Tom Parkinson CA: Fuelling innovative ideas
To help good ideas flourish, start-ups and change-makers need support. Whilst new ventures require creativity and drive to see them through, they also need to be carefully managed to prevent them vanishing into obscurity, says Tom Parkinson CA.
Before joining SteamaCo, a technology start-up focused on energy access, I found it difficult to reconcile how my skills could be helpful to an early stage company. How does a start-up with minimal revenue and a minuscule cost base justify the need for an accountant? The world of disruption seemed exciting but distant.
What I didn’t realise was that CAs have unique and valuable skills which can support growth. Spending years diligently following processes, implementing controls, and managing data gives us the discipline and rigour to help ideas flourish in the incubation phase.
Being able to provide clear, trustworthy, and simple messaging to stakeholders is invaluable.
Research from Ormsby Street found that six in 10 UK businesses fail in the first five years. Managing Director Martin Campbell said: "A small business can fail for many reasons of course, but poor cash flow remains one of the main causes of problems.”
They also found that small UK companies who regularly credit check their customers are around 30% less likely to experience business failure in their first 12 months.
This suggests that even something as simple as a cash flow forecast or basic due diligence can mean the difference between survival and early death for a company.
CAs can help companies overcome these issues - freeing up time for other members of the team to focus on value creation, marketing, and product development.
Stakeholder management is another key skill. The lifeblood of any idea is funding, which requires investment, and consequently investors. Being able to provide clear, trustworthy, and simple messaging to these vested constituents is invaluable.
At SteamaCo, we have benefitted tremendously from a focused and engaged board, able to add value and expertise due to being properly informed.
CAs are in the privileged position of having access to data and the ability to manage and interpret it effectively.
Innovation is the lifeblood of a start-up, so it’s crucial to enable it. Problem-solving requires creativity, and creativity in product development when done right requires measurement.
Strategy for success
The successful ‘Lean Start-up’ model, as described by Eric Ries and used by companies like Dropbox, GE, and Intuit, promotes the virtue of rapidly testing new ideas in front of customers to refine a new product.
The strategy is to build, measure, and learn using five guiding principles. Critically, ‘Innovation Accounting’ is the measurement step where accountants can add real value.
CAs are in the privileged position of having access to data and the ability to manage and interpret it effectively. Working closely with an accountant can help teams drive improvements to new products and services.
To get innovation off the ground also requires funding. In the UK, we have a thriving grant sector, with £1.8bn of grants provided by InnovateUK since 2007.
Each of these proposals requires an application (essentially a business plan) and despite being a simple and non-dilutive route to gaining funding, the typical success rate is low, hovering around the 20% mark.
Key reasons for failure are poorly prepared forecasts, a lack of commercial strategy, and inadequate risk analysis. Anyone who has passed through ICAS will recognise these as key skills learned during training.
I have used these learnings to SteamaCo’s advantage, specifically in raising £500k of non-dilutive grant funding. That money was used to help develop the latest iteration of our product, which has been a game-changer for the company, catapulting our growth.
There are innovative start-ups with great ideas in desperate need of accounting skills. If you want to be at the forefront of change then be open to new ideas, use your skills to enable them and make a difference.