There are many financial mistakes a start-up can make according to study participants. Under capitalization was identified as the leading mistake, while others include underestimating cash needs, over hiring, purchasing too much technology and equipment, and not raising enough funds.

"We firmly believe that leasing is a strategic option. As a start-up we have to monitor the value of our assets. As we look to build and develop overall value, we certainly would not want to retain assets that can quickly diminish in value. As such, leasing becomes an extremely attractive option for our company," said Jim Ogle, Controller, ShareMax.

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START-UP ATTITUDES TOWARD LEASING/EQUIPMENT LEASING

The primary benefits of leasing cited by start-ups include increased cash flow, tax benefits, balance sheet management, and avoiding technology obsolescence. With the cash flow that was conserved as a result of leasing, start-ups are reinvesting funds into one of several areas including: technology, research and development, marketing, and staff. A quality unique to the high-tech start-up market space, participants discussed how leasing provides the opportunity for a lower recorded burn rate (the rate at which the company is spending its capital while waiting for profitable operation).

"For high tech companies, cash and capital are even more critical than for slower growth companies. By leasing equipment, we can use our capital to rapidly expand our technology and stay ahead of the competition," said Jim Fox, CEO of EqualFooting.com.

THE LESSOR

A common agreement among startups was that the high tech industry has fueled the growth of the leasing industry - they have created a new segment of business. The risk is considered higher with high tech startups compared to other industry segments partly due to the higher failure rate; however, start-ups suggested that lessors could reduce their risk by investing in a partnership with them. It was commonly felt by participants in the study that the more the lessor knows about a business, the better the lessor can assess the business potential and risk factors involved in working with the company.

There is also common consensus among start-ups on how lessors can improve the leasing process including simplified and streamlined processes; reduced amount of paperwork; increased Web services; and increased flexibility.

"Partnering and figuring out how to partner is important to start-ups. Leasing companies should take a look at these businesses and help them to evaluate their risks and put together the best package," said Alan Ferguson, Senior Vice President, Internet Data Centers, Nupremis

The evolution of e-business is also a topic favored by participants of the study. There is a significantly strong belief that e-business will continue to evolve, moving forward over the next several years. Most companies believe that e-business is still in a very early stage and that we will see noticeable changes in the near future. Predictions include an increase in personalization, a shift from products to services, a continued explosion of viral marketing (B2E-business to employee), and increased accessibility.

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So what are the effects of conducting business online? Participants agree that e-commerce has had a drastic impact on how companies do business every day. E-commerce has made business more efficient and it has forced companies to adapt and change business models to meet market demands. Interest in using the Internet for online leasing and financing was driven by advantages in price, convenience, comparative shopping, fulfillment, service and speed. Another finding is that the start-up community demonstrates a higher adoption rate of online financing compared to other industries.

"Having an online presence does not just offer an advantage, it is a requirement. If you are not online, you are making a mistake. We are married to technology as part of our lives," said Joe NeSmith, Chief Operating Officer, eContributor.com.

STARTING A COMPANY ATTITUDEs/TRENDS

There were similar challenges cited by each of the executives involved with starting a company. Participants faced trials including: VC pressure for profits; attracting and retaining employees; funding; equipment financing; finding office space; product launches in competitive spaces; and execution.

"Vision helps you acquire the talent and capital - the market and money givers are far more sophisticated and look for companies to have all of the factors thought out," said Alan Ferguson, Senior Vice President, Internet Data Centers, Nupremis.

Source: Office World News

Author: Michael J. Fleming

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