Imagination, innovation, ingenuity, leadership, execution and……..administration
Administration is a key skill I’ve been thinking about in recent days because a contact sent me their business plan to sanity check prior to their fundraising exercise. Their documents just reminded me how much paperwork goes into creating a startup — behind the scenes, the elevator pitches and the slick UIs. There’s the written business case, the tech documentation for the build, all the financials, all the legal filings for trademarks and patents (as applicable), all the contracts of employment plus service licensing agreements plus shareholder agreements and user agreements, all the marketing and press literature and another stack of paper dedicated to everyday operational communiques.
It’s not quite as extensive as one of the “deal bibles” that used to be delivered to my office — one M&A took up 15 boxes of literature and one colleague went into an entire vault of information during the firesale of Enron’s assets and we were deciding which assets were worth buying on the cheap — but even a startup has a lot of admin to contend with.
Now I always love to check out other people’s business plans for 3 reasons:
(1.) I can often help them re-engineer it to increase the likelihood of attracting appropriate investors;
(2.) It’s always informative to experience how others approach their business models; and
(3.) Taking yourself out of your own area of focus and expertise is always healthy for intellectual development; it provides reference points for me to access later in any multi-disiplinary cross-pollinations I may do in problem-solving.
Anyway, the administration aspect also makes me think about………ACCOUNTING and how inappropriate assumptions during the modeling process can put the strategy off course whilst on-the-spot assumptions can shortcut a startup towards success. The best thing a startup can do is to proxy model themselves against either a direct competitor or a company providing broadly similar services — rather than carve out a cashflow model and balance sheet from scratch.
Recently I heard several UK startups claim that, “The numbers don’t matter, we can just make them up. That’s what everyone else does. The investors don’t care, they’re just taking a punt on the team.”
Hmmn………and this may be one of the reasons the startup sector in the UK is less developed than in the US where they do, at least, try to crunch some numbers about potential market size from credible industry sources (IDC, McKinsey, Gartner, Datamonitor et al).
Just as another observation: the startups which have typically failed have been the ones which “made up the numbers” (whether that’s in # of users, how long they engage with the site per visit, how sticky they are after X months etc.) to try and persuade investors to keep pumping money into them.
Sooner rather than later it becomes obvious that these “made up numbers” are unsustainable and actually ERODE the value of the investment.
Anyway, in the interests of avoiding such pitfalls I’m using a number of financial modeling tools to sanity-check my own projections (the example below is a dummy version — the real version is available only under NDA):
It’s also not the case that someone with an MBA, ACCA or chartered status always produces a spot-on financial model. Again this may arise from lack of access to assumptions data and this deficiency then feeds into the model as a whole. It’s something to be aware of — if not avoided as much as possible.
As for the imagination, innovation, ingenuity, leadership and execution traits needed in a startup founder, those are probably more of a natural state than administration skills.
Yet it’s probably the attention to detail during admin (e.g. checking through invoices and ensuring its compliance with the original financial plan) which makes the startup a success and how much of a success, long-term.
