Andy Nurumov

Author: Andrew Nurumov

It is crucial for CEO to work on product-market fit, go-to market execution, funding, hiring, etc. But many CEOs do not care much about company’s finance at first years of organization. But that also should be essential. Even if your organization is non-profit. Below there are 5 important but not straightforward advices, that allow to boost your company:

1. Divide financing for the business and for working capital. Many entrepreneurs do not make this decision and do not communicate this split to their investors. The reason for split is that there are different risks for 2 streams and as a result there should be different costs of financing. It’s OK to have equity financing for core-business activities, but it is very costly to do so with Working Capital.

2. Use Working Capital wisely. Negative Working Capital could make a difference. You simply could finance your business-related activities if company growth is high. At the same time, high working capital could increase your burn-rate at least in 2-3x times in comparison with burn-rate with zero WC. It is even more crucial when your company grows in several times per year. How to reach negative Working Capital in your business – is a separate post.

3. Try to focus on dividends as early as possible. At least small fraction – 1-2% dividend yield. This creates discipline for CEO and your Executive team. And investors always positively consider dividends if you clearly communicate company’s reasoning. Otherwise you create unsustainable long-term situation for your investors. Several large tech companies, unfortunately, are already in the trap of dividend absence and lost capitalization instantly if they do not show significant growth, which will always end.

4. Form P&L mindset for your employees. Everything starts with culture and Finance is not an exception. This mindset for employees is about knowing the value and price for every decision, every execution action, every meeting. Some corporations try to implement P&L at departments or at lower levels but I have not heard about effective top-down implementation. At the same time, CEO at start of business has an opportunity to include this in DNA of company’s culture. 

5. Nurture business Frugality. How to make something with 10x less investments? What resources are needed only for the main objective? These are just 2 of many questions related to frugality. Some companies, for instance Amazon, even have this in their leadership principles.

Last but not least, a Finance team in your business should be an engine of this stream. At the end, CEO should be a leader, not a manager of Financial stream after company incubation.