Do you know the business fundamentals to grow your company from 0 to 100?
Herve Leong-Chung and Camellia Ho, Partners at Smythe Ratcliffe, spoke about preparing your company for expansion. Here are the key takeaways from the presentation:
Ready for Expansion? What You Didn’t Know but Now You Know
1. Whether you are selling your company, obtaining private equity or preparing for a public offering, the due diligence process is a time consuming and demanding process. You need to plan for what investors will be looking for:
- Audited financial statements to gauge financial performance and spend patterns, a minimum of 2 years is usual;
- All key contracts and agreements to demonstrate there are no hidden contingent liabilities and you have complete ownership of your IP;
- Are your tax filings current? In particular, have you managed the risk of filings in foreign jurisdictions.
2. Manage your capitalization table and understand how many shares and what classes are issued. Don’t issue too many shares early on and dilute yourselves and family and friends. A cap table with millions of shares outstanding will deter investors. Structure your own ownership to make sure that you can take advantage of capital gains exemptions when you dispose of your shares; this can take at least two years to plan for.
3. Know early on whether the goods or services you are selling are subject to sales taxes – not having the proper pricing early on could impact your profit margins anywhere from 5% to 20% depending on the jurisdiction into where you are selling.
4. Understand who can enter agreements on behalf of your company and ensure these agreements are signed in Canada. If agreements are signed outside of Canada you could be subject to tax filings in the country where the agreement is signed.
How to Use SR&ED to Scale Your Growth
Alex Popa presented on how to use SR&ED to scale your growth. Here are two takeaways as well as the slides you can reference for an example:
1. SR&ED is a federal and provincial tax incentive program that allows companies to recover costs associated with R&D. To qualify, you must meet three criteria (technological advancement, technological uncertainty, and technical content) as well as have strong documentation to support your claim.
2. Leveraging the SR&ED tax credit is the best way to scale your company – you’re able to increase your bottom line without increasing spend.
Expert Panel: Take Your Company from 0 to 100
The expert panel included (from left to right): Keith Ippel, Co-founder, Spring; Kenshi Arasaki, Co-founder, A Thinking Ape; Brent Holliday, Founder & CEO, Garibaldi Capital Advisors; and Ray Walia, Executive Director, Launch Academy.
Panelists shared great advice on the three things startups need to succeed: innovation; talent; and capital. (For more advice and to check out the online conversation, visit #0to100YVR. )Brent Holliday shared the following:
Your customers are the cheapest form of capital during the early stage.