The observations that follows is based on our own experience and observations of others over 35 years. We have seen startup companies come and go.

 

We have established successful financial services entities from stretch. That is what makes us unique, plus our unparalleled years of experience.

 

OVERALL OBSERVATIONS

 

• Often the successful startups make their founders and shareholders a lot of money.

 

 

• Ill-conceived startups fail and founders/shareholders lose money and every worker, career time. No one wants to be associated with a failure.

 

 

• Some stagger on for years, before than finally close down.

 

 

• Some are just unlucky.

 

 

• Cost control is critical.

 

 

• An undercapitalised business eventually close down, finally.

 

 

• Timing is everything. Launch at the right time and success is more likely. No point trying to sell straw hats in winter.

 

 

 

WHAT WE OFFER

One of the many services we offer is a sounding board for you to discuss your idea for a financial services business with us.

 

This might turn out to be the best money you ever spent. Why?

 

A.   We are industry people, with real world experience, including bad experiences. That means we have experienced failure and it has cost us money. Other consultants have not and they never have ‘skin in the game’.

 

B.  We have learnt lessons by both experiencing (and observing) failure and success. We know the cost of success and its financial rewards.

 

C.  After consideration of your plans, our advice at this exploratory stage will be frank. Sometimes, it will be don’t start a new financial services business. Other times, we will suggest modification of your start up plans or suggest no change at all.

 

D.  We can recrate realistic financial budgets base on your objectives. The budget, might turnout to be more than your anticipate to spend and it might conclude that success is further away than you anticipate.

 

Nine questions to asked yourself before starting a business.

 

1. Why do you want to start a business?

     Building a business is hard work and it is often an emotional rollercoaster.

     There are many good reasons and a few bad ones.

 

2. What does success look like for shareholders and staff at say 3 years?

You need to have a realistic base case forecast. The temptation is only to  forecast ‘rainbows and unicorns’. When that doesn’t eventuate you will be disappointed and lose enthusiasm.

 

Worse, those who have supported you will be less than encouraging that you should go on. Finding new capital will be difficult.

 

A realistic forecast made at the start is better all round.

 

3.  How are you going to execute your business strategy?

Here are two quotes about the importance of turning a good idea into  successful reality.

 

Steve Jobs said, “To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions,” and

 

Lawrence Bossidy said, “Execution is the ability to mesh strategy with reality, align people with goals, and achieve the promised results.”

 

We can act as a sounding board for you. There are many, many things that turn a startup into a successful business and keep to growing.

 

Equally, there are a lot of things if not allowed for, will drive the business into the ground.

 

People are one critical asset that will determine the success or failure of a business strategy.

 

Here are somethings we have experienced / observed:

• Founders’ Immediate family

 

Get buy-in from your family. If they are not 100% behind you, don’t even bother starting out. The financial sacrifice and cost on family time will be too great.

• Founders Equity

 

This is tricky stuff. Founders need to be happy with their share of the original equity offering. If not success will cause unpleasantness as those with smaller equity will claim that more credit than they actually achieved to success.

 

Founders need to agree, that their voting equity will be impacted by the additional of new non-founder-capital into the business and the terms under which new founder capital will be accepted.

• Executive staff

 

The work ethic of executive staff, needs to be consistently at a high standard. Working with people that accept mediocracy is not going to make the company anything more than mediocre, and that means failure.

 

Be prepared to allow great staff to earn or buy equity. Some will ask for a stake in the company if it is doing well, even if their contribution is modest.

• Support staff

 

As frustrating as this might be, few staff will be as driven as much as you for the company to succeed. Expected it.

 

These are just a few of the things we can you about dealing with people before you open the doors.

 

4.   How much capital will you need to operate with little or no revenue for 2 years?

As discussed and question 2, make a realistic estimate of costs and revenues. Then reduce the revenue forecast by 25% and increase costs 25%.

 

Success always takes more time that you think. All sorts of things will not go according to plan.

 

The most appealing aspect to this analysis is that it means that it is likely that once the foundational capital is raised based on this lower return scenario, you will probably never have to raise much capital again, if you do better that this pessimistic scenario.

 

Raise capital based on an optimistic scenario, as tempting as that maybe, if only because you will, other things being equal, you will not have to go back to the original funders again and sell your now somewhat tainted vision.  Some may say they are not ‘throwing-in good money in after bad’. Others might go again, but they will require new equity at a lower price.

 

We can talk to you about how much capital to raise.

 

5.    How much capital do you need, before cashflow breakeven?

This is an important question.

 

This is because cashflow breakeven is an important indicator or the health of the business. The longer your business experiences net negative cashflows, the greater the reduction in value to owners, and the more likely it is that you will have to raise additional capital.

 

You need to be realistic about best, base and worst financial scenarios to cashflow breakeven.

 

6.  What are the key milestones for the business to be considered to be on the right track to make a profit?

Mapping out the milestones on the journey to profits, will make it easier to raise capital.

 

Achieving the milestones, will be encouraging and help maintain confidence in the vision. If you do run short of capital, it might be easier to raise new capital if you can prove that milestones have been achieved.

 

Our experience and access to our extensive library of policies and procedure will speed up attaining each milestone especially the early ones.

 

7.  Will you pay dividends?

This answer will determine the expected return to all shareholders. Non-executive shareholders will want some chance of a return along to journey to their exit.

 

8.   What is the exit plan for shareholders (including executive shareholders)?

This is a question often overlooked by startups.

 

All shareholders need the opportunity to realise the value of their investment.

 

Executive shareholders will need to know what value they will receive for their equity, if they are terminated, retire or resign.

 

Non-executive shareholders will to know how they can liquidate their equity positions when they need to.

 

If in the long run, exit strategies include, management buyout, trade sale, merger or public listing, some idea what funds under management or profit might trigger these exits would be very helpful. Investors can then make an assessment of the value might realise on disposal.

 

Be prepared for shareholder agreements to include such considerations. We can help you write a fair shareholder agreement.

 

9.   Do you have an exit plan for you and your family?

You might think, why ask this question of yourself?

 

Over more 35 years in financial services observing startups that become successful, aside from asking yourself, why to I want to start a business, how do I get out is the next most important question.

 

If you are own, your answer only has to satisfy yourself.

 

If you have a family, then your answer is a lot more important.

 

Being a key man in your own business, will require a lot of time away from your family.

 

If you are away from home too much, eventually your partner and kids will become used to you not being around. They will come to understand that they don’t need you, they only need your money and that might produce much unhappiness.

 

If you have an exit plan, they may be willing to suffer your absence in the cause of the ‘greater family good’.

 

We can help you with each of these important questions.