Top Tips for Building a Technology Start-up from an Accountant and Valuator’s Perspective

UPDATE (October 10, 2024): This article has been updated to reflect changes in legislation, regulations, and accounting practices since the date of publication (February 18, 2020).

The Vancouver technology sector is evolving rapidly, attracting more entrepreneurs into the marketplace. At DMCL, we strongly support entrepreneurship and love hearing success stories from the tech space. Many successful tech entrepreneurs have followed these ten steps early in their journey:

Create a compelling story and business plan

A strong business plan and narrative are essential to attract both internal and external stakeholders. It should clearly articulate your value proposition, include realistic financial projections, and offer a growth roadmap. These elements are critical if you’re planning to raise funds. Investors look for companies that know where they’re going, how they’ll get there, and what it will take to succeed. A compelling story makes your business stand out and inspires confidence.

Reward key employees with stock options or equity

In a competitive market, attracting, and retaining top talent is crucial for growth. Offering stock options or equity incentives not only helps retain key employees, but also aligns their long-term success with the success of your business. This approach provides a sense of ownership and loyalty, ensuring that your core team is invested in the company’s future. It’s a win-win, particularly in the tech industry, where competition for skilled workers is fierce.

Consider assurance on your financial statements

Investors and other users rely heavily on financial statements to make decisions. Having some level of assurance (such as an audit or review engagement) provides users with greater confidence in your numbers. From an investor’s perspective, well-organized and reliable financial statements signal that the company is well-run and positioned for growth. Consistent bookkeeping is one of the most important indicators of a company’s operational maturity and can pave the way for smoother investment or acquisition discussions down the road.

Budget for development costs

Building your product or service requires significant upfront investment, and managing those costs effectively is crucial. Create a detailed budget for your development costs and benchmark them against market data. By controlling your expenses and allocating resources carefully, you’ll be able to reinvest in your business as it grows. Staying on top of development costs also allows you to remain agile and pivot as necessary without jeopardizing your financial stability.

Develop financial projections and set milestones

Financial projections aren’t just for potential investors—they’re essential for your own planning and tracking purposes. Set realistic milestones to measure your progress and success. Regularly reviewing your financial performance against these goals helps you identify where things are going well and where adjustments are needed. Tangible proof of effort and success builds confidence with investors and stakeholders alike and helps you stay on track for long-term growth.

Keep your financial affairs in order

Establishing a system to organize your financial affairs early is critical. Potential buyers or investors will conduct due diligence before committing to any transaction, and disorganized records can slow down—or even derail—these processes. Having your financial records in order will make any future sale or investment process more efficient and professional, positioning you as a company that’s prepared for growth and transition.

Understand investor expectations

Investors and creditors expect returns that reflect the risk they’re taking. Continually improve your offering, and maintain open lines of communication with those who’ve contributed to your company’s success. Providing transparency around your company’s performance and showing that you’re consistently working to reduce risk and enhance value helps you build long-term, productive relationships with your financial partners.

Take advantage of tax incentives for tech start-ups

There are several tax incentives and credits available to tech start-ups that can provide much-needed cash flow to reinvest into your business. Programs like the SR&ED tax credit or provincial tech grants can offset costs associated with research and development, hiring, or purchasing capital assets. Understanding these incentives and how they apply to your company can help you maximize your available resources and keep your business growing. Be sure to stay up to date with new government incentives as they evolve.

Surround yourself with a team of professionals

Having the right advisors is essential to navigating the complex world of accounting, tax, and legal rules. Mistakes can be costly, and fixing them later is often more difficult than getting it right from the outset. Professional guidance will be critical as you grow—helping you make informed decisions, execute a solid strategy, and quickly course-correct when necessary. Surrounding yourself with experts gives you the confidence to focus on what matters most: building a successful business.

Success in the tech industry relies on having a clear strategy, staying proactive, and seeking expert advice. With the right team, you can make confident decisions and drive your business toward long-term success. Ready to take the next step? Contact your DMCL advisor.

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