been born to be a presenter, a sales person, but he majored in Philosophy at school and went on from their to go to a seminary school because he wanted to spread the good word. But life intervened and money started to run out.

Realizing this, Scott decided to start his first business: a print shop. And, despite his lack of training in business he did okay. But he made a common mistake that many first time entrepreneurs make by charging too little for what he did. (As the title of this post would suggest, that is what his talk for us was all about.)

Eventually, Scott’s print shop started including marketing services and that was a great move. Scott’s natural ability to connect with people and communicate ideas effectively started to shine through. Since then Scott’s career has been on the same track. He has worked as a marketing executive, consultant, and speaker for decades now.

And it was because of this story and because of his expertise in marketing that we invited him to speak to the CSUF Entrepreneurship community last night. Specifically, Scott focused his talk on how to help his clients charge higher prices for their goods and services.

The talk was wide ranging and contained a lot of great value for those in attendance. I think we might be able to publish some of the videos from his talk but don’t hold me to it. One way to work with Scott is to engage with one of our CSUF Consulting teams. These consulting teams provide insights and come up with innovative solutions that no other consulting teams in Southern California can come up. These projects start at the beginning of each semester and the fall semester is less than a month away so make sure to get in touch now!


#CSUF

For more details on CSUF Entrepreneurship:
http://business.fullerton.edu/Center/Entrepreneurship/

For more details on how we help people become entrepreneurs:
http://business.fullerton.edu/Center/Entrepreneurship/Incubator

For more details on how CSUF Consulting can help businesses thrive:
http://business.fullerton.edu/Center/Entrepreneurship/Consulting

Attend one of our events for entrepreneurs or sign up for a free mentoring session:
http://bit.ly/CSUFEntrepreneurEvents

Knowledge @ CSUF Entrepreneurship video series:
http://bit.ly/csufknowledge

How to Fund your Startup @ CSUF Startup Incubator

Jim Cooper is an expert on startup funding and at this talk he will go through some of the lesser known funding options for entrepreneurs.

Jim Cooper is an expert on startup funding and at this talk he will go through some of the lesser known funding options for entrepreneurs.

You have a great idea but you need some funds to make it happen. What do you do? [First step, attend this talk at the CSUF Irvine campus this Wednesday, August 2 at 6pm; register here.]

As an entrepreneur, there are many options for funding all with clear pluses and minuses. Our speaker, Jim Cooper of Braid Theory, will discuss what some of these options are but he will be focusing on SBIR funding as a great alternative for startups.

“The Small Business Innovation Research (SBIR) program is a highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization. Through a competitive awards-based program, SBIR enables small businesses to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation”s R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs.” – sbir.gov

Pizza and soft drinks will be served at this event.

We hope to see you there!

[You will need to purchase a parking permit to park on this campus. Information for parking can be found here: http://www.fullerton.edu/irvinecampus/about/campusmap.php]

Jim Cooper: Jim Cooper has had over 20 years of startups, market research, market intelligence and competitive analysis experience. He has assisted companies enter the United States market, and has helped many other companies entering markets further afield.

He is CTO of Braid Theory, an early-stage startup advisory and consulting group located in Los Angeles

He also created a consultancy, Conscientia Research, and as a full-service Market Research business its goals are to make businesses successful and competitive by employing research to understand markets, so a business doesn’t have to rely on assumptions about how a market works.

He employs a number of services, including market sizing, primary and secondary research, customer validation, market validation, competitive analysis and strategy, regulatory and standards compliance, supply-chain optimization, production analysis and business planning.

Jim has been a Principal Advisor to companies seeking Phase I and Phase II Commercialization through SBIR grants. With his assistance, businesses have utilized his research products to enhance the growth projections for their business and strengthened their market capabilities.

Jim’s specialties include: Market Intelligence, Market Validation Research, Economic Development, Small Business Issues, Competitive Analysis and Strategies, Supply Chain Optimization, Market Entry, Production Strategy, wrapped in timely and actionable recommendations.

Jim is trained in economics, political science, biology and mathematics, in both the United States and his birth country, Australia. He holds positions on business advisory boards, lending his experience and broad knowledge to startups. He is a mentor to CSU students NSF i-Corps teams.

Jim is interested in STEM/STEAM and Linked Learning education initiatives, and how that channels into innovation, and Lean Start-ups. He uses an evidence-based entrepreneurship approach to increase intellectual capital.


#CSUF

For more details on CSUF Entrepreneurship:
http://business.fullerton.edu/Center/Entrepreneurship/

For more details on how we help people become entrepreneurs:
http://business.fullerton.edu/Center/Entrepreneurship/Incubator

For more details on how CSUF Consulting can help businesses thrive:
http://business.fullerton.edu/Center/Entrepreneurship/Consulting

Attend one of our events for entrepreneurs or sign up for a free mentoring session:
http://bit.ly/CSUFEntrepreneurEvents

Knowledge @ CSUF Entrepreneurship video series:
http://bit.ly/csufknowledge

How I Raised Millions for my Startup @ CSUF Startup Incubator

Tony Wong, Founder of Badu Networks, pickFlick, and will become a presenter at the CSUF Startup Incubator on August 10 when he discusses how he raised more than $4M for his most recent startup.

Tony Wong, Founder of Badu Networks, pickFlick, and will become a presenter at the CSUF Startup Incubator on August 10 when he discusses how he raised more than $4M for his most recent startup.

This is a tale of a current software startup and all that it’s done and still doing to raise capital. This talk will not sugarcoat anything, it’s the story of the real life startup grind. The company I’ve riased this money for is Badu Networks, a tech company that develops wifi solutions, and it has been around for 2.5 years and has raised $4.5M all from family, friends, and Angels without having any revenue. We’re nowhere near being successful.

Hear what’s worked and what hasn’t. This is real life, right now stuff!

Join us at the CSUF Startup Incubator on August 10 to see this awesome talk.

More about the speaker, Tony Wong:

Tony has a unique set of skills and proven accomplishments based on a broad range of functional roles and industries. He has contributed to companies as small as Firmgreen, Inc. (alternative fuel) and Morphotrak (bio-metric systems formally called Printrak) to large Fortune 125 companies that includes Apple Computer, HP, Sun Microsystem, Gateway Computer, Black & Decker, and 3M.

In 2013 Tony authored and published a career advice book for young and mid-career professionals to help them mooove ahead, soooner. The book is called “Mooove Ahead! of the corporate herd”. The ebook version is available at Amazon.com, Apple iBookstore, Barnes&Noble.com, and the paperback version at Lulu.com. All proceeds continues to be given to charities (that deal with helping kids, pets, and curing cancer).

Tony recently co-founded a software startup, Badu Networks, Inc. Badu has developed technologies (patent-pending) that will push (and hopefully disrupt) several industries. Badu can significantly and easily increase wireless (cellular, WiFi) throughput.


#CSUFEntrepreneur #CSUFStartup

Sign up for the CSUF Startup Newsletter to keep up-to-date on all the events, news, and everything else we do: http://bit.ly/CSUFStartupSignup

For more details on CSUF Entrepreneurship: http://bit.ly/CSUFEntrepreneurship

For more details on how we help people become entrepreneurs: http://bit.ly/csufstartup

Attend one of our entrepreneur events or sign up for a free mentoring session: http://bit.ly/CSUFEntrepreneurEvents

What every Startup needs to know about Bookkeeping @ CSUF Startup Incubator

Karla Amador

Karla Amador

Karla Amador is the CEO of Thrive Financial and Bookkeeping Services and is a sponsor of a scholarship for CSUF Entrepreneurship. At this talk Karla will discuss the different aspects of keeping books for a startup with a special focus on QuickBooks.

We hope to see you at the CSUF Startup Incubator!!!

More about Karla:

Thrive is a cloud bookkeeping and financial services firm that specializes in QuickBooks and works with businesses that outsource their financial needs.

They maintain clients’ books, including managing a company’s cash flow, A/P, A/R, billing, collections, reconciliations, financial reporting, sales tax management/filing, and more.

Their client industries include, real estate, special event, construction, consulting firms, venues and asset management companies.

Karla sets up, manages and trains on Quickbooks, collections, forecasting, budgets, A/P, A/R, payroll, record-keeping and billing. Her expertise also includes reconciliations, chart of accounts, cost accounting, journal entries, sales tax and maintenance.

A percentage of all sales go to a scholarship fund to help a deserving individual pay for college costs.

We believe in helping our clients and community Thrive! A percentage of all sales go to a scholarship fund to help a deserving individual pay for college costs.

What every Startup needs to know about Bookkeeping @ CSUF Startup Incubator

Wednesday, Feb 24, 2016, 6:00 PM

CSUF Startup Incubator
120 South Bradford Avenue Placentia, CA

2 Entrepreneurs Attending

Karla Amador is the CEO of Thrive Financial and Bookkeeping Services and is a sponsor of a scholarship for CSUF Entrepreneurship. At this talk Karla will discuss the different aspects of keeping books for a startup with a special focus on QuickBooks.We hope to see you at the CSUF Startup Incubator!!!More about Karla:Thrive is a cloud bookkeeping…

Check out this Meetup →

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Guide to QuickBooks [EVENT]

Cal State Fullerton’s Mihaylo College of Business & Economics and the SBDC
are partnering to offer a Hands-On Beginners Guide to QuickBooks session. Learn how to be  more efficient and simplify your bookkeeping using QuickBooks Accounting Software. This seminar will demonstrate functions useful for daily operations in your small business. Items
covered:

  1. Introduction to Financial Management
  2. Why Accounts are Important
  3. Getting Started with QuickBooks
  4. Managing Sales & Customers
  5. Managing Expenses & Vendors
  6. An Overview of Reports
  7. Next Steps…

To RSVP please go here: https://goo.gl/znvXcy Continue reading