In recent years, startups and growth companies have enjoyed rapidly increasing access to a wider range of educational resources. That’s why we are excited to be a Gold Sponsor of the upcoming SaaStr Annual 2016, which is devoted to sharing some of the best practices in scaling startups, teaching you to avoid the pitfalls, and showing you strategies to go From Impossible To Inevitable. Check it out if you haven’t heard of it!
Over the years, Intacct has worked closely with hundreds of founder teams and startups to help them scale their businesses—from raising the first rounds of financing to expanding their companies—and, for some, completing successful IPOs. Below are some of the principles and strategies we’ve learned and refined for scaling finance through a company’s growth phases.
Survival: $0-2 Million ARR
As you attract your first set of customers, raise seed money from angels and other early investors, and (later) prepare to raise your Series A capital, finance processes are straightforward. You’re paying bills to keep the lights on, invoicing your first customers, and keeping ahead of compliance tasks such as paying state and payroll taxes. You might have an administrator or coordinator who handles many back office functions (in addition to finance tasks). And many companies we work with hire a part-time CFO to help with cash-flow management and oversee financial operations.
Building: $2-10 Million ARR
This is where the fun really begins for finance. Your business has been backed by institutional money, you may have raised a Series A (or later) round of financing. Your board members now expect quarterly financial statements. Meanwhile, you’ve been busy signing up new customers and your billing volumes are spiking. Your contracts are becoming increasingly complex as well.
This is precisely when you need to hire dedicated finance pros to handle (on a full-time basis) standard finance processes such as accounts receivable, accounts payable, and payroll. The first dedicated hires in finance also coincide with the need for basic financial controls, such as reconciling bank statements, proper month-end closes, and expense approvals. In addition, your business needs a CFO who can scale the team and be a strategic partner to help founders validate business strategy from a financial standpoint.
This is an ideal time to adopt Intacct Cloud ERP to help your new finance team establish their processes and controls, step up the reporting and analysis, and scale up to accommodate business growth in an efficient and flexible manner. Intacct can provide necessary structure, but also provide enough “pivot room” to adapt as needs change.
Execution: $10-30 Million ARR
With the basic infrastructure in place, it’s time for liftoff. This phase is all about execution and gaining scale. Finance is the key partner by implementing efficient processes that remove barriers to sales, billing and collecting timely payments from clients, and providing insightful analyses to the management team to identify strategic threats and opportunities.
As your business matures, so will your finance team and processes. Key new hires during this phase include a controller responsible for the transition to a rigorous, audit-ready financial reporting process. This includes tacking the difficult challenge of revenue recognition and ensuring GAAP-compliant transactions. Hear how Marketo relied on Intacct to solve these challenges and scale their finance team through to successful IPO.
Liftoff: $30-100 Million ARR
OK, your business is taking off and you are nearing “escape velocity.” In many instances, companies take on some pre-IPO financing to get across the finish line. This funding usually comes from a large institutional investor, such as a mutual fund. But this funding brings ever greater financial oversight. These new investors will hold your financials to the same level of scrutiny as a public company. This means your finance team must close books and report GAAP financials within days—not months—and comply with a myriad of controls and regulatory requirements that public companies face.
This dynamic drastically changes many aspects of the finance function. One key area is hiring. The profile for new hires shifts from operationally minded people to those with stronger backgrounds in technology and public accounting. You’ll also need to have an IPO-ready financial system in place that. (We have a great white paper that explains in detail how you can transition to an IPO-ready finance team.)
As you can tell, there are many elements for finance to consider when scaling the business from $0 to $100 million in ARR. At Intacct, we’ve partnered with hundreds of firms that have successfully achieved this. Visit us at SaaStr Annual 2016 to learn more about how Intacct can help you scale finance, avoid the big mistakes, and go From Impossible to Inevitable.