Saturday, June 20, 2009

No accounting for...

Here I find myself preparing for a DoD Phase II SBIR, the first for my nascent company. We were founded just over a year ago, submitted our first Phase I proposal a month later, and received the award two months later. I was thrilled. Now before I get too self-congratulatory, I realize in full that it was great luck that a topic directly to the heart of our core research was published just at that moment. In fact, there were two topics, but we could only manage to prepare one proposal to deadline.

I have heard and believe that one key to success with SBIR (frankly in general for a small, innovative business) is sticking to your core. Don't waste time preparing proposals for work that takes you away from what your business is all about.

Of course, sticking to your core means being willing to delegate non-core tasks along the way, of which for an entrepreneur and a start-up there are many. There's the rub, however. As an entrepreneur, I bristle at the thought of hiring someone else to do what I can do better or just as well. Knowing when it's appropriate, and when my self-confidence is unwarranted, is the key to wisdom, which admittedly I've yet to master.

Years ago, I used to change the oil in my car, until I realized that paying someone else $30 to do it might save me a couple hours of trouble, what between buying a new filter and oil, crawling under the vehicle, waiting for it to drain, being sure I've the right wrench, and that the bolt is properly tightened, then responsibly discarding the used oil at a recycling center. So, what's my time worth? Clearly more than $15/hr. Decision made. I drive it to the lube joint, bring an Economist for the half hour wait, and smile as I hand over my credit card.

But, what to do when a service provider wishes to charge me $100, $150, or even $400 an hour?

I rejected the $100/hr grant writer. I did just fine without him. The quote I had gotten a year ago was a fixed $7000 to help me with the two proposals, ostensibly for 70 hours of his time. But, how much time would it really save me, since it's my technology that needed describing, which he had no knowledge or understanding of? $7000 for even an experienced and talented editor wasn't something I was willing to justify.

Fortunately, I had the invaluable support of my wife and a couple dedicated advisors from the Wisconsin Entrepreneurs Network as readers, so I was willing to take a chance. I had a bunch to learn about the submittal process, but I managed alright. I focused on one proposal, and won the award. Would that $7000 spent have garnered me two awards? No telling.

$400 is the ballpark for a patent attorney's rate. But if they're not experienced or knowledgable in my domain (which NONE of the locals are), will I get my money's worth? I'm still going to be doing all the hard work of writing up the description, and being sure I've cited, compared, or dismissed a sufficient quantity of prior art (though I hear the USPTO patent agents will always find something you missed).

The patent however is really only as good as the claims. And that is something I'm not sure I'm qualified for. Jury's out on this one. I just may fork over the dough, if I can become convinced that whomever I hire can really deliver. It's a tough call.

Then... $150/hr is the rate I pay my local CPA (his staffers are cheaper, but the point's the same). Problem is, he's not really versed in the arcana of DCAA regulations. I'm not that interested in paying someone that kind of wage to learn what I'm paying him to know. I have been looking for alternatives. I got one recommendation for a firm out of state that ostensibly specializes in SBIR firms. Great! I gave them a call.

Nice guy, knowledgeable, not the best listener though. That's always a red flag. Don't tell me what your business can do. Don't tell me how qualified you are at your job. Listen to my needs, and address them. Otherwise, you've just lost a customer.

But, I listened. I gave him the benefit of the doubt... well, until he explained their pricing schedule. It'd be about $2000 (A MONTH!) for them to do a QUARTERLY review of my books, and a full $30,000 if I want them to handle everything. Um... what? Here's where the listening part comes in.

What he failed to hear was this:
Hi, I'm a small startup research firm. Well, essentially so far it's just me, with some occasional consulting, and currently a part-time summer intern. I'm looking to hire three or four post-docs and an IT & Administrative Specialist come the fall, to gear up for hard-core R&D. I need to set up a system now that meets regulatory guidelines, and lets me prepare and execute a proper budget for a two-year $750,000 effort. There're other projects pending, so we're hoping to grow, but nothing certain.
Now, listening to that honestly and openly, can you imagine an entrepreneur--a bootstrap, meaning it's all my own money on the line, not a dime from investors--agreeing to commit 6.4%-8% of future (and at this point still not guaranteed) revenues to pay an accountant to do, what? I mean, how complicated a job could this be?

To put it in perspective: at $150/hr, we're talking 160-300 hours, or 13-25 hours per month to oversee the finances for a staff of 4 or 5! I think I'll find a CPA who knows what needs to be known (or is willing to pay their own way to learn), and who is willing to grow with my business. Otherwise, it's back to being President/CEO/Receptionist AND Accountant. For $150/hr or $2000/month, there's a lot of learning I'm capable of doing!

1 comment:

  1. ***UPDATE***
    I spoke with an out-of-state accountant yesterday who was recommended to me, with experience and knowledge of DCAA regulations. He expects he can get me set up with what I need in 2-3 hours at $125/hr. That sounds more like it. We'll see how it goes.


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