Opening the Books at a Start-up
Popular wisdom has it that the risks of open-book financial management outweigh the rewards at a young company, particularly when the lack of sales or profitability could demoralize employees and retard growth. Leslie Danziger, chief executive of Lightpath Technologies, in Tucson, disagrees. "This type of financial communication helps make your team more seasoned."
At Lightpath, an eight-year-old research-and-development company that has projected positive revenues only as of this year, financial education takes many forms, including weekly staff meetings in which new rounds of capitalization and cash flow are discussed. "It's been important that everyone, both our scientific and our business staff, understands when and how much money is coming into the company and how much money we're spending and why," Danziger explains.
Part of employee education, Danziger admits, sometimes involves teaching people -- especially nonbusiness types -- about why they should want to know about the company's finances. "It's helped us to do that in a low-key way at social events, rather than hold formal seminars. Our staff goes hiking together every two weeks and comes to get-togethers at my house once a month. It's much easier and less intimidating to discuss what's happening with our financing campaign or cash flow in those kinds of settings."
Employee response has been enthusiastic. "This has helped us bridge the gap between our technical and our business workers, so all employees feel they're bringing more of themselves to the workplace."
This year, since Danziger expects the company's financial results to become more complex as revenue streams start to develop, she plans to bring in a financial consultant to run employee seminars, so that people will continue to fully understand the company's finances. "So far, we've been able to convey most of our vital information verbally, which has been good because people feel comfortable asking questions and talking about results. But as we grow and move closer to my ultimate goal of going public, I expect we'll need to make use much more of written financial statements."
-- Jill Andresky Fraser* * *