Retailing in Today’s Market – One Person’s Lessons Barbara Darlow, CMA,CPA Business Advisor, Invest Ottawa

One Person’s Background Undergrad degree in Commerce Certified Management Accountant 25 years internal accounting Technology companies IPO, >$150M capital raised CFO, COO 8 years retail Small business <$500k revenue Continuously profitable and cashflow positive 6 part time employees Happy customers from a large catchment area!

A Few Hard Earned Lessons Look Big, Act Big Treat your small business like a big business Keep your books accurately - produce statements and understand them Manage your cashflow rigorously Create a plan with measurable outcomes and track your performance Report to yourself

A Few More Hard Earned Lessons Plan for the eventual sale of your business Think through internal processes and document them Develop staff – training, succession planning, empowerment Avoid customers imprinting on you Customers should get same level of service regardless of who they contact Find your key differentiator and make sure everyone knows what it is

Yet Some More Hard Earned Lessons Last thoughts – Make sure you have a professional web and social media presence Know what you can do and what you should pay someone else to do Stay focused on your core business – know what you’re good at and what you’re not and learn how to say NO Remember to have fun and learn, learn, learn!

Introduction to Finance for Entrepreneurs Barbara Darlow, CMA,CPA Business Advisor, Invest Ottawa

Why is finance so important (and why didn’t I pay more attention in school)? Internal requirements – managing YOUR business External requirements – outside stakeholders Historical and projected

What should you do yourself? Balance your abilities, interests and time You own your statements, not your bookkeeper or accountant Make sure you have a good understanding before handing off

Historical Information

Record Keeping Basics Keep business and personal separate Record everything – expenses, income, equity Use a real accounting system like QuickBooks, Simply Accounting, etc. Outcome is to produce complete, accurate financial statements

Financial Statements What are they anyway? Income Statement Balance Sheet Statement of Changes Internal cashflow Cap table and equity continuity

Financial Statements Internally produced – no review Reviewed by auditors Audited

Common Terms Revenue – what you are in the business of selling Cost of Sales (COGS) – total costs used to create the product or service Gross Margin – difference between revenue and cost of sales

Common Terms Operating Expenses – SG&A, R&D Capital Assets – useful life greater than 1 year, material Depreciation/Amortization – writedown of cost of capital assets over useful life

SR&ED Primer Can be refundable or a tax credit – excellent source of non-dilutive funding Requires documentation to support resolution of technical uncertainty using a scientific approach Financial and technical requirements Consider using an external consultant to guide your claim

Sample Statements - Basics Handouts to be provided Income Statement (P&L) Balance Sheet Statement of Changes (Cashflow)

Sample Statements – Basic + Internal cashflow More detailed view by expense type Can be monthly or weekly Cap Table Point in time view of equity investment By share class, by investor - ESOP Snapshot for outside investors, also useful to track ownership for CCPC

Sample Internal Cashflow

Sample Capitalization Table

Sample Statements – Bonus Pts Equity Continuity Tracks share issuances over time by investor Useful when multiple rounds of investment are contemplated Easier than referring to minute book

Sample Equity Continuity

Forward Looking Information

Financial Projections Key for both internal and external use Allows you to model your business to test assumptions Determines how much cash you need and when Provides information for external stakeholders

Where to start? Understand your revenue model How will you make money? How will you be paid? How will your customers make money? How will you sell your product?

Where to start? Understand your expense model: How many people will you need? R&D S&M G&A What other expenses are required? How will you make and support your product?

What will they look like? Ideally in same format as your historical financial statements Don’t just stop at the income statement! Balance sheet and cashflow as important Allows easy comparison between historical and projected Makes life easier for investors/bankers if they are in standard format

Why do I need them? Encourages you to think through all implications of business model Do you have all resources required – people, time, money? Timing of product delivery Etc Allows you to test impact of different scenarios Outside stakeholders always ask for them!

What do I do with them? Key part of your financing strategy How much money do you need and when? Financeable milestones What will the money be needed for? Use of funds Working capital vs R&D Keep them “live” – update regularly

And now…… You have up-to-date accurate historical information you can rely on You have projections that you understand in a format that you can present You understand how much cash you need, when and why You are the master of your financial domain!