A quick intro from the editor: Steve Kornreich heads inDinero’s NYC-based consulting team that serves entrepreneurs east of Chicago. He is the proud father of a soon-to-be 5-year-old cockapoo named Mickey.
I recently had the pleasure of joining founder and CEO of Justworks, Isaac Oates, and Founder and CEO of LawTrades, Raad Ahmed, on a panel sharing personal success stories and practical advice to entrepreneurs of all stripes. While I haven’t personally started a business, I do have the breadth of experience working with countless startups and watching them grow. I’ve worked for a big Wall Street firm and an early stage startup (we, unfortunately, did not make it), and led business development efforts for small and mid-sized financial institutions at Gartner before coming back to the startup ecosystem with inDinero.
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With that said, I was excited to round out the panel with an objective opinion rooted in the fact that I speak to entrepreneurs all day, every day. What I’ve come to realize from that experience, is that while no business or business owner is the same, there are common themes.
Follow along with the rest of the post for my answers to some of the hot-button questions asked during the panel Q&A.
Common Startup Stumbling Blocks and Challenges
1. What’s the hardest part about starting a business?
If you look around any room filled with entrepreneurs, you are bound to bump into more than your fair share of incredibly smart people that have a lot to offer. It’s obvious the challenge isn't necessarily rooted in the idea-generation, but more so the execution. To be able to answer the question of what to build or why to pursue is and should be the easy part. But how?
“Understanding your own core strengths and how to maximize the efforts while off-boarding other functions is key.”
Most entrepreneurs that I speak with tend to be self-starters. They have a deep-rooted belief that they need to have the answers to every question. But the fact is that it’s impossible and that mindset is irrational. Understanding your own core strengths and how to maximize the efforts while off-boarding other functions is key. You are the visionary and are central to driving the business forward, but it's easy to get lost in the million and one tasks needed to do so effectively.
2. What tax related issues come up when starting your business?
I previously mentioned that most entrepreneurs beat themselves up when they don't have the answers to everything. It's no different with regard to the tax code. The IRS is a beast, and the tax code is incredibly complex. Most ins and outs require a real expert with years of experience.
In terms of aligning resources to help on these fronts, I see time and time again that entrepreneurs wait too long. Bookkeeping, accounting, and tax prep/filings are tedious and traditionally labor and time-intensive. It's easy to push them to the backburner to focus on the more exciting parts of your business such as refining your product or service, hiring talented team members, and seeing your customer base grow.
With that in mind, it's super important to have a trusted resource that is not only an expert and can "get the job done," but one that is built to scale. Ripping and replacing finance-related resources can often be a painful process. So do it early and leverage someone/something that is built to grow with you as the company doubles, triples, or quadruples.
How Entrepreneurs Can Move Forward Without Looking Back
3. No business owner looks forward to tax season. How should entrepreneurs prepare for filing their first business tax return?
It's all about getting the preparation right. How do you maximize your tax benefit or minimize your taxable liability? How do you set up a core infrastructure and processes that are built for not just today but tomorrow as well?
“Your time and drawer space are too valuable to be record-keeping in retrospect.”
One of the most inspiring things that can happen for my team is to bring on an early stage company when they are one, two, or three people, only to learn that six months later they've raised a round of funding, hired ten more employees, and turned on the revenue switch. There are certainly tax implications to all of this, but what service providers like inDinero, Justworks, and LawTrades are here for—extending or enabling the success of the entrepreneur.
4. We’ve all found ourselves with a desk drawer stuffed with receipts. Is there a better way for entrepreneurs to keep track of their business spending for taxes?
People still do that?
In all seriousness, there are a number of apps and companies that can help track expenses seamlessly. I look at the iPhone and half-jokingly say that it's the most important device in our lives.
With inDinero, it’s extremely simple. When you get a receipt, snap a photo of it and send it over to your service delivery team. That's it. We take care of the rest.
Also, if it's a vendor, we'll go ahead and create a vendor profile and map those expenses accordingly. We're digital folks living in a mobile world, which means your time and drawer space are too valuable to be record-keeping in retrospect.
Avoiding Mistakes for Future Entrepreneurs
5. What do you wish you knew before starting a business?
From an outside perspective and after being so close to so many business owners, I try to tell each first-time founder to nail down their core competencies and stick to them. That is what is going to be most valuable to the success of your company.
Rather than spread yourself too thin, think about the 3-4 ways that you can best create an environment of success within the organization. Now, I'll admit that this isn't an easy thing to do. But you'd be shocked to see the impact that it has when you can focus on exactly what you’re best at instead of taking one for the team.
6. What are a few basic accounting and tax practices that all entrepreneurs should know?
Time and time again I see companies paying fines for missing deadlines that are entirely avoidable. (In fact, we've put together a straightforward list of those tax deadlines here.) The common instance of this is when the founder takes on doing this all him/herself. The first week or month, it's easy. But then priorities shift, and the entrepreneur quickly pushes these items to a later date. Next thing you know, it's year-end, and the books haven't been kept up-to-date since that first week. There's a sense of defeat when you realize that you have months worth of catch-up work.
Find a resource, understand where that resource fits into the broader scope of the business and its goals, and trust that you will not only save money by not paying unnecessary fines but that you'll also be best positioned to take advantage of benefits available to you within the tax code.
As Steve put it, founders who are not already experts in accounting and taxes really need two things:
- An automated platform they can use to track their cash flow and spending, create performance reports, and handle day-to-day financial tasks (pay bills, invoice customers, etc.).
- Expert support from trained and talented accountants, bookkeepers, and CPAs who can help them scale smartly.
But what does it take to get started with a new accounting or tax provider? Spoiler alert: It’s more straightforward than you might think.