1892 – Accounting & Finance For Startups with Paul Bianco

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0:58with us right now it's paul bianco paul you are the founder and ceo of graphite financial you're found on the web at graphitefinancial.com thank you so much for joining us paul thank you so share with us who graphite financial is who you work with what you do so graphite financial does finance and accounting support for early stage companies, whether they're startups or SMBs. Specifically, what we do is we are we're not an audit firm. We are doing the accounting, the bookkeeping, the accounting, the financial reporting for the company on behalf of the company. So we step in and do anything an in-house team can do from the basic bookkeeping, accounts payable, paying your even invoicing your own customers all the way through financial reporting, board reporting, if you have a board of directors, everything like that.

1:46So we are a full replacement or supplement for an internal accounting team. Yeah. So at what stage? I mean, I would imagine you could work with a solopreneur or kind of where do you typically start? I'd say for us, if you're an owner-operated business, you've got a little bit of heft behind the company, millions in revenue. It doesn't have to be tens of millions in revenue, but a few million bucks in revenue and things are getting complicated enough. if you are a venture-backed company, very early, because the reporting requirements are much trickier and things are a little bit different. So I say, basically, even before you raise any money, institutional money, before you raise that serious seed.

2:27Well, so what I'd really love to do, Paul, is maybe just for our friend that's listening, obviously, you keep eyes and ears on your world pretty closely and have for some time. I think most of us are just kind of doing our thing, right? Serving our clients, kind of focused on what we do. From your perspective and in your work with your clients, what are some of the big, you would say, kind of tentpole issues that you find yourself advocating for, say, to an SMB founder audience? Well, I think there's a couple of things. I'm going to put venture and SMB a little bit together in this. And I think just, I'd say the number one thing that's happened over the, money was very easy to come across, whether it's loans or equity or any kind of investment over the past few years.

3:16Too easy to the point where it gave, I think, founders some artificial confidence that there's going to be some kind of backstop there and they could invest ahead of demand all the time. And I think there's been, and I'm a huge advocate for this, is getting less reliant on outside capital markets. Just grow the company. And a long way of saying, just make money and don't lose money. That's it. Nothing fancy. Really, if you get too fancy about, hey, I'm going to justify this investment and all these hires and we're going to start losing money, you better do that sometimes. But make sure you've got plenty of backstop if things go off track.

3:54Again, I think just staying reliant on yourself and the operations of the company is the most basic and simple thing you could do as a founder. Just make sure the thing is growing a little bit, staying alive, then optimize. Yeah. At what stage do you typically, Paul, recommend if you're experiencing this, this, this, or this, it might be time. You know, obviously, you know, you provide professional service like bookkeeping. Do you get into tax as well? We do. Right. So that's one. You can't not do it. So you can do that at any time. It's really when there's complexity. We see a couple of different things, right?

4:27If you're a bootstrap founder, you're doing your own thing. A lot of times we see you're kind of doing your own accounting. Could be a little bit messy, takes up a lot of time. Then it makes sense to take things off your plate. Tax though, I mean, that's the number one thing. Don't mess with that. Obviously, that's the last thing you want to mess with. Just make sure you're compliant from a payroll standpoint is one, right? There's payroll tax filings, whatever, sales tax, and then any kind of federal income and state income taxes as well. So just make sure you're doing that at a bare minimum.

4:59Easier to do that all when your books are all clean, but at least start there. Yeah. And at what stage or what might be the indicators be that a founder or an operations leadership team might be ready to start looking at a bit of an upgrade in that financial leadership role and even potentially looking at bringing in or starting to get toward more of that realm of someone who might be fulfilling a little bit more of a fractional CFO type role? Yeah. So we do that as well. What I'd say is it depends on the complexity of your company and the type of company you are. Again, if you're venture backed, I recommend you've raised a bunch of money.

5:39It's off to the races. You got to just, you need to establish product market fit right away, right? As soon as you can take that risk off the table for you and your investors. I'd say outsource anything that's not core to what you do and give yourself as much information as you can. I think for venture, it's really early and don't spend your time doing this stuff. Understand it, work with your partner, have a fractional CFO, again, service like us. That's it, right? For an SMB, it's when things start getting a little bit more complicated is when I would lean into it a little bit more. And even just sometimes an hour or two of conversations really, really helpful.

6:18It's going to unlock some things you weren't thinking about. What's the company look like? Do you want to sell the company one day? What's a buyer going to expect out of the books and understanding and the margins and kind of the revenue health and things like that? It's important stuff to know, even if you don't have existing investors breathing down your neck, you own your own thing. Well, someone may provide you some liquidity one day. It makes sense to understand what is important going into that kind of transaction too. And we sell for that. What would you say are some of the most common misconceptions or myths or flaws that maybe a founder may be practicing or doing because maybe someone told them this once or they just developed this idea somewhere along the way that you find yourself having to, you know, maybe do some a little bit of course correction with them when you start to engage.

7:11Anything come to mind? Well, from an accounting standpoint, I'd say the number one issue we see is a founder saying, hey, we want to raise money, do this, get acquired, you know, get a loan. So we need to get a whip up financial model so we can give it to our potential investors, and then they never look at it again. That's not what it's for. So a financial model or a budget, what we help companies put together, that's supposed to be a tool to help you understand how the company is going to run and operate over the next, like a window into the future, how things are going to go. That really is the number one thing.

7:46It seems like a checklist item. I need to just get this done. Forget it. Now I'm just going to do my thing. If you have one, any kind of budget, do what you can to try to use that to understand what things you need to do to make things look better and move towards a goal in the future. So that's one. On the tactical side, it tends to just be putting the cart ahead of the horse and a little over-optimism. You got to be optimistic as an entrepreneur. I think just really thinking things through, especially if they're kind of irreversible or difficult to reverse decisions, like over-hiring too quickly in certain things where you're not 100 % sure that's the right thing to do.

8:22Overhiring and sales before the product is ready to go is probably the number one example of that. The product's like okay, and one or two customers are kind of maybe want to pilot. You hire five sales reps into that, you're going to be in trouble. And I've seen that many times before. Yeah. I'm just curious when you've seen that, like what ends up happening other than a bunch salespeople sitting around or going to market with something that they don't believe in and they know is crap. Yeah. Well, you have salespeople making promises and no one wins. You have salespeople trying to get commission and doing what they're doing and sometimes making promises that the company can't keep.

9:01You have high churn because the sales will close a deal, right? And then the customer's like, this isn't really what kind of what I expected, a good sales process. And I thought we spoke about my needs, but it didn't really work for me. And then they churn off and that's filling a leaking bucket. What ends up happening is most of that team ends up getting caught anyway, which you could avoid just by not doing it. Start slow. I'm a huge believer that I did this myself for our first hundred customers. I did every sale personally. Then I hired a sales rep to support me. And then he grew in the organization, started building out a sales organization.

9:38Once we knew the pitch, we knew the needs, we really understood what the customer wanted and how we fit in the overall market. I think it's pretty important. The founder is a chief salesman at the very beginning. And you know your product more than anyone else, then go from there. Yeah. Well, that's the stage I've been in. I do. And I think it's of all of the roles that I no longer do. I would say that's the last kind of less than maybe not necessarily a CEO role is, you know, kind of just really kind of holding on to the sales. The last one I seem to be letting go of. How do you see that? I mean, again, this is a little bit outside of you, but from a financial standpoint, how does someone calculate a good move in that area when the CEO says, OK, I'm at the tail end here.

10:33I think I'm ready to let go of the reins, overdue perhaps, and ready to kind of set some, you know, formal sales structures that I'm not as involved in. Have you seen that done well, or have you advised on that? Well, I like to think we do it all right. I'm still involved in some sales, right, but not much. And it is hard for a founder to let go of. It was fairly hard for me to let go of it. And it was, your role will change. It's an interesting, you know, for me, and for a lot of founders, speaking to the potential clients and your market each and every day is a good indicator and helps inform you, right?

11:07You will step a little further away from the customer as you relinquish the sales responsibility. But I think just doing it slow and steadily and from a financial standpoint to tie it in, one thing that I've seen is there tends to be a surprise that, hey, I was doing all the sales and marketing myself. All my clients are referrals, whatever. Now I hired a sales team. Why is it costing me so much to sell stuff? Well, because you were kind of doing it for free. You need a sales team now that you're paying commissions to now you may not be fully reliant on just referrals to you as a person. If you're trying to scale a company, you have people going out and about, forging partnerships, business development, doing real marketing to get leads through the door, costs money to do it.

11:51So your customer acquisition costs will go from$0 when you're just doing it. And it's just people, you know, sending you deals to some amount much more than that. And I just know there's financial impact. It's important to just kind of sketch that out, what it might be. It's a net. If your sales team is not paying for itself, that's a huge problem. And so that's a different problem. But no, there will be an upfront lift before the sales team start paying for itself, which could be a bit of time. It takes time. So I think sometimes, just speaking for myself as a founder of a couple of companies, I don't want to make a mistake when I hire a financial service provider, bookkeeper, tax preparer.

12:32Any, you know, maybe I don't say red flags, but, you know, any kind of rules of the road for making a good decision on hiring, you know, either a bookkeeper or CPA or something, someone is going to fulfill those services? Yeah, I mean, I think trust or got more than anything. It's tricky. It's financial decision, too, right? I think if you see something that seems too good to be true in terms of price, at the end of the day, what we do is a professional service with people that know how to do the work, doing the work. We use technology behind the scenes to make it a little less expensive for our clients and a little bit more efficient for us, but it's a professional service.

13:13We're paying people to do the work and we have to pass that on to the customer to do the work. So if you see something where it's like a hundred bucks, a few hundred bucks, like a month, and there's a lot of work, think about, is it really going to take like two hours total to do that? Or is there something here? Am I not going to get hands-on support. So I think get comfortable, make sure that make sure they know your industry very well, because it's very industry specific. Every industry is a little different. And the devil's in the details. So get a good industry understanding, get a feel for the team that's actually if the if the if the provider won't let you meet the potential team that you are going to be working with.

13:51Not the best because it's really based on the team, right? We want everyone to meet the team that they're going to end up working with after signing up with us. And again, it's one of those buy once, cry once type of things. Everything, if you go from doing it yourself, it's free, just like I was talking about with sales, to now having a service provider doing a thing, it will cost incremental money. I wouldn't optimize only for that. Be a fiduciary to the company. Don't overspend. Try to cut a good deal. but go for who you think is going to be the best long-term partner. Yeah. So I'm at your website right now, graphitefinancial.com.

14:32Do you mind sharing just a bit about, you know, your offer, how you work with, I know you've got kind of some tiered services with, you know, it looks a little productized, which I appreciate. So we did productize the way we market it, but we are a service at the end of the day. We're just trying to make it simple. There's so many things that go into what an internal accounting team can do. It's not just classifying transactions that come in through your bank and credit card and stuff. I guarantee you that anyone who's pitching that is probably not the right partner. There are so many things that go into it.

15:02We kind of just visualize it in a way that's simple. But high level, we have a couple of tiers. One, think about it as accounting, managing your QuickBooks, everything that comes in, all the revenue, making sure that paying bills, everything that's what has happened and catching you up and giving you good indication as to what happened and good reporting as to what happened. The second tier is saying, all right, based on what happened, what is going to happen? And that's more like FP &A and CFO layer on top of that. Building that financial model, giving a really good dashboard with really, really good metrics from any tool you use from HubSpot, whatever, putting it all together in a way that lets you understand not only what happened, but what's going to happen in the future, planning ahead.

15:47And then we have some add-ons on top of that if you want some tax or other sorts of services that don't fit within those tight buckets. Yeah. So Paul, again, I'm on your website. It's graphitefinancial.com to our friend that's been listening to us. And they're like, okay, this sounds great. I definitely need some help or some guidance or at least want to have a conversation. What would some of those next steps be from here? We actually made a dedicated page called graphbyfinancial.com slash podcast. If anyone wants to go there, take a look, reach out. I even have a Calendly link that if you want to talk to me, you could do that.

16:26That's what I enjoy. Like I was talking about during the sales conversation, like meeting entrepreneurs, happy to do it. I said, check the website out. You don't have to talk to me. You can just talk to whoever on our team and we can see if you're a fit. And we just reach out right on the website. Yeah. Yeah. You're based in New York. You have some team members here in Orlando, which is great as well. And just any limitations on industries or size companies or anything like that? No, not really. We're about 100 employees. I'm in New York. We've got some folks in the tri-state area, New York, New York City, New Jersey, all that.

17:03But also all over. A lot of folks on our team in Florida, California, Texas, Colorado, really all over the place. industry-wide, I'd say technology generally is our number one. Whether you're venture-backed or an SMB, consumer packaged goods or e-commerce generally is another piece. So SaaS, think about SaaS, e-commerce, and then even within those verticals, food and beverage, fintech, insurance tech, and all sorts of other things. So really any sub$100 million in revenue tends to be it, which encompasses most companies. Sure. Yeah. That's a pretty big chunk of the business population there. Well, Paul Bianco, again, founder and CEO of Graphite Financial, your website, graphitefinancial.com.

17:52The special page that you've got set up is graphitefinancial.com forward slash podcast. And there's actually quite a few templates and resources there. You've got a financial model template, chart of accounts template, month-end closed checklist, accounting tech stack guide. And again, those are all on those pages. So Paul Bianco, again, CEO founder, thank you so much for joining us. Thank you.

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