DIGITAL ENTREPRENEUR HAMBURG

Budgeting Archive

Montag

15

April 2013

3

COMMENTS

What to do with all this liquidity…?

Written by , Posted in Strategie

Encouraged by Alexander Graf and his critical analysis of the current digital environment I asked myself why so many irrational business seem to get an almost unlimited amount of funding. In Germany there is always Zalando as a great example of this trend. The business is so far not profitable and investments that by now are topping over a billion Euros will never be recovered but international money is being thrown at Rocket Internet with an ever increasing speed. Its business model is not closely examined and investors push new capital into the firm without even asking some of the most basic due diligence questions. Is it really a plan to buy up the fashion market and pray that your proprietary brands and size will eventually lead you to break even? How are logistics organized behind the shiny technology and TV commercials?  Why is there such an irrational rush to throw more money at these kind of businesses? Since we are now starting to talk about investments going into the billions I am going to take a macro economic perspective to create a possible explanation. Due to the current monetary crisis money has been pumped into our economic environment – […]

Dienstag

28

August 2012

0

COMMENTS

Strategy – why do we even bother with all of this? (b)

Written by , Posted in Strategie

Balance sheet Your balance sheet – yes, you have seen it when the yearly accounts were prepared but it really did not matter to your start-up. For you the one and only key was liquidity in the beginning, followed by profitability but what now? Yes, those accounts become important eventually. What do I mean by that – well, once you have established your strategic goals you will need to optimize your balance sheet accordingly. If you are preparing for a sale, potential investors (and their highly-skilled forensic accountants) will look at your accounts. Are you planning to change your debt to equity ratio and work with more capital? Will a bank lend you money? Are you going to build / buy your next office or remain a humble tenant? There are a lot more questions to ask and you are now playing with the big boys. A Fortune 500 CFO will be very concerned with her balance sheet and watch movements in these accounts closely. As an eCFO of a start-up this is a new area for you and you should slowly get into it as your business develops. In summary a balance sheet can also teach you lots of […]

Sonntag

26

August 2012

0

COMMENTS

Strategy – why do we even bother with all of this? (a)

Written by , Posted in Strategie

So, why do we even bother with all of this? Initially, you need to make sure that your business performs well, does not run out of money and that financials analysis and data points support operational decisions. All of that you can do but if you are a serious eCFO this is probably not the stuff that makes you get out of bed every morning. What really should get you excited is building a healthy, growing and extremely successful venture.  Your operational measures will support that but more importantly you should be influencing the strategic development of your company – if you are not doing that you chances are you will never be more than a glorified accountant. Strategic decisions In order to make a strategic decision you will need a strategy. This may sound a little too simple, but ask some start-ups about their strategy and often you will find that they either do not have one or are unclear in what it is they are trying to achieve. How much time do you think an operationally involved management team has for strategic discussion, decisions and evaluations? From my personal experience: very, very little. Daily business and the demands […]

Freitag

1

Juni 2012

0

COMMENTS

Budgeting & Planning or how to explain the world with financials (b)

Written by , Posted in Strategie

Top-down: This approach is based more on market growth rates and assumptions that initially tend to be very broad. In this case do not provide cost data right from the beginning. Instead, obtain some general market information that will allow for a good ‘guestimate’ of market size and volume growth patterns. Then discuss a growth rate with your CEO/department heads and apply it to your last actual financials. Once you have determined the growth rate compare your resulting revenue to the absolute size of your market and the monthly/yearly growth forecasted for your business. If there is no obvious problem (your total revenue in Year 2 is larger than total market size etc.) you can now add the cost data to your revenue assumptions. As with the bottoms-up method, discuss the relation between revenue growth/decline and cost increase/decrease with management. eCFO Tips: This is a good exercise for start-ups in very fast growing markets. It will help to illustrate that if your market is growing by 30% per year and your company has top-line growth of 25% you are underperforming. If your company is not even growing in line with your target market something is wrong. Often your CEO and […]