Your Company’s Logistics Part 1: Banking

If you are successfully growing your business, there is one thing you will quickly find out: most of what you are doing has nothing to do with what your business does. This is a frustrating realization for many virgin startup owners. You signed up to take your vision and execute the hell out of it. You psyched yourself up to put everything on the line to fulfill the idea you had in your head. And you read all of these books, and they taught you to how to create a Lean Startup or create a Business Model Canvas.

What no one told you when you first started?

How to handle the logistics.

There are a ton of things to think about when starting your company: how should you manage documents? what is the most affordable way to keep track of contacts? which bank do you use? how do you handle expenses?

I don’t profess to have the right answer for all of these questions, but I can tell you what I have learned in hopes that you make fewer mistakes.

Handling Expenses

When you first start your company, it is easy to take out your personal credit card and just begin swiping to pay for things. RESIST THAT URGE. From the beginning, you want to separate your personal and company expenses. This doesn’t mean that you won’t have to lend the company money. But keeping that barrier makes it easier to do taxes and ensures you have limited liability (in the case of LLCs and Corporations).

So how do you do so in the first few days as a startup? Your startup has no money. Well you want to do 3 things: (1) setup a bank account (2) find a credit card to apply forĀ and (3) agree on an amount with your founders to fund the company. (Each of these things are addressed in future blog posts) Part number three is most important. Otherwise, what happens is eventual arguments over how much each person is spending on company items. So it makes sense to determine how you will fund the company ahead of time. Then, at the determined time, make those payments.

Deciding on a Bank

My company has been around for less than two years, and we have already used 4 different banks. This is to show that either I am really experienced, or just terrible at picking. At any rate, I’ve been able to learn some things along the way:

* Startup Banks – There are a few banks that pledge to be great for startups. These include Square 1 Bank, and Silicon Valley Bank. Both are very popular, and SVB has a cache among many investors that may be worth choosing them for. As a bootstrapped startup, you are looking for some key attributes: (1) you need to easily deposit checks, (2) you want to easy access to your account wherever you are, and (3) you don’t want to pay any fees. The great thing is that both banks offer #1 and #3. So you may find that they are great for you to begin with. However, don’t expect them to be able to support you in the one thing you need most – money. They know that most startups fail as well, and as a result, are unlikely to lend any funds or allow contacts into their network. So as you choose a bank, think about whether #1 and #3 matter more than #2. If the answer is no, try a more traditionalĀ bank

* Traditional Banks – Traditional banks (Bank of America, Chase, and PNC Bank) may not seem like a good place to begin. But you may be surprised. Many of the banks offer services for those trying to startup. PNC Bank, for example, allows you a free account for your first year. Bank of America has a free account as long as you make minimum deposits. And both accounts have really easy to use mobile apps, so that you can do the banking you need from anywhere you are. You can even talk to them about payroll, wire transfers, and even taking payments online.

* My pick: For my company, it was much easier to use the traditional banks. While I applaud some of the efforts of the startup banks, the few things they did offer for startups of my size weren’t worth the lack of features I had with more traditional banks. PNC was great for me to start with because I had a free account for a year. As we grew however (and moved), we quickly recognized new services we would need. So we switched to Bank of America, which is available in our new location, and has a very user-friendly way to cash checks through mobile (up to $25,000) and send and receive wires easily.

(Part 2: Credit Cards)

Leave a Reply