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Oh no – not again!

Mindy Barker | Barker Associates

Many entrepreneurs who launch a business are focused on selling and bringing in revenue so much they are not thinking about the type of infrastructure needed to efficiently operate their business. I have to admit that some of this even happened to me when I first began my consulting practice. All of the support I received in my role as a corporate CFO was nonexistent. That saying about building the airplane while flying it applies here.

Infrastructure refers to all of the pieces behind the scenes that are capturing your business’s daily transactions. It is one of the Seven Essential Tools I discuss in my book, Pitching to Win: Strategies for Success.

Are you thinking, “Oh no – Mindy’s going on about Essential Infrastructure – again!”

You bet I am – because it’s that important to the success of your business.

In an ideal world, your infrastructure can be represented by this graphic:

Mindy Barker | Barker Associates


(* ERP – Enterprise Resource Planning – is the conductor that manages all of your business’s processes to integrate them into a cohesive database for reporting purposes).

Small businesses starting out often prioritize going after the work to generate revenue while building a “just-in-time” infrastructure. No thought is behind how all of the pieces should work together with the end result in mind. With a computer and a phone, you can run many types of businesses by the seat of your pants in the beginning.

For a business to grow to the next level, a business owner needs a vision and a roadmap that includes the evolution of their company infrastructure.

Understanding the basics of what your infrastructure should be able to do for you is critical when selecting the right tools to operate. Here are two of the most fundamental components: Cash and your General Ledger.

Knowing your cash burn rate – the rate at which you spend cash over time – is the most basic component for a business owner to know. Without cash you cannot operate. Maintaining a cash ledger, even if it’s in Excel or a tool such as QuickBooks, is critical. Select a tool that provides download capabilities for future integration needs. Forecasting cash needs over the next few weeks or months will help you decide the timing of critical versus discretionary spending. I advise my clients to know at least a 12-week forecast of cash needs.

You may be saying at this point that you already have a tool – your online banking site. Anyone who has heard me speak on this topic knows my position on this – you MUST have a checkbook that is reconciled each month to maintain history. The information gained from this piece of your infrastructure can be used to diagnose issues and strategically to plan for future growth. The online account is only a moment in time and does not serve your future.

Setting up your general ledger with the end goal of financial reporting in mind provides you with the insights you will need to answer questions such as, “How much did I spend in Marketing last year?” and “Am I making or losing money in my Hoboken location?”

Whether or not your future includes seeking investment funding, you must have the infrastructure in place to answer these types of questions when planning for the future. Potential investors will require you have data to back up projections for future sales. If you cannot rely on your general ledger and reporting tools to produce answers, perhaps it’s time to revisit your current infrastructure to support future needs.

Wondering where to start to build the right infrastructure? Let’s start with your General Ledger. Structuring your GL in order to generate reports from various perspectives is critical to daily decisions, budgeting, and financial reporting.

Note this example:

Mindy Barker | Barker Associates

When a GL is structured with these various categories you can examine your business from multiple angles to determine if a location, product, or department are serving the business as needed. If you cannot produce financial reports to support tactical and strategic decision-making, perhaps the GL structure is the problem.

Mindy’s Money Tips contains in-depth, free advice for new entrepreneurs and mature business owners, alike. Find out when new articles are published by following me on your favorite social media platform – the links are shown at the end of this article.

If you would like to discuss how to structure your general ledger to work for you or other specific areas of concern, I would love to speak with you. Click here to schedule a 30-minute free consultation to discuss your unique situation.

Essential Infrastructure

“Essential” has new meaning.

We have learned many definitions related to essential in 2020. The interpretation of essential has been heavily debated, including discussions over golf courses, liquor stores, restaurants, and bars. As communities open up, these debates are getting more interesting as the discussions center around who is allowed to be open.

My favorite debate about “essential” is the one where the attorneys representing Elizabeth Holmes, the Founder and CEO of Theranos, appealed to the court that they should be considered essential and allowed to meet at the office to work.

Mindy Barker | Barker Associates The right infrastructure is critical to generate the data about your business during the due diligence process with potential investors.

Pre-COVID, one meaning of “essential” described having the right infrastructure in place if a company wanted to raise capital. The right infrastructure is critical to generate the data about your business during the due diligence process with potential investors.

Here are a few examples of why this is important:

Revenue projections will be a key component of what the investor will look at when evaluating the business. The revenue in the projected income statement for the prior year probably represents an increase in the revenue over the current year. The investors will ask questions like: “How long does it take you to close a deal from the time you speak to a customer to close?” “How many deals do you have in the pipeline now?” “What is your customer churn rate?” “How do you charge customers – as SaaS, by transaction?” etc.

These questions will be asked during the initial discussion as well as during the presentation. Whatever answer you give, if the due diligence moves forward, must match the data in the general ledger, CRM (Customer Relationship Manager data base) and other systems.

I have known a C Suite executive falsely stating things like they have never lost a customer or they close a deal in 30 days. But when we drilled down on the historical data his statements are not supported by facts.

I have also experienced a C Suite Executive who stated that the projections were high because “that is what we need to close this deal.” False information may get the attention of a potential investor but it will not keep their attention when they drill down to the “essential” infrastructure and claims are not backed up by facts.

Burn rate – potential investors will ask what your burn rate is, i.e. what is the amount of cash the company requires each month. Burn rate is based on the cash leaving the checking account – not the pretax income. These are two different calculations and often commingled into one number for companies. If the C Suite executive states the monthly burn rate is $10k because that is the best guess he has during an investor presentation, but the historical cash spend is $15k per month, the investor will lose trust and the company seeking investment will lose credibility. Best guess does not get the job done.

According to the experts at Ernst & Young:

“Increasingly, buyers are looking for infrastructure that can help them identify, track, measure and report on a broad range of externalities. Being able to demonstrate actions taken to date, along with a path forward that helps buyers envision how the company can help address or mitigate global challenges and serve societal needs, can help them think more expansively about opportunities for creating value.”

In their article, the E&Y authors are directing their advice to Private Equity Firms to emphasize the importance of creating value for portfolio companies the PE may want to sell. The quote above supports my assertion that adequate infrastructure is essential for companies seeking investment.

You may say to yourself, I will build the infrastructure when I am ready to pitch to investors – we are not ready right now. If you have the ability to influence decisions about company spend, it is your fiduciary responsibility to insist the company has the right infrastructure. Not only will it position the company to prepare for the future, it will guide the entire management team in making the right decisions day to day.

Let’s dive into your essential infrastructure concerns – click here to set up a 30-minute free consultation to discuss your unique situation.