Minding The Books: Indie Beauty Brand Founders Share How They Make Sense Of Dollars And Cents
In this edition of Beauty Independent’s ongoing series posing questions to beauty entrepreneurs, we ask 15 founders and executives: Are financial documents scary as hell or second nature for you?
- IDA-SOFIA KOIVUNIEMI Founder and Owner, Evil Queen
Scary as hell! But I recently hired an online accounting firm called Bench to help with my accounting. It’s affordable for a small business, and they handle all the important documents you could ever need and connect right to your online store and credit cards. I can’t say enough good things about them.
- Michelle Ranavat Founder, Ranavat Botanics
I invested in a good bookkeeper early on because I need to have clarity on the financial health of my business at all times. I use Xero, which is pretty user-friendly for my accounting, and I have a bookkeeper that was recommended via Xero that reconciles and files all my transactions in a timely manner. I always keep my A/R and A/P up-to-date as well because, once things start getting messy, it is really hard to recover.
- Lisa Pineiro Founder and CEO, Glotrition
If you’re not a CPA or a finance major, this side of the business is definitely scary as hell. My life got so much better when I hired a financial group to take this off my plate. I have a dedicated team now, including a fractional CFO, and they have saved my life. Finding a good, affordable solution that understands the nuances of a CPG company isn’t easy. We use Stage 1 Financial. They’ve even helped with investor introductions.
- Tess Taylor Founder, Taylor + tess
Scary as hell, but I am lucky to have three immediate family members with MBA degrees and an awesome business coach that not only helps me get everything done, but teaches me along the way. There are so many great tools like LivePlan, QuickBooks, FreshBooks and more that make it so much easier to build a business from the ground up, brick by brick (or Google Sheet column by Google Sheet column).
I attended law school for a year and, recently, completed my second graduate program, so I love to research and find tools that help me work more efficiently. I have wanted to be an entrepreneur since I was 12, selling warm-ups to my middle school cheerleading and volleyball teams, so getting to tap into my entrepreneurial spirit while having an outlet to be creative is everything I could ask for.
- Kathy Chou CEO, Selfkaire
Having poured through hundreds of financial documents, I would say financial documents are, unfortunately, second nature. I've worked every angle: from reviewing and sending comments to the client before they go live to deep dives and forecast modeling to determine an accurate valuation and trajectory for the company. What I recommend for anyone taking their first stab is to whip out those sticky tabs!
First, take a look through the index to see the titles of the contents. Investopedia is your friend if you need summaries of terms. Once you figure out what sections you’re interested in (risks, legal, forecasts, etc.), you can section off the document to make it less daunting. So, instead of seeing 1,000 pages, you see each section as say, <20 pages or so which is more manageable.
There are also summaries/overview of the statements and the management discussion and analysis which can serve to guide you to what sections you think you need to look deeper into. The MD&A is more conversational with easy-to-digest charts versus data-overload statements.
Finally, the appendices are great for specific data points you might want. Charts and tables are fairly uniformly labeled across companies, so eventually you’ll know what terms to search for even with a new set of statements.
- Ju Rhyu Co-Founder and CEO, Hero Cosmetics
I'm somewhere in between and created my own cash flow model since controlling cash flow for a growing business is so critical. You can always outsource these functions if they're something you're really not familiar or comfortable with, but my advice is to try doing it yourself in the beginning. That way, when you outsource, you know what questions to ask and what to look for. Running and growing a business is as much about the financials as it is about the vision and creativity.
- Eugene He Founder, Ceramiracle
I was never financially trained, but I've grown to love financial documents and excel spreadsheets. They can be a nightmare when your numbers are bad, but I see them as a looking glass into the future.
My advice to fellow entrepreneurs is to not avoid your financial documents. If they scare you, find a CFO/co-founder. The earlier you get your documents in order, the easier to raise funds in the future.
- Tracy Golbourne Founder, Fortifyd Natural
Second nature. Day-to-day operations get really busy, and there’s no real time to focus on financials. Instead of trying to find time to input numbers, write all expenses down in a notebook. This makes it easier to build your spreadsheet at a later date instead of trying to dig through a ton of receipts.
- Melinda Herron Founder, 103 Collection
Financial documents can be very scary for some, but I realized very early that maintaining your financial records is crucial to your success. We've always had a platform such as QuickBooks to ensure that we can run a quick financial report, send invoices and make payments. The best advice I can give is, if you are not an accountant, hire one and maintain your financial records with platforms such as QuickBooks, or Intuit. Trust me, it's worth every penny.
- NIMA JALALI Founder, Salt & Stone
Second nature because I’ve been running a small business for a while now. I would just say to keep it as basic and simple as possible. I like QuickBooks because it’s just very easy and user-friendly.
- PETER SCHAFRICK Founder, Schaf Skincare
It really depends on the month or quarter you just had! I believe it’s important to watch both the revenue and the profit, so you can make adjustments to your marketing efforts. Measuring what is working is just as important as measuring what is not working.
- Anne Kukkohovi Founder, Supermood
I must confess, scary as hell. But that is why the team needs different talents. My biggest advice most definitely is to find the right people for the team: someone with a soul, someone to understand the finance, someone to create amazing visuals and someone to understand the law of the business. As a founder, my superpowers are communication and product development. I am happy to pass the other responsibilities to my team members.
- Sarah Marcus Co-Founder and CEO, Lines of Elan
Scary, but totally necessary! We started with good accounting practices right from the beginning, and this is our number-one tip for any new entrepreneur. Take the time to learn the financials or find a good accountant. It will make it much easier on you and the future growth of your business.
- DAVID SIMNICK CEO and Co-Founder, Soapbox
They have become second nature over time. One of my investors/advisors once said that running a company without knowing how to read a P&L is like trying to be a pilot but not understanding what the instrumental gauges mean. It's not safe.
I hired an accountant to sit with me for a couple days during the early days of starting our brand and she hit me over the head a couple of times until I understood the basics. Over time, like with any education, I became better and better.
We still have brought on an amazing CFO and a financial team, but the information that they're providing me wouldn't matter if I cannot make sense of it. If you want to be a pilot of your company, you have to be able to read the instruments.
- Christinah Nicolaisen Co-Founder, Eleni & Chris
Attention to the numbers is such a crucial part of running a business so I have grown to love financial documents!
A piece of advice I received early on that I found to be extremely useful is to continuously measure cost as a percentage of turnover. This gives a much better understanding of the business, makes benchmarking easier and is a really an effective way of reviewing where your potential is to improve the business further.
If you have a question you’d like Beauty Independent to ask beauty entrepreneurs, please send it to [email protected].