Accounting Basics(Optional)

I believe that understanding some basic accounting principles is a must for a future entrepreneur. The reading included basic information about General Ledger, Journal Entries, Cash Receipts and Disbursements cycle, payroll, bank reconciliation, investments, and other topics. However, I would like to give an example showing understanding of accounting is significant.

I’m taking an Auditing class, and we had a lecture on Fraud. A family friend was an accountant at a small family business for a long time. She used about $500,000 of business money on her personal needs. It was going for some time, but one day she booked her vacation on a business credit card and it showed up on the statement. Business owners would never think she could do something like. They were not interested in looking over accounting documents, and never checked/reconciled the cash balance. There are millions examples like this one. Entrepreneurs should have basic idea of accounting principles and should show interest to finance activities within the company.

Dot Com to Dot Bomb

I heard about Dot Com and Enron Bankruptcy in almost all my classes. We discussed Enron bankruptcy, some accounting issues and unethical behavior that led to bankruptcy. We also discussed how the market crashed in 2000. However, I didn’t really know what exactly happened with Dot Com Industry. Professor outlined five stages of the Dot Com to Dot Bomb process:

1. An innocent beginning.
2. Boom!
3. Insanity!
4. Bust
5. The crawl back to sanity.

Internet and networking was really new for people. People were paying money for having an email address. The industry was changing very fast. Other companies started providing services for free for which other companies still were charging. A lot of companies went public. The equity on the companies in Internet sector and related fields rose rapidly. However, It was all based on fiction. Some people made a lot of money; some investors lost billions of dollars. As a result, public lost confidence in the nations’ securities markets. In 2002 Sarbanes Oxley Act was issued.

Michele Armstrong

Michele Armstrong is a HR senior manager at Vulcan, Inc. She worked 8 years for this company. First of all, I would like to say that I’m graduating this quarter and applying to so many places right now. Her advices were really valuable. I learned about the process of job posting, applicant systems, and hiring agencies. The first source of recruiting is Employee referrals. The next one is Graigslist.com, Linked In, Twitter and Facebook. I didn’t know that companies could post open positions on facebook. Another valuable advice was a salary offer negotiation. I was always feeling uncomfortable to talk to employers about salary. Now I will do a salary research before coming to an interview. I was also amazed when Michele said that they check credit history. After she explained the reasoning, that the person will treat company’s finance the same way as his personal finance, I thought that it is a good procedure. Her lecture was also helpful for writing a business plan. She explained that compensation growth should be determined on early stages of the setting up the company, because it will be hard to fix it later.

Derek Young

Derek graduated with politics and biology degree. He opened his first company in 1999, second in 2000, and 3rd in 2001. If it worked, he continued working on it, if not, he was moving on to something else. He never took outside money, because he said it would change the whole business and his world if he had to pay to outside investors. He was working in Apartment Management Company. They had quick writers, designers that provided extremely high quality. However, this business was cost effective.

Right Now he has few businesses which are Exit 133, Suite 133, and Seasonal View. He started Exit 133 project in 2005, when he still had a full time job. This project has a community draw, people support it. Seasonal view is his main source of income right now. He began this project with few friends that were frustrated with their jobs and wanted to do something else. Derek said that being flexible is important in order to be entrepreneur.
His income is coming from multiple sources: writing articles for magazines, outside consulting, and seasonal view.

I was amazed how he said that he has conference calls at 5 o’clock on Monday mornings. After I wake up at 6 o’clock I’m still in a sleep mode for a few hours. Derek was a good example of self-motivator. I enjoyed listening to this guest speaker, and I learned that there is a lot going on in Tacoma community. There are so many people who care….

1 question was asked to a guest speaker.

Bruce Kendall

Bruce Kendall started his presentation talking about branding. Branding is very important. It is sending message to the market. Economic development Board for Tacoma with its CEO, Bruce Kendall, create Jobs and Wealth in the area. They are creating opportunity for citizens and businesses of Tacoma-Pierce County. Their primary job is making product, selling it to another outside market, and bringing money to this market. 31 % of Pierce County employment is in Aerospace, Boat building, Business services, electronic shopping, clean tech, and others. Bruce said that it is impossible to do everything. The big five clusters are Aerospace, CleanTech, IT, Life Science, and Logistics International Trade. I learned about incubators, places for start-up Companies that have discounted place with receptionist, accounting services, and etc.

Building out your own company

Before building the company, I will get an advice from a lawyer with some experience in entrepreneurship. Second person I advise would be an accountant. Accountant will help to do the budget and project the revenue and expenses, will estimate the cost to start up the business and tax effects. I will also get some advice from a successful entrepreneur who went through opening the business and who could share valuable lessons they learned a hard way.

The funding of company is important element. The first resource would be myself and my savings. Second resource is family and friends. Next resources will be Angels and VC.

Choosing and building a team is also important element. Assembling people doesn’t make a team. Employees should have passion to achieve a common goal. High Tech company will need a president, tech, marketing, advertising, lawyers, accountant, HR, developers, designers, graphics, sales, customer service, production, Q&A employees.

Guest Speaker- John Dimmer

John’s lecture gave a good idea of process of getting money for the business. He outlined the order of resources we should use. First, the owner will try to save and invest money as much as he/she can. Second source would be friends and families that should give 25k to 150 k. Personally, I would probably like to skip this source due to chance of losing good relationship with friends and family members. Third source would be angel investor. I have never heard of those guys. They are private individuals who invest money in start-up businesses and meet the definition of accredited investors. Finally, the last source is Venture capital that could provide 4 million and up.

The article “How to Negotiate a Term Sheet” by Tom Taulli was also helpful. I didn’t know a lot about Venture Capitalist. It gave me a basic idea of the process and things I should be aware of. I realized that people can get in financial trouble if professional advice is not used.