onthemarket.com OnTheMarket blog | Property, Houses & Flats for Sale Why Transparency is very Important for the Start Up of a Business?
A scene from the 1950's, where autocratic behaviour was normal in many company boardrooms, even today it manifests , in some companies restrictive ideology on business practice and freedom to trade.
A start up business often requires entrepreneurs to understand and complete a variety of business functions. An important business function when starting a small business is accounting. Although many entrepreneurs may be fearful of dredging through endless stacks of financial documents, accounting often provides entrepreneurs with the clearest picture of their business’ success. Entrepreneurs must also keep copious amounts of records regarding the small business start-up for tax and legal purposes.
Many small businesses started as a hobby or side business use cash basis accounting. This accounting method records and recognizes transactions when cash changes hands. It provides entrepreneurs with a simple method for maintaining accounting information. As companies grow and expand, they may need to change to the accrual accounting method. Accrual accounting is the most widely used method in business; it records and recognises transactions as they
occur, regardless of cash changing hands.
Forecast Financial Estimates
Entrepreneurs may need to provide banks, lenders or investors with a financial forecast relating to the new, small business venture. This information is essential for obtaining outside financing for business startup costs. Entrepreneurs usually write a business plan, which includes an economic forecast, expected startup and monthly expenditures, and pro forma financial statements. This accounting information is heavily relied upon by lenders or investors, to ensure the entrepreneur has an accurate and reliable picture of financial expectations.
An important accounting function for starting a small business is the creation of a budget. Budgets outline the expenditures needed for various aspects of the business. Entrepreneurs may budget capital for hiring employees -salaries from top down, the ceo to the humble office Jnr.The marketing strategies tv, online, printmedia ;with the latter being more irrelevant in our 24 hr digital consumer environment; mentioned in previous post, inventoried purchases and other types of business expenditures. Sticking to a budget, helps entrepreneurs avoid wasting capital on non-essential business items. Budgets can also create a historical record of, how the small business spent capital for producing consumer goods or services.Who sponsors you? or more importantly,who do you sponsor within the property industry ?
Accounting is the predominant way a company determines its profitability. Although a small business may be able to generate high amounts of sales revenue, failing to generate enough profits may doom the business to failure. Entrepreneurs need to understand how well they are using assets to generate services and the costs of inventory compared with the company’s profit margin. Banks, lenders or investors may also require the small business to release financial information to ensure that these individuals will be repaid in a timely manner.
Small businesses may seek advice, from an accountant registered with the HMRC or an individual chartered accountant.Professional accountants usually offer copious amounts of education, experience or expertise when helping the entrepreneur is set up their small business accounting operations. These individuals may also offer lower rates to small businesses to help defer start-up costs. Entrepreneurs may also need professional help when filing business tax returns and ensuring that all business issues are accounted for at year end. When individuals or a group of people have invested in your company, they need to see total transperancy, their commitement to invest in you should NOT be forgotten.
Public limited companies are a good example, where transparency to their share holders is mandatory, financial expenditure in one of many areas outlined each financial quarter .Giving good perception, shows accountability and best practice ,conveying faith and trust to their investors and improving their public image.
Without clear accounting ,many backers would seriously strat to question where moey invested is being spent.
When investors and potential investors, are not given figures in writing, where and how the money is being spent ,it's hardly any wonder why everything stops.
The UK workforce is comprised of about 23 million people, approximately 10 million are available to hire at a level of £27,000 / $54,000 (realistically, without the London weighting, it's around 20>21 K) but the pool of people who are available, competent and experienced enough to take on a FTSE 100 CEO role is much smaller. As a start up most of the team will work almost 24 / 7 driven by the end game , to get a share of the profits ,albeit through initial public offering in a few years time, or a yearly bonus, which I might add is always performance based.
So to the many legions of start ups, venturing out ( pun intended ) would you set a salary of £500 K / $1M for a CEO yet to prove her/him self ? of course not;Though it's happening out there, irrespective of past form, when you set up a new start up esp tech ,the rules are simple economical, rent, furniture and salaries for all etc etc.
Tech companies can nose dive, within months, and when there are so many, who may or may not be of CEO calibre. who for the fraction of the cost, who are willing and able, with all hands on deck.
You get more bang for your buck, from those who are hungry, why? the desire to succeed, is a far greater and powerful tool,in contrast to a CEO whose been there and worn the hat;more importantly whose drive is muted, the large carrot on the short stick, is already, sitting in their bank account.
Can we pay a competitive rate, to attract the best CEOs for our top UK businesses? Yes for an already profitable FTSE / Nasdaq company,why not if performance has been delivered to the company in question,
Remember tech years, are like dog years, with respect ,you can't teach an old dog, new tricks,technology grows very fast. As a start up, the money invested ,raised, should not be seen as a gravy train, by all and sundry, who think they can jump aboard ,because of what they did 10 years ago.What's worse is trying to justify, that running a tech company, is like desktop publishing ( pun intended :).
I have seen. how,a ceo was bought into run a portal, I worked for, from a well known "software" company,within 8 months the company floundered, sold on. They would always buy pizza and jot a way on a board regurgitating strategy, from "the old workplace"; a nice person, but not, the foggiest, what their role entailed.
Coincidently ,before starting at the software company, they were also with well known, photocopying brand ;late 80's, that was a good fit "then" for a software company looking to gain office :), work place connections;a smooth fanciful talker, but then, no follow up >follow through, on action.
The CEO's credentials from that software company, made good city headlines when they joined, but performance wise they ..."cough splutter " say no more.
We all need good ceo's for economic growth, but not at the expense of the company .certainly not stifling competition or going against the very grain of entrepreneurship, markets should be open to everyone.So imagine, twentyfive + eager willing, capable, people added to a "start up"
CEO / founders take notice.
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