September 24, 2024 • 29 mins
In this episode of Behind the Numbers, I'm pleased to welcome Victoria Yampolsky, who is the president and founder of the Startup Station.
Victoria shares insights on how a positive mindset can lead to better outcomes, even in challenging situations like receiving negative feedback from investors. She highlights the importance of mindset training, comparing it to physical exercise, and discusses proven strategies such as meditation, exercise, and setting aside time for self-awareness.
Victoria illustrates the impact of mindset with real-life examples, including entrepreneurs who thrived by embracing feedback and those who struggled due to rigid thinking. She also emphasizes the significance of financial literacy for entrepreneurs, explaining common mistakes in revenue projections, cost understanding, and the importance of cash flow management.
Throughout the conversation, Victoria and Dave explore the critical financial metrics that entrepreneurs need to track, such as EBITDA, cash flow from operations, and unit economics. They stress the importance of creating flexible and robust financial models that reflect the business strategy and market realities.
As the episode progresses, Victoria delves into the essential characteristics of effective leadership in entrepreneurship, including mental flexibility, intrinsic motivation, emotional regulation, and integrity. She provides valuable advice on how to develop these traits and their impact on business success.
About Victoria Yampolsky
Victoria Yampolsky, CFA, is a serial entrepreneur and an experienced business and finance executive with extensive startup experience. She is the President and Founder of The Startup Station, a CFO advisory and finance education platform for startups and small businesses.
Victoria founded The Startup Station in 2013 after she realized that while startup founders had a lot of passion and technical knowledge about what they were doing, they rarely had business acumen about how to bring their idea to market. Even more rarely they could analyze the financial implications of their decisions, let alone explain the business in financial terms to investors.
The Startup Station focuses on strategic financial modeling of startups and small businesses. We are fractional CFOs who know how to build and use financial models, or plans, as business intelligence tools. These tools translate the founders’ vision into an executable measurable roadmap. By properly implementing this roadmap in the financial systems, we can respond faster and more accurately to market feedback.
About Dave Bookbinder:
Dave Bookbinder is the person that clients reach out to when they need to know what their most important assets are worth. He’s a corporate finance executive with a focus on business and intellectual property valuation. Known as a collaborative adviser, Dave has served thousands of client companies of all sizes and industries.
Dave is the author of two #1 best-selling books about the impact of human capital (PEOPLE!) on the valuation of a business enterprise called The NEW ROI: Return On Individuals & The NEW ROI: Going Behind The Numbers.
He’s on a mission to change the conversation about how the accounting world recognizes the value of people’s contributions to a business enterprise, and to quantify what every CEO on the planet claims: “Our people are this company’s most valuable asset.”
🔸 Grab Dave’s #1 Best-Selling Books: The New ROI: Return on Individuals & The NEW ROI: Going Behind The Numbers
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Music.
(00:20):
Hi, everyone, and welcome to Behind the Numbers. My name is Dave Bookbinder,
and welcome back to the show where we dig deeper to understand what really matters most in business.
Today, I'm pleased to welcome Victoria Yampolsky, who is the president and founder
of the Startup Station. Hey, Victoria, welcome to Behind the Numbers.
Hi, David. It's a pleasure to be here, and thank you for inviting me.
(00:40):
It's our pleasure. Before we get into the meat of the conversation,
why don't you introduce yourself to the audience? Tell them a little bit about
you and Startup station?
Absolutely. So my name is Victoria Impolsky. I'm a startup CFO.
I run a company called the Startup Station.
It has three business lines. One is the CFO advisory, where we work with startups,
(01:01):
both as they fund raising, helping them to come up with the financials that
make sense to investors, as well as post funding to help them execute on their strategy.
The second part of the business is education.
We do a lot of various webinars, podcasts, published content for the entrepreneurial
community, educating founders on the subjects of accounting,
(01:23):
startup finance, valuation, and financial modeling.
We also have a PEAT curriculum with more technical knowledge available as well
for those founders who prefer to go deeper into the subject area.
And finally, we have a third business line. It's a recent development.
It's our program targeting female founders fundraising or about to fundraise
called Female Founder Mindset Gym and it's the only online accessible program
(01:46):
focused on mindset training, business training and mentorship.
Well let's kick off with that then. Let's talk about mindset because so many
things in business and in life start with what's going on between your ears.
So why don't you explain that to the audience? Where does mindset fit into this
whole concept of finance and leadership?
(02:06):
Absolutely. So So the way I think about mindset is that it's a set of beliefs
that drives business decisions, drives contract resolution, drives how you evaluate opportunities,
the company's potential, how you react to investors' meetings and feedback that you get from them.
When do you stop pursuing a certain course of action?
(02:28):
So especially if you are a startup founder and you're operating in an environment
with a lot of uncertainty, a lot of financial stress, a lot of stress in general,
because you are depending on a lot of people and you don't really know,
you don't really control a lot of variables.
It's very important to keep focused, to be very clear about what you can and
(02:49):
cannot control and to be aware of your thoughts because ultimately it's the
thoughts that will determine your actions and these actions will determine the
outcome of your venture. So let me give you an example.
Let's say that you're a founder and then you were fundraising and then you got
negative feedback from 10 investors.
If you are a founder that has an ego, you may think two things.
(03:16):
One is, oh, there is bias in the market if I'm an underrepresented founder.
They're giving me this feedback because of who I am and not because of what my venture is.
And not look for the pockets of truth in that feedback that can help you improve
your value proposition.
So they will focus just on the negativity, just on the criticism.
(03:36):
And after getting 10 negative results, they may choose to stop because they cannot succeed.
It's not the right environment. There is bias in the market, et cetera.
Now let's take another founder who is secure and knows that what they're doing
is a good idea, but it may need refinement.
Let's say they get the same negative feedback. And let's say that this feedback
(03:59):
is not given in a kind way because investors are not your your mentors.
They're not there to cajole you around your dream world journey and tell you,
oh, but, you know, we don't want to upset you in any way, but would you like
to, you know, fix the slide in this way?
No, they're going to tell you in a way how they're capable, often based on their
time constraints, and that may not be pleasant.
(04:20):
So let's say that you have a founder who understands that and was like,
okay, I got 10 negative responses.
Let me understand what is common between those responses. What is the common thing?
What can I do to make my value proposition better to address their concerns and let me try again.
If maybe I can go back to them and say, hey, I fixed it. What do you think?
Maybe these are not the right partners, but I have enough confidence in my venture,
(04:44):
in my ability that I believe that I will find the right partners who will believe
me and join me on my journey.
So if you have this mindset, even if you get a negative response,
it gives you enough drive life to take it take whatever you need to do to adjust
um your you know if you're pitching your pitch decks financials whatever it
is and go on the same can be applied to absolutely any entrepreneurial situation
(05:08):
let's say you're going to market and you can't uh get clients.
You can again be in the mindset, these clients are not ready.
My product is awesome. I'm awesome.
Screw them. And then you're still sitting with no sales.
Or you can be in a situation, okay, let me talk more to the customers.
(05:29):
Let me understand their pain points. Let me understand where I'm not getting
to them through the messaging.
Let me adjust my process. Let me get help. You know, if I don't have a sales
background, let me build an advisory board with the sales else expertise,
who can coach me how I can do this so that I get better results.
Now, we're starting with the same outcome, but because we have a different perspective,
(05:51):
we're going to end up in a completely different situation in the end. And guess what?
The financial result is also going to be different.
So there is a direct link between what you think and the financial results that
it will will eventually translate to as a result of your decisions over time.
(06:12):
Yeah, because your thoughts will drive your beliefs and your beliefs will drive
your behaviors and that's going to drive your actions.
And what you just shared is so true in the entrepreneurial space,
but it's also true, I'll call it in day-to-day life.
I'm sure everybody who's listening to this is thinking in the context of any
kind of a negotiation, whether it's applying for a job, a promotion,
(06:34):
a conversation with a friend or a partner.
There's these underpinning beliefs. So I have to ask you, Victoria,
because it's easy to say the words about taking that different perspective,
but it's so hard to do that mindset shift.
How do you go from fundamentally wiring the negative to more of the positive
(06:57):
frame so you can put these things into perspective that allows you to make better decisions.
So here we're getting into a mindset training.
And what has helped me to embark on this journey is that realize that my brain
is a biological computer and it can be trained just like my body.
(07:17):
So if I go to the mind gym, just like I go to the gym where I exercise certain
ways of looking at things, just like I exercise my body, over time,
my reactions will be different. friend.
It's not going to happen immediately and it depends on how consistently I do
it, just like when you go to the gym.
Now, there are proven ways of how you can control your mind,
(07:41):
which is meditation, exercise, taking walks.
Going, setting aside time in your day where you can stop and then you can really
focus on taking pause, understanding what's bothering you and learning to share
it into process so that you gain self-awareness of what is going on, right?
And so these are all the components that we've included in our program that
(08:04):
we're running for female founders,
as well as with proven strategies that were created by the coach,
how to react in different situations so that you can stop the thought cycle
and get out of the rabbit hole in which you meet the end.
And then if you do it over time, your brain will learn because we are a biological
machine and then there is neuroplasticity and it's been proven by many,
(08:28):
many people that when you train your mind, you will get results.
It's an important consideration, for example, in sport.
You know, just now I was watching US Open and I was so inspired by the two champions.
Uh so the female singles champion is Arina Sabalenko happens to be also from
the former Soviet Union just like I am and um the male singles champion is um,
(08:54):
Yannick Sinner, so he's from Italy, they both talked about mental toughness.
In fact, Irina talked about the journey that she took over the past year when
she did not win in the past year's US Open.
And she got all the way to the finals and it was devastating.
She went back and she trained harder and she worked on her mindset.
And this year she was able to win two big championships, Australian Open and
(09:18):
US Open, only the fourth woman ever to do it.
And that's a testament to what can happen when you train your mind.
Like that is what she said was a major contributor to her success.
If you listen to any successful person, whether it's Jim Bezos,
Sarah Blakely, Oprah Winfrey, Melinda Gates, Eleanor Roosevelt,
(09:41):
you know, I can go back, you know, to many, there are many wonderful people.
Thomas Edison, you know, they all talked about the importance of mindset as
the critical contributor of their success over time,
of course, contributed by hard work and persistence and mental flexibility,
but it's the mindset that helps you keep focused no matter what and be consistent
(10:03):
and develop discipline and maintain motivation in the face of difficulties, et cetera.
And I find that, unfortunately, entrepreneurs do not understand how critical
it is to make Take it part of the entrepreneurial journey from the very beginning.
It is important to get market validation. It is important to get customers.
It is important to create an advisory board. But the way to do it is to start
(10:27):
training your mind so that you can succeed long term and react in a positive
way to whatever happens in the journey.
Yeah, and along the way, that's how the successful ones develop what we call resilience.
And the ones that give in to that will end up going down a path that they're
open to and probably regret.
Victoria, in working with your entrepreneurial clients, are you seeing any particular,
(10:51):
I'll call them patterns, recurring behaviors that are driving their decision making?
The ones that are thriving or the ones that are not thriving?
What would you like me to say? Well, you can touch on both.
Let's start with the ones that
are thriving, because I think that's a nice positive mindset to hold here.
So I'm working with a client right now, and then she has gone through,
(11:15):
I would say, significant mindset training.
And as a result, even though she has to completely pivot her value proposition,
she is doing it with a positive mindset and excitement and motivation and does
not take it as a reflection of the worth of her venture or of the worth of her as an entrepreneur.
(11:35):
More so she's able to react positively even
to negative feedback even if it means which is
extremely unpleasant that what you thought before and how you envisioned your
venture before isn't what will actually has to happen because the market reacts
differently right and there are some things that are coming up that she did
(11:55):
not think of and i have another client who have come up with a beautiful,
great product for women, actually, that I myself use.
It's a premenopausal supplement.
And they're in a situation where the market price is high.
And they are not willing to react to the reality and lower prices because they
(12:19):
consider their product to be premium and they don't want to be equated with CVS.
And as a result, they're sitting on an amazing product with no sales.
And it's a very difficult mind shift.
Take. There's two of them. There's different personalities and different considerations and beliefs.
But in the end, this is the reality that they're in. And so far,
(12:41):
they have been unable to get out of that situation.
I have another client who, you know, in the book, Good to Great,
Jim Collins talks about people who are the one-man show and who hire doers as
opposed to thinkers around them.
And so the whole company hinges on one man being brilliant.
(13:04):
This is my client who likes to surround himself with people who just do what he says.
Unfortunately, in his situation, he doesn't know finance.
And by not getting help early enough, he ended up in a situation where his company went into bankruptcy.
And that's an example of what can happen if you don't pay attention to such
(13:24):
a critical function in your business, such as finance, because,
you know, if you think about it, it is the language with which your company speaks to you.
It's the only way how it can communicate whether or not it's doing well,
what needs to be changed,
what's working, what's not working, which departments need a little bit of help,
which business lines need a little bit of help, or vice versa,
(13:47):
which ones are ready to grow further.
So if you don't have the right mechanisms to interpret the data,
you're going to be in a situation where eventually you're going to run out of cash.
That is 100%. The case, the only thing we don't know is when it's going to end
up, depending on how much money is being generated by the business.
In his case, it happened after five years.
(14:09):
That's a story and a recurring theme that I've heard and observed personally,
where so many entrepreneurs are good at the thing, right?
They've created a product or a service.
They're good at sales, they're good at relations and things like that.
But the finance component is often lacking and a lot of times to their own peril,
(14:30):
as you just described here.
What are some of the other common mistakes that you're seeing that founders
and entrepreneurs are making?
Well, when they're fundraising, there are different mistakes that people make at different stages.
When they're fundraising, the mistake that I find that they make the most is
how they think about their revenues.
They use typically two ways to predict them.
(14:53):
Either they say, oh, let's assume a certain percentage of market share,
which is not connected to the product development timeline, to their capital
constraints, to the sales cycles if they're using a sales force,
to the number of people or the hiring cycles that they need to consider if they're
planning to use a sales force or if they use a new marketing budget to the conversion
(15:17):
rates or the actual budget that they have available in order to produce certain conversions.
So one approach is to consider the market share some arbitrary growth rate just
because it seems small or large, whatever the vision is,
or maybe they have some beginning number of users, some small number of users,
(15:38):
and they just didn't apply a growth rate.
That, again, has the same problem.
And it is my advice to all founders, regardless of whether they have revenues or don't have revenues,
to really think through and model their go-to-market strategy and to really
understand what other aspects of the business will be connected to revenue growth.
(15:58):
For example, customer departments, account management departments.
Maybe some IT maintenance, et cetera,
so that you build a model that is flexible and as you put in different growth
assumptions, the operational part of it to support the road is properly reflected as well.
So these two mistakes, which is projecting revenues and then not really understanding
(16:19):
the cost of supporting that growth, are the two most common mistakes that I see.
The third one would be not really understanding unit economics and not really
being able to calculate the metrics that will determine success,
that will determine whether the company is following the strategy and producing
(16:42):
the results that the management expects.
And so all of this comes from finance not being an area of expertise.
For example, I have a computer science degree. I have not programmed in 20 years,
and I would not pretend that I can now go and program even a single website.
The amount of time I would spend
would not be justified, and I would still not produce a good product.
(17:09):
But with finance, it's a similar thing. If you don't understand how to think
about it, you have two choices.
One is to educate yourself and then learn, or you can also get help.
But if you just hack it in this specific area, the result is going to be a model
that investors are going to laugh at and will ultimately reduce your credibility
(17:31):
and hurt your chances of fundraising.
When post-funding, the mistakes that I see is that the entrepreneurs often only
hire Are there accountants that file taxes and bookkeepers who just record results
without understanding what is going on with the company's strategy,
how it's translating to financial results?
(17:52):
And then what is the reconciliation between what they thought and planned for
happened and what actually happened?
And what does that mean with the steps going forward? Just recording results
and looking at the high number or low number tells you nothing if you don't
understand the decision-making process that led to this outcome.
A lot to unpack there.
(18:12):
I'm a so-called valuation expert. I help clients in valuing their businesses
for way longer than they could have.
I'm a former investment banker as well. I've seen this move so many times.
In fact, I just got contacted by a CEO of a startup who shared a pitch deck
with me. and the valuation was predicated on what you just described here,
(18:34):
middle addressable market size is X.
And if we can get just 1% of X, then in five years, we'll be a billion-dollar company.
Investors that got that deck threw up on it. The other thing that you talked
about, which is also important,
is the projections and building a model that's flexible and robust and has some
(18:55):
thought and some underpinnings to it because ultimately, buyer and investors
are going to be looking into it and doing their own modeling.
And it's a guidepost for you. It's your strategy going forward.
It's a document that should be living and being updated constantly.
Absolutely. And I would say that the way to think about what is the financial
(19:16):
model doesn't matter what state it is. It's a planning tool.
It's a representation of the plan. And then when you have a market share exercise,
it can be to understand, is your business financially feasible?
When will it be financially feasible? What percentage of market share do you
need to take in order to break even? Questions like this can be answered,
(19:38):
but it can be used to project the market share.
It cannot be used to project the go-to-market strategy. It should be used to do it.
And another question that I often get when I talk to founders,
they don't have the data. How can they make projections?
And then they start from the wrong perspective because they're trying to see
into the future. We don't know the future.
(20:01):
It's our job as entrepreneurs to make the future happen. So the financial model
helps understand what financial goals should be reached and how to reach them.
It lays out an execution roadmap.
It's up to the management to follow that roadmap and react to market feedback
as this roadmap must be adjusted.
The financial model is not supposed to be a crystal ball.
(20:24):
It's not a psychic in the form of Excel that's going to tell you in five years
you're going to be a billionaire.
That is not the role of a financial model. But founders often feel because they're
not psychics, they cannot put the right inputs into the financial model,
and therefore they cannot produce any numbers.
So that's another thing I think to demystify, whether you're pre-funding,
(20:45):
you're pre-raving, you're post-raving,
either way, your financial model is your strategy, inequality.
Yeah, and there's so many different metrics that people hear about when I talk
to business owners and entrepreneurs.
They've heard about EBITDA. Some of them know how to spell it.
Some of them know what it means, sort of.
(21:05):
What, in your view, are the most important financial metrics that entrepreneurs
need to be thinking about and tracking?
Well, you touched on a very important one. One, EBITDA is an operating income,
which is you get it by deducting your variable costs,
which are costs that vary with revenues and your fixed costs,
(21:26):
which are your operating costs, costs that don't vary with revenues.
So you get how much money you make from operations.
However, it is not the same as cash flow from operations, because the way you
calculate EBITDA includes some non-cash expenses. And so it's very important to look at both.
And its cash flow from operations is an extremely important metric because it
(21:49):
also accounts for the differences in timing for when you book revenue and you
get cash from it or you book expenses and you actually have to pay them.
And for product companies, it accounts for inventory. And of course,
it reverses the effect of non-cash expenses that are included.
Well, they're not included in EBITDA, I apologize, but they will be included
(22:10):
in EBIT. So when you calculate the cash flow, you will have to reverse those effects.
Generally speaking, founders do not understand the difference between net income
and cash flow and why they're different.
And I want to go over. So one reason why they're different is because net income
has non-cash expenses, like I mentioned.
(22:32):
The second reason why it's different is because there are, like I've also mentioned,
sometimes timing differences between when you get revenue, so you get cash for
it, that's an account receivable.
When you book an expense and you actually have to pay, that's an account payable.
Or when you have inventory as a product company where you have to purchase inventory
(22:54):
and spend money before you can generate a sale.
And the third difference is that cash flow is not just generated by operations.
There are also two other sources that affect liquidity in their investment and financing activities.
And so those three differences, those three reasons result in cash flow not
(23:14):
being the same in net income.
And both are very important to look at. The third component that would advise
founders to keep in mind on unit economics, specifically customer acquisition costs.
If this is a SaaS company, we need to look at the revenue per customer,
recurring revenue on a monthly basis and annual basis.
(23:35):
But the unit economics will differ by the business model.
And it's either revenue per customer or cost per customer or some other financial metric per customer.
And I highly recommend that founders understand what it is in their case and
calculate it so that they understand what their business is profitable on a per-customer basis.
(23:58):
If they find out that it's not, it means it's time to stop immediately and take
a step back and rethink their business model because they must be able to generate
money per customer in the long term in order for their business to be sustainable.
Good stuff. Good, good stuff. And a lot of business owners need to understand
that while EBITDA is a convenient metric, it's just a proxy for cash flow.
(24:21):
And your emphasis on cash flow is spot on because your business is worth the
present value of those future cash flows.
Victoria, we're getting close to the end of the program here very quickly,
but I'd be really remiss if I
didn't ask you to touch on some of the leadership aspects of what you do.
And from your view, what are the most important characteristics that entrepreneurs
need to do to be an effective leader?
(24:47):
I would say that there are three characteristics. And in here,
I'm going to borrow research that's been done by venture capitalists and published
by Romy Dominguez in a psychological book for VCs where they shared what they
look for founders when they evaluate founded personalities and founding teams.
(25:07):
So it's mental flexibility, it's intrinsic motivation, and that's emotional regulation.
And I would add to that that it's good to have integrity so that you don't have
to compromise your moral compass as you make decisions.
And sometimes those decisions are hard and they may have a financial risk,
(25:29):
but you stay true to who you are as a person and to the mission of your company.
And you said emotional regulation, if I heard that correctly, yeah? Yeah. Yes.
Intrinsic motivation, mental flexibility, emotional regulation.
Expound on that piece just for a little bit.
Emotional regulation would mean that, let's say you're in a situation where
(25:54):
you have a disagreement with your co-founder, with your stakeholder,
or with somebody who works for you.
The way you communicate your displeasure, the way you react,
will determine the ultimate outcome.
If you're able to take a step back and come down and achieve clarity and be
(26:16):
focused on a bigger goal, it will allow you to achieve a win-win outcome.
Even if you may be compromised from your side on a couple of subjects.
If you are very angry in the moment and you're just intent on getting your way,
this may just lead to more conflict.
And in fact, one of the reasons why a lot of startups fail is counter-disagreement,
(26:40):
precisely stepping from this problem.
We may also have a situation where you're facing disappointing results, right?
You're upset because things did not go your way. So what do you do?
Two, if you let your emotions get in the way, you're not going to be able to
work that day. You're not going to be able to focus.
(27:01):
You will let your emotions spill into every interaction you have and into your
decision making, not producing the right decision in that point in time.
It's very important. The way to do it is, again, if you practice meditation,
one of the big benefits of meditation is because you have to focus in that moment
or whatever the meditation is, it teaches you to compartmentalize.
(27:25):
So it teaches you to focus whatever is in front of you right at this moment
and ignore everything else.
That skill is so critical that it helps regulate emotions specifically in those situations.
The founders are bombarded with those situations a lot.
That's solid advice about the meditation piece, for sure.
Victoria, unfortunately, we're out of time here. But before we go,
(27:46):
why don't you tell the audience how they can connect with you if they want to
learn more about you, how to work with you. And what's next for you?
Absolutely. So I'm available. I'm always happy to talk to any founder.
My email is victoria at the startup station. You can follow me on LinkedIn,
the startup station, on LinkedIn, Instagram.
(28:09):
And Facebook, my website is thestartupstation.com.
What's next is we have the first of many events coming up for female founders
called Breaking Barriers, Female Founders in the Immensurless Side of Venture
Investing to talk about some of the things that we've discussed here.
Hear the things that investors look for when they evaluate founders,
(28:33):
which is a subjective side of venture investing,
as well as why they look for it and why do they look for those mindset qualities
and establish a clear link between mindset and financial success.
And then introduce our program as a very concrete way for founders to become
unstoppable, to develop the right mindset and set themselves for success.
(28:55):
We will be doing those events on a quarterly basis and possibly more often in
the future as we scale this program in the U.S. and then around the world.
Excellent. Thanks so much for joining us here today on Behind the Number with
Victoria. Thank you so much for having me.
It's our pleasure here. And thank you out there for watching and listening.
(29:16):
Can't do the program without you. Really appreciate your support.
Again, my name is Dave Bookbinder and I'm known for helping my clients and valuing their businesses.
If you're a business owner or entrepreneur and you don't know what your company's
worth, give me a holler. You can contact us on LinkedIn.
That's all we have for today, folks. We'll see you next time on Behind the Numbers. Take care. .
(29:36):
Music.
Music.
(00:20):
Hi, everyone, and welcome to Behind the Numbers. My name is Dave Bookbinder,
and welcome back to the show where we dig deeper to understand what really matters most in business.
Today, I'm pleased to welcome Victoria Yampolsky, who is the president and founder
of the Startup Station. Hey, Victoria, welcome to Behind the Numbers.
Hi, David. It's a pleasure to be here, and thank you for inviting me.
(00:40):
It's our pleasure. Before we get into the meat of the conversation,
why don't you introduce yourself to the audience? Tell them a little bit about
you and Startup station?
Absolutely. So my name is Victoria Impolsky. I'm a startup CFO.
I run a company called the Startup Station.
It has three business lines. One is the CFO advisory, where we work with startups,
(01:01):
both as they fund raising, helping them to come up with the financials that
make sense to investors, as well as post funding to help them execute on their strategy.
The second part of the business is education.
We do a lot of various webinars, podcasts, published content for the entrepreneurial
community, educating founders on the subjects of accounting,
(01:23):
startup finance, valuation, and financial modeling.
We also have a PEAT curriculum with more technical knowledge available as well
for those founders who prefer to go deeper into the subject area.
And finally, we have a third business line. It's a recent development.
It's our program targeting female founders fundraising or about to fundraise
called Female Founder Mindset Gym and it's the only online accessible program
(01:46):
focused on mindset training, business training and mentorship.
Well let's kick off with that then. Let's talk about mindset because so many
things in business and in life start with what's going on between your ears.
So why don't you explain that to the audience? Where does mindset fit into this
whole concept of finance and leadership?
(02:06):
Absolutely. So So the way I think about mindset is that it's a set of beliefs
that drives business decisions, drives contract resolution, drives how you evaluate opportunities,
the company's potential, how you react to investors' meetings and feedback that you get from them.
When do you stop pursuing a certain course of action?
(02:28):
So especially if you are a startup founder and you're operating in an environment
with a lot of uncertainty, a lot of financial stress, a lot of stress in general,
because you are depending on a lot of people and you don't really know,
you don't really control a lot of variables.
It's very important to keep focused, to be very clear about what you can and
(02:49):
cannot control and to be aware of your thoughts because ultimately it's the
thoughts that will determine your actions and these actions will determine the
outcome of your venture. So let me give you an example.
Let's say that you're a founder and then you were fundraising and then you got
negative feedback from 10 investors.
If you are a founder that has an ego, you may think two things.
(03:16):
One is, oh, there is bias in the market if I'm an underrepresented founder.
They're giving me this feedback because of who I am and not because of what my venture is.
And not look for the pockets of truth in that feedback that can help you improve
your value proposition.
So they will focus just on the negativity, just on the criticism.
(03:36):
And after getting 10 negative results, they may choose to stop because they cannot succeed.
It's not the right environment. There is bias in the market, et cetera.
Now let's take another founder who is secure and knows that what they're doing
is a good idea, but it may need refinement.
Let's say they get the same negative feedback. And let's say that this feedback
(03:59):
is not given in a kind way because investors are not your your mentors.
They're not there to cajole you around your dream world journey and tell you,
oh, but, you know, we don't want to upset you in any way, but would you like
to, you know, fix the slide in this way?
No, they're going to tell you in a way how they're capable, often based on their
time constraints, and that may not be pleasant.
(04:20):
So let's say that you have a founder who understands that and was like,
okay, I got 10 negative responses.
Let me understand what is common between those responses. What is the common thing?
What can I do to make my value proposition better to address their concerns and let me try again.
If maybe I can go back to them and say, hey, I fixed it. What do you think?
Maybe these are not the right partners, but I have enough confidence in my venture,
(04:44):
in my ability that I believe that I will find the right partners who will believe
me and join me on my journey.
So if you have this mindset, even if you get a negative response,
it gives you enough drive life to take it take whatever you need to do to adjust
um your you know if you're pitching your pitch decks financials whatever it
is and go on the same can be applied to absolutely any entrepreneurial situation
(05:08):
let's say you're going to market and you can't uh get clients.
You can again be in the mindset, these clients are not ready.
My product is awesome. I'm awesome.
Screw them. And then you're still sitting with no sales.
Or you can be in a situation, okay, let me talk more to the customers.
(05:29):
Let me understand their pain points. Let me understand where I'm not getting
to them through the messaging.
Let me adjust my process. Let me get help. You know, if I don't have a sales
background, let me build an advisory board with the sales else expertise,
who can coach me how I can do this so that I get better results.
Now, we're starting with the same outcome, but because we have a different perspective,
(05:51):
we're going to end up in a completely different situation in the end. And guess what?
The financial result is also going to be different.
So there is a direct link between what you think and the financial results that
it will will eventually translate to as a result of your decisions over time.
(06:12):
Yeah, because your thoughts will drive your beliefs and your beliefs will drive
your behaviors and that's going to drive your actions.
And what you just shared is so true in the entrepreneurial space,
but it's also true, I'll call it in day-to-day life.
I'm sure everybody who's listening to this is thinking in the context of any
kind of a negotiation, whether it's applying for a job, a promotion,
(06:34):
a conversation with a friend or a partner.
There's these underpinning beliefs. So I have to ask you, Victoria,
because it's easy to say the words about taking that different perspective,
but it's so hard to do that mindset shift.
How do you go from fundamentally wiring the negative to more of the positive
(06:57):
frame so you can put these things into perspective that allows you to make better decisions.
So here we're getting into a mindset training.
And what has helped me to embark on this journey is that realize that my brain
is a biological computer and it can be trained just like my body.
(07:17):
So if I go to the mind gym, just like I go to the gym where I exercise certain
ways of looking at things, just like I exercise my body, over time,
my reactions will be different. friend.
It's not going to happen immediately and it depends on how consistently I do
it, just like when you go to the gym.
Now, there are proven ways of how you can control your mind,
(07:41):
which is meditation, exercise, taking walks.
Going, setting aside time in your day where you can stop and then you can really
focus on taking pause, understanding what's bothering you and learning to share
it into process so that you gain self-awareness of what is going on, right?
And so these are all the components that we've included in our program that
(08:04):
we're running for female founders,
as well as with proven strategies that were created by the coach,
how to react in different situations so that you can stop the thought cycle
and get out of the rabbit hole in which you meet the end.
And then if you do it over time, your brain will learn because we are a biological
machine and then there is neuroplasticity and it's been proven by many,
(08:28):
many people that when you train your mind, you will get results.
It's an important consideration, for example, in sport.
You know, just now I was watching US Open and I was so inspired by the two champions.
Uh so the female singles champion is Arina Sabalenko happens to be also from
the former Soviet Union just like I am and um the male singles champion is um,
(08:54):
Yannick Sinner, so he's from Italy, they both talked about mental toughness.
In fact, Irina talked about the journey that she took over the past year when
she did not win in the past year's US Open.
And she got all the way to the finals and it was devastating.
She went back and she trained harder and she worked on her mindset.
And this year she was able to win two big championships, Australian Open and
(09:18):
US Open, only the fourth woman ever to do it.
And that's a testament to what can happen when you train your mind.
Like that is what she said was a major contributor to her success.
If you listen to any successful person, whether it's Jim Bezos,
Sarah Blakely, Oprah Winfrey, Melinda Gates, Eleanor Roosevelt,
(09:41):
you know, I can go back, you know, to many, there are many wonderful people.
Thomas Edison, you know, they all talked about the importance of mindset as
the critical contributor of their success over time,
of course, contributed by hard work and persistence and mental flexibility,
but it's the mindset that helps you keep focused no matter what and be consistent
(10:03):
and develop discipline and maintain motivation in the face of difficulties, et cetera.
And I find that, unfortunately, entrepreneurs do not understand how critical
it is to make Take it part of the entrepreneurial journey from the very beginning.
It is important to get market validation. It is important to get customers.
It is important to create an advisory board. But the way to do it is to start
(10:27):
training your mind so that you can succeed long term and react in a positive
way to whatever happens in the journey.
Yeah, and along the way, that's how the successful ones develop what we call resilience.
And the ones that give in to that will end up going down a path that they're
open to and probably regret.
Victoria, in working with your entrepreneurial clients, are you seeing any particular,
(10:51):
I'll call them patterns, recurring behaviors that are driving their decision making?
The ones that are thriving or the ones that are not thriving?
What would you like me to say? Well, you can touch on both.
Let's start with the ones that
are thriving, because I think that's a nice positive mindset to hold here.
So I'm working with a client right now, and then she has gone through,
(11:15):
I would say, significant mindset training.
And as a result, even though she has to completely pivot her value proposition,
she is doing it with a positive mindset and excitement and motivation and does
not take it as a reflection of the worth of her venture or of the worth of her as an entrepreneur.
(11:35):
More so she's able to react positively even
to negative feedback even if it means which is
extremely unpleasant that what you thought before and how you envisioned your
venture before isn't what will actually has to happen because the market reacts
differently right and there are some things that are coming up that she did
(11:55):
not think of and i have another client who have come up with a beautiful,
great product for women, actually, that I myself use.
It's a premenopausal supplement.
And they're in a situation where the market price is high.
And they are not willing to react to the reality and lower prices because they
(12:19):
consider their product to be premium and they don't want to be equated with CVS.
And as a result, they're sitting on an amazing product with no sales.
And it's a very difficult mind shift.
Take. There's two of them. There's different personalities and different considerations and beliefs.
But in the end, this is the reality that they're in. And so far,
(12:41):
they have been unable to get out of that situation.
I have another client who, you know, in the book, Good to Great,
Jim Collins talks about people who are the one-man show and who hire doers as
opposed to thinkers around them.
And so the whole company hinges on one man being brilliant.
(13:04):
This is my client who likes to surround himself with people who just do what he says.
Unfortunately, in his situation, he doesn't know finance.
And by not getting help early enough, he ended up in a situation where his company went into bankruptcy.
And that's an example of what can happen if you don't pay attention to such
(13:24):
a critical function in your business, such as finance, because,
you know, if you think about it, it is the language with which your company speaks to you.
It's the only way how it can communicate whether or not it's doing well,
what needs to be changed,
what's working, what's not working, which departments need a little bit of help,
which business lines need a little bit of help, or vice versa,
(13:47):
which ones are ready to grow further.
So if you don't have the right mechanisms to interpret the data,
you're going to be in a situation where eventually you're going to run out of cash.
That is 100%. The case, the only thing we don't know is when it's going to end
up, depending on how much money is being generated by the business.
In his case, it happened after five years.
(14:09):
That's a story and a recurring theme that I've heard and observed personally,
where so many entrepreneurs are good at the thing, right?
They've created a product or a service.
They're good at sales, they're good at relations and things like that.
But the finance component is often lacking and a lot of times to their own peril,
(14:30):
as you just described here.
What are some of the other common mistakes that you're seeing that founders
and entrepreneurs are making?
Well, when they're fundraising, there are different mistakes that people make at different stages.
When they're fundraising, the mistake that I find that they make the most is
how they think about their revenues.
They use typically two ways to predict them.
(14:53):
Either they say, oh, let's assume a certain percentage of market share,
which is not connected to the product development timeline, to their capital
constraints, to the sales cycles if they're using a sales force,
to the number of people or the hiring cycles that they need to consider if they're
planning to use a sales force or if they use a new marketing budget to the conversion
(15:17):
rates or the actual budget that they have available in order to produce certain conversions.
So one approach is to consider the market share some arbitrary growth rate just
because it seems small or large, whatever the vision is,
or maybe they have some beginning number of users, some small number of users,
(15:38):
and they just didn't apply a growth rate.
That, again, has the same problem.
And it is my advice to all founders, regardless of whether they have revenues or don't have revenues,
to really think through and model their go-to-market strategy and to really
understand what other aspects of the business will be connected to revenue growth.
(15:58):
For example, customer departments, account management departments.
Maybe some IT maintenance, et cetera,
so that you build a model that is flexible and as you put in different growth
assumptions, the operational part of it to support the road is properly reflected as well.
So these two mistakes, which is projecting revenues and then not really understanding
(16:19):
the cost of supporting that growth, are the two most common mistakes that I see.
The third one would be not really understanding unit economics and not really
being able to calculate the metrics that will determine success,
that will determine whether the company is following the strategy and producing
(16:42):
the results that the management expects.
And so all of this comes from finance not being an area of expertise.
For example, I have a computer science degree. I have not programmed in 20 years,
and I would not pretend that I can now go and program even a single website.
The amount of time I would spend
would not be justified, and I would still not produce a good product.
(17:09):
But with finance, it's a similar thing. If you don't understand how to think
about it, you have two choices.
One is to educate yourself and then learn, or you can also get help.
But if you just hack it in this specific area, the result is going to be a model
that investors are going to laugh at and will ultimately reduce your credibility
(17:31):
and hurt your chances of fundraising.
When post-funding, the mistakes that I see is that the entrepreneurs often only
hire Are there accountants that file taxes and bookkeepers who just record results
without understanding what is going on with the company's strategy,
how it's translating to financial results?
(17:52):
And then what is the reconciliation between what they thought and planned for
happened and what actually happened?
And what does that mean with the steps going forward? Just recording results
and looking at the high number or low number tells you nothing if you don't
understand the decision-making process that led to this outcome.
A lot to unpack there.
(18:12):
I'm a so-called valuation expert. I help clients in valuing their businesses
for way longer than they could have.
I'm a former investment banker as well. I've seen this move so many times.
In fact, I just got contacted by a CEO of a startup who shared a pitch deck
with me. and the valuation was predicated on what you just described here,
(18:34):
middle addressable market size is X.
And if we can get just 1% of X, then in five years, we'll be a billion-dollar company.
Investors that got that deck threw up on it. The other thing that you talked
about, which is also important,
is the projections and building a model that's flexible and robust and has some
(18:55):
thought and some underpinnings to it because ultimately, buyer and investors
are going to be looking into it and doing their own modeling.
And it's a guidepost for you. It's your strategy going forward.
It's a document that should be living and being updated constantly.
Absolutely. And I would say that the way to think about what is the financial
(19:16):
model doesn't matter what state it is. It's a planning tool.
It's a representation of the plan. And then when you have a market share exercise,
it can be to understand, is your business financially feasible?
When will it be financially feasible? What percentage of market share do you
need to take in order to break even? Questions like this can be answered,
(19:38):
but it can be used to project the market share.
It cannot be used to project the go-to-market strategy. It should be used to do it.
And another question that I often get when I talk to founders,
they don't have the data. How can they make projections?
And then they start from the wrong perspective because they're trying to see
into the future. We don't know the future.
(20:01):
It's our job as entrepreneurs to make the future happen. So the financial model
helps understand what financial goals should be reached and how to reach them.
It lays out an execution roadmap.
It's up to the management to follow that roadmap and react to market feedback
as this roadmap must be adjusted.
The financial model is not supposed to be a crystal ball.
(20:24):
It's not a psychic in the form of Excel that's going to tell you in five years
you're going to be a billionaire.
That is not the role of a financial model. But founders often feel because they're
not psychics, they cannot put the right inputs into the financial model,
and therefore they cannot produce any numbers.
So that's another thing I think to demystify, whether you're pre-funding,
(20:45):
you're pre-raving, you're post-raving,
either way, your financial model is your strategy, inequality.
Yeah, and there's so many different metrics that people hear about when I talk
to business owners and entrepreneurs.
They've heard about EBITDA. Some of them know how to spell it.
Some of them know what it means, sort of.
(21:05):
What, in your view, are the most important financial metrics that entrepreneurs
need to be thinking about and tracking?
Well, you touched on a very important one. One, EBITDA is an operating income,
which is you get it by deducting your variable costs,
which are costs that vary with revenues and your fixed costs,
(21:26):
which are your operating costs, costs that don't vary with revenues.
So you get how much money you make from operations.
However, it is not the same as cash flow from operations, because the way you
calculate EBITDA includes some non-cash expenses. And so it's very important to look at both.
And its cash flow from operations is an extremely important metric because it
(21:49):
also accounts for the differences in timing for when you book revenue and you
get cash from it or you book expenses and you actually have to pay them.
And for product companies, it accounts for inventory. And of course,
it reverses the effect of non-cash expenses that are included.
Well, they're not included in EBITDA, I apologize, but they will be included
(22:10):
in EBIT. So when you calculate the cash flow, you will have to reverse those effects.
Generally speaking, founders do not understand the difference between net income
and cash flow and why they're different.
And I want to go over. So one reason why they're different is because net income
has non-cash expenses, like I mentioned.
(22:32):
The second reason why it's different is because there are, like I've also mentioned,
sometimes timing differences between when you get revenue, so you get cash for
it, that's an account receivable.
When you book an expense and you actually have to pay, that's an account payable.
Or when you have inventory as a product company where you have to purchase inventory
(22:54):
and spend money before you can generate a sale.
And the third difference is that cash flow is not just generated by operations.
There are also two other sources that affect liquidity in their investment and financing activities.
And so those three differences, those three reasons result in cash flow not
(23:14):
being the same in net income.
And both are very important to look at. The third component that would advise
founders to keep in mind on unit economics, specifically customer acquisition costs.
If this is a SaaS company, we need to look at the revenue per customer,
recurring revenue on a monthly basis and annual basis.
(23:35):
But the unit economics will differ by the business model.
And it's either revenue per customer or cost per customer or some other financial metric per customer.
And I highly recommend that founders understand what it is in their case and
calculate it so that they understand what their business is profitable on a per-customer basis.
(23:58):
If they find out that it's not, it means it's time to stop immediately and take
a step back and rethink their business model because they must be able to generate
money per customer in the long term in order for their business to be sustainable.
Good stuff. Good, good stuff. And a lot of business owners need to understand
that while EBITDA is a convenient metric, it's just a proxy for cash flow.
(24:21):
And your emphasis on cash flow is spot on because your business is worth the
present value of those future cash flows.
Victoria, we're getting close to the end of the program here very quickly,
but I'd be really remiss if I
didn't ask you to touch on some of the leadership aspects of what you do.
And from your view, what are the most important characteristics that entrepreneurs
need to do to be an effective leader?
(24:47):
I would say that there are three characteristics. And in here,
I'm going to borrow research that's been done by venture capitalists and published
by Romy Dominguez in a psychological book for VCs where they shared what they
look for founders when they evaluate founded personalities and founding teams.
(25:07):
So it's mental flexibility, it's intrinsic motivation, and that's emotional regulation.
And I would add to that that it's good to have integrity so that you don't have
to compromise your moral compass as you make decisions.
And sometimes those decisions are hard and they may have a financial risk,
(25:29):
but you stay true to who you are as a person and to the mission of your company.
And you said emotional regulation, if I heard that correctly, yeah? Yeah. Yes.
Intrinsic motivation, mental flexibility, emotional regulation.
Expound on that piece just for a little bit.
Emotional regulation would mean that, let's say you're in a situation where
(25:54):
you have a disagreement with your co-founder, with your stakeholder,
or with somebody who works for you.
The way you communicate your displeasure, the way you react,
will determine the ultimate outcome.
If you're able to take a step back and come down and achieve clarity and be
(26:16):
focused on a bigger goal, it will allow you to achieve a win-win outcome.
Even if you may be compromised from your side on a couple of subjects.
If you are very angry in the moment and you're just intent on getting your way,
this may just lead to more conflict.
And in fact, one of the reasons why a lot of startups fail is counter-disagreement,
(26:40):
precisely stepping from this problem.
We may also have a situation where you're facing disappointing results, right?
You're upset because things did not go your way. So what do you do?
Two, if you let your emotions get in the way, you're not going to be able to
work that day. You're not going to be able to focus.
(27:01):
You will let your emotions spill into every interaction you have and into your
decision making, not producing the right decision in that point in time.
It's very important. The way to do it is, again, if you practice meditation,
one of the big benefits of meditation is because you have to focus in that moment
or whatever the meditation is, it teaches you to compartmentalize.
(27:25):
So it teaches you to focus whatever is in front of you right at this moment
and ignore everything else.
That skill is so critical that it helps regulate emotions specifically in those situations.
The founders are bombarded with those situations a lot.
That's solid advice about the meditation piece, for sure.
Victoria, unfortunately, we're out of time here. But before we go,
(27:46):
why don't you tell the audience how they can connect with you if they want to
learn more about you, how to work with you. And what's next for you?
Absolutely. So I'm available. I'm always happy to talk to any founder.
My email is victoria at the startup station. You can follow me on LinkedIn,
the startup station, on LinkedIn, Instagram.
(28:09):
And Facebook, my website is thestartupstation.com.
What's next is we have the first of many events coming up for female founders
called Breaking Barriers, Female Founders in the Immensurless Side of Venture
Investing to talk about some of the things that we've discussed here.
Hear the things that investors look for when they evaluate founders,
(28:33):
which is a subjective side of venture investing,
as well as why they look for it and why do they look for those mindset qualities
and establish a clear link between mindset and financial success.
And then introduce our program as a very concrete way for founders to become
unstoppable, to develop the right mindset and set themselves for success.
(28:55):
We will be doing those events on a quarterly basis and possibly more often in
the future as we scale this program in the U.S. and then around the world.
Excellent. Thanks so much for joining us here today on Behind the Number with
Victoria. Thank you so much for having me.
It's our pleasure here. And thank you out there for watching and listening.
(29:16):
Can't do the program without you. Really appreciate your support.
Again, my name is Dave Bookbinder and I'm known for helping my clients and valuing their businesses.
If you're a business owner or entrepreneur and you don't know what your company's
worth, give me a holler. You can contact us on LinkedIn.
That's all we have for today, folks. We'll see you next time on Behind the Numbers. Take care. .
(29:36):
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