By Rob Panepinto
When you look at the make-up and expertise of founders and initial entrepreneurial teams, they tend to come from technical, operations, or business development backgrounds. All necessary expertises to turn an idea into a scalable business. However, two other critical areas of expertise, finance and legal, generally get short shrift. A CFO or financial leader is often the last member of the “C” Suite to be filled. Given the limitation of capital and the nature of early-stage enterprises, none of the above is surprising. However, entrepreneurs ignore this expertise at their own peril, both in terms of their ability to successfully get out of the blocks and to scale to the next stage.
On the finance side, many early-stage enterprises’ financial reporting goes no further than measuring cash in the bank account at the end of the month. A lack of financial detail and visibility creates a challenge to effectively forecast costs, understand gross and net margins, set pricing, and determine employee compensation. It also makes it nearly impossible to raise capital as even the earliest angel investor will want to see an income statement, balance sheet, projected forecast, and uses of capital.
In terms of legal support, beyond incorporation, detailed operating agreements, NDAs, sample contracts, patents/IP protection, and investor documentation are areas where a lack of good documentation and legal advice can have huge negative downstream effects on businesses trying to scale.
Again, given limited resources and the inherent skills and experiences of founders, the challenges listed in the above two paragraphs are to be expected. It is rare to find a “complete” executive team at this stage of development. However, the needs cannot be ignored. Fortunately, fractional CFOs and accounting expertise can be found at a reasonable cost and there are law firms that specialize in working with early-stage entrepreneurs, often leveraging access to standardized documents that can be used or customized at reasonable costs. Additionally, as clients of the UCF Business Incubation Program, you have access to the financial and legal support services we provide as part of the program. Ask your site manager to learn more and see how we can help.
