Women Entrepreneurs in Science and Technology, Inc. Newsletter -- Issue No. 21 -- May 24, 2004 Building a Solid Cost Structure Session: Finance Workshop

 

Speaker:
Donna Lopolito, CFO, AccountAbility Outsourcing
Ann M. Vickers, CPA, Managing Director, AccountAbility Outsourcing

By Sulo Musyaju

For the entrepreneurs who chose to spend their lunch session listening to panelists Donna Lopolito and Ann Vickers, of AccountAbility, the hour was spent very well. Drawing on their experiences working with entrepreneurs, Ann and Donna shared practical insights. These included preparing a business plan, choosing a legal entity, and finding appropriate funding source(s), as well as managing the day-to-day financial and accounting operations.

Finding the right source of funding for an enterprise starts long before the actual need for such funds. Donna emphasized that understanding the implications a legal entity can have on your business and choosing one that fits the business' needs best is critical. Having a well thought out strategic business plan is important. At the same time, identifying and cultivating relationships early on with potential investors cannot be overemphasized. You must understand what kind of ventures a prospective investor is interested in and what the investor looks for in a business proposal. More often than not, venture investors are strongly biased towards finding strong potential in an entrepreneur rather than in a business idea. The ideas may change over time, but a savvy entrepreneur can execute a good idea and achieve great results.

A board of advisors that understands your business and can champion your cause in the right forums will help you get far. In addition, it is important to look for complementary functional expertise while choosing an advisor, which includes your accountant and attorney. Find someone you can trust and with whom you can build a comfortable working relationship. Donna also had advice to entrepreneurs: building relationships with a finance team helps you get strong peer buy-in, or early support from those who may have input in the decision to fund your venture, within that department for later reviews. Not only that, you may then have valuable champions of your funding requests in front of decision-makers.

Research who invests in what and find out what they seek. Most importantly, do not put all your eggs in one basket: try to find more than one potential funder. Competing investors who believe in your venture are the best thing you can ask for.

Venture capitalists, angels, friends and family - what are the best sources of funding? It depends on how much money you need and when you need it. Often, friends, family and angels are important sources of funds in the initial stage of an enterprise. Donna cautioned not to overlook corporate funding and grants, however. Bring in fewer equity investors in the early stages. When meeting with venture capitalists, be prepared to talk about your exit strategy.

Donna also underscored the value of paying attention to the cost structure early on. Sign a short-term lease with options to expand rather than a long-term lease up front, even though you have a slightly higher rent. Get insurance that provides balance between risk and premium. Critically review the coverage, limits, and deductibles against your business needs. A good insurance broker can help you find balanced coverage. Most of all, she said, do not underestimate the importance of seeking professional help in legal and accounting matters when needed.

In her parting advice she said, "Persevere, and build collaborative relationships with your potential funders, advisors, suppliers."