5 ms·

Disclosing Your Finances: Should you publicly publish your finances?

26 points by j0ncc 17y ago

dmytton 17y ago
If you run an incorporated company, at least in the UK, you have to submit annual accounts which will contain manny of these figures anyway. Although they won't go into as much detail, anyone can get access to the accounts if they want. You can bet that investors will do this, as will interested competitors and even larger companies you do business with may well dig them up. Posting figures on a blog is more public, you're drawing attention to them, but given that the data is available anyway, it might be better to reveal them on your blog. (Of course, accounts don't get filed until after the first year...but then you would only be publishing the last financial year's stats.)
- smanek 17y ago
  In the States you don't have to submit much unless you're public/really-big. I'd be very surprised if the UK had reporting requirements that stringent for every corporation ... Do you have a source on that claim?
  - dmytton 17y ago
    Indeed, the reporting requirements differ depending on the size of the company. But even a small company has to file: a profit and loss account and a full balance sheet These are submitted every year to Companies House. See http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml chapters 6 & 7.
jacquesm 17y ago
> I can assure you that openly talking about your revenue if it's not mind-blowing is going to turn off investors. If you show that your company did $100,000 a year in revenue last year and increased to $150,000 this year, then fewer investors are going to be interested in chatting with you. I don't get that. Does he mean that those investors will not find out in due course what your turnover is? Surely that would be a part of any - even preliminary - talks. And if it is because VCs wouldn't want to be associated with such small companies then it might hold some water, but not a whole lot in my experience. What is more important is that if you are successful in some niche that you don't want to be too lippy about it simply because you are waking up a bunch of would-be competitors. That's mentioned too, and I think that is one of the only really valid reasons for holding your cards close to your chest. But even then, looking at a company from the outside in and having some stats to work with you can usually get within the ballpark of what a company is making. Also, in many countries you do a public filing of what you are making anyway, usually with the local equivalent of the chambers of commerce. Anybody so inclined would be able to find out in a heartbeat. The ground rule to me seems to be don't blab but act as if everybody will know it anyway.
briancooley 17y ago
I can assure you that openly talking about your revenue if it's not mind-blowing is going to turn off investors. If you show that your company did $100,000 a year in revenue last year and increased to $150,000 this year, then fewer investors are going to be interested in chatting with you At some point, these numbers are going to come to light with potential investors. If your numbers aren't great, not disclosing them might earn you audience with more investors, but ultimately you'd be wasting time that would be better spent improving your offering. Perhaps it's better to let them disqualify themselves.
- smanek 17y ago
  People (including investors) aren't purely rational. After I already like you, think good things about you, etc. it's easier for me to explain away or disregard negative things. I'm sure you've heard about the 'halo effect' or 'post purchase rationalization' (in this case the purchase price being time/effort, not money).
  - lsc 17y ago
    yeah, but an 'unqualified' investor wastes my time as well as his. I've been approached by several entities looking to buy out prgmr.com, and we wasted a bunch of time dancing 'cause we weren't clear at the outset about what we wanted/had. I guess it wasn't entirely a waste of time; I was able to pass one of them off on one of my sort-of competitors. (hey, goodwill for me, and another competitor I don't have to worry about)
sivers 17y ago
He asks, "who are the people who care about this information?" - but forgot that CUSTOMERS often care, too! I never considered publishing financials until the dot-com-crash when so many companies were going under, we started getting daily emails from our customers asking, "Are you guys going to be around? Everything OK?" Then I started publishing the info once or twice a year to show that everything was healthy and fine: http://cdbaby.org/stories/02/06/04/5349389.html http://cdbaby.org/stories/02/06/04/5349389.html http://cdbaby.org/stories/03/03/11/2873136.html http://cdbaby.org/stories/03/03/11/2873136.html http://cdbaby.org/stories/03/08/12/6186390.html http://cdbaby.org/stories/03/08/12/6186390.html Many customers told me that's why they chose to do business with us. Because we were so wide-open with our numbers.
- spencerfry 17y ago
  I completely disagree. There are better means of letting your customers know that everything is going well. Adam said it best on a comment on my post: "The biggest issue, I think, is #3, and I'd put it a bit more strongly: most people are financially illiterate. They don't have a strong sense of the difference between gross revenue, net revenue, profit, etc. They can't read a balance sheet or a cash flow statement. This is fine, generally speaking. Although everyone might be better off with such knowledge, most of us don't really require it to get through our day." "In the end, what probably matters most is whether customers believe that your company is building its success on their backs, or whether they're your partners in growth. And really it's hard to see how disclosing financial helps with that perception, and easy to see how it might hurt." Source: http://spencerfry.com/disclosing-your-finances#c-2171928 http://spencerfry.com/disclosing-your-finances#c-2171928
  - lsc 17y ago
    What could be a more effective means of communicating the health of the company to your customer base?
    - spencerfry 17y ago
      Off the top of my head... 1. Talk/show your user growth. 2. Blog about how you're all working full-time. 3. Hiring people. Usually (at least in self-funded companies) the more people you've got the healthier you are. 4. Talk about your server infrastructure and about how you just upgraded your servers / added more servers to keep up with the "amazing growth". 5. Be active on your blog. Talk up about your plans for the next year. If you've got plans for the next year... you're probably not going anywhere. 6. Keep producing updates to your product. Nothing shows the health of your company like continuing to release updates.
evanjacobs 17y ago
Hey, after this we only need to publicly publish the frequency and variety of our sexual intercourse and we will have finally opened up every last previously taboo subject.
- lsc 17y ago
  so you are saying that we should keep our revenue numbers secret not out of selfishness but because it's impolite to discuss money? But then, I guess I'm just crass... I never understood why workers tend to keep their salaries secret from their peers; it seems to contribute to asymmetrical information distributions, in the employer's favor.
grellas 17y ago
A few observations based on having dealt with countless startups over the years from a legal perspective and otherwise: 1. Officers and directors owe a fiduciary duty to their companies to perform their duties in the best interests of the company and its shareholders. Divulging company confidential information such as finances easily could be construed as a breach of such duties. Thus, in any company having shareholders besides the founders, public disclosure is a step to be taken only with caution. Whatever is happy and upbeat today might be otherwise tomorrow and shareholders may be only too keen to second-guess management if they think some disclosure ultimately left the company vulnerable (e.g., by helping a competitor). 2. You can't ultimately raise money for your company without making disclosure of financial information to prospective investors and a company would, in my view, have potential liability risks from legacy public disclosures that might have been made before the funding itself. What if such disclosures were inaccurate, as they would be if tainted by puffing or by any other depiction of the company's situation that appeared to be accurate on the surface but was in fact misleading. In such a case, what is to prevent an investor from claiming to have relied in a material way on such information to his detriment? There may be other legal risks as well. There certainly are business risks: giving competitors useful information on where to target their resources based on your numbers; giving adversaries in a lawsuit added leverage in their settlement negotiations with your company; giving potential vultures ammunition for when to close in for the kill in an acquisition (e.g., you disclose "happy numbers" in a couple of good years and then go silent when you get overextended as a company and become vulnerable). In general, one of the great advantages of being a closely-held company is the privilege of keeping the financial information within a very tight-knit group inside the company. To give that up gratuitously will in most cases be a big mistake. Of course, it may make sense for some founder groups to opt for such disclosure for some of the reasons cited in the post and in this thread. But this should be the rare exception and not the rule.
auston 17y ago
One point I would like to add / disagree with: "Suffice it to say that I don't think that the press you're going to receive outside the entrepreneurial community is enough to justify exposing your finances to the public." I believe the opposite, most people (outside of tech) do not know much about products in tech, so they often come to people in tech for recommendations on everything from cell phones, to computers, to websites for fun / etc. The same way you might ask a girl what flowers would be nice to get for your mom. Recommendations exist in the real world & I personally think that putting yourself in front of a group of influencers (like the people here on HN) is a great way to gain word of mouth marketing.

26 points by j0ncc 17y ago

If you run an incorporated company, at least in the UK, you have to submit annual accounts which will contain manny of these figures anyway. Although they won't go into as much detail, anyone can get access to the accounts if they want. You can bet that investors will do this, as will interested competitors and even larger companies you do business with may well dig them up. Posting figures on a blog is more public, you're drawing attention to them, but given that the data is available anyway, it might be better to reveal them on your blog. (Of course, accounts don't get filed until after the first year...but then you would only be publishing the last financial year's stats.)

smanek 17y ago
In the States you don't have to submit much unless you're public/really-big. I'd be very surprised if the UK had reporting requirements that stringent for every corporation ... Do you have a source on that claim?
- dmytton 17y ago
  Indeed, the reporting requirements differ depending on the size of the company. But even a small company has to file: a profit and loss account and a full balance sheet These are submitted every year to Companies House. See http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml chapters 6 & 7.

jacquesm 17y ago

> I can assure you that openly talking about your revenue if it's not mind-blowing is going to turn off investors. If you show that your company did $100,000 a year in revenue last year and increased to $150,000 this year, then fewer investors are going to be interested in chatting with you. I don't get that. Does he mean that those investors will not find out in due course what your turnover is? Surely that would be a part of any - even preliminary - talks. And if it is because VCs wouldn't want to be associated with such small companies then it might hold some water, but not a whole lot in my experience. What is more important is that if you are successful in some niche that you don't want to be too lippy about it simply because you are waking up a bunch of would-be competitors. That's mentioned too, and I think that is one of the only really valid reasons for holding your cards close to your chest. But even then, looking at a company from the outside in and having some stats to work with you can usually get within the ballpark of what a company is making. Also, in many countries you do a public filing of what you are making anyway, usually with the local equivalent of the chambers of commerce. Anybody so inclined would be able to find out in a heartbeat. The ground rule to me seems to be don't blab but act as if everybody will know it anyway.

briancooley 17y ago

I can assure you that openly talking about your revenue if it's not mind-blowing is going to turn off investors. If you show that your company did $100,000 a year in revenue last year and increased to $150,000 this year, then fewer investors are going to be interested in chatting with you At some point, these numbers are going to come to light with potential investors. If your numbers aren't great, not disclosing them might earn you audience with more investors, but ultimately you'd be wasting time that would be better spent improving your offering. Perhaps it's better to let them disqualify themselves.

smanek 17y ago
People (including investors) aren't purely rational. After I already like you, think good things about you, etc. it's easier for me to explain away or disregard negative things. I'm sure you've heard about the 'halo effect' or 'post purchase rationalization' (in this case the purchase price being time/effort, not money).
- lsc 17y ago
  yeah, but an 'unqualified' investor wastes my time as well as his. I've been approached by several entities looking to buy out prgmr.com, and we wasted a bunch of time dancing 'cause we weren't clear at the outset about what we wanted/had. I guess it wasn't entirely a waste of time; I was able to pass one of them off on one of my sort-of competitors. (hey, goodwill for me, and another competitor I don't have to worry about)

sivers 17y ago

He asks, "who are the people who care about this information?" - but forgot that CUSTOMERS often care, too! I never considered publishing financials until the dot-com-crash when so many companies were going under, we started getting daily emails from our customers asking, "Are you guys going to be around? Everything OK?" Then I started publishing the info once or twice a year to show that everything was healthy and fine: http://cdbaby.org/stories/02/06/04/5349389.html http://cdbaby.org/stories/02/06/04/5349389.html http://cdbaby.org/stories/03/03/11/2873136.html http://cdbaby.org/stories/03/03/11/2873136.html http://cdbaby.org/stories/03/08/12/6186390.html http://cdbaby.org/stories/03/08/12/6186390.html Many customers told me that's why they chose to do business with us. Because we were so wide-open with our numbers.

spencerfry 17y ago
I completely disagree. There are better means of letting your customers know that everything is going well. Adam said it best on a comment on my post: "The biggest issue, I think, is #3, and I'd put it a bit more strongly: most people are financially illiterate. They don't have a strong sense of the difference between gross revenue, net revenue, profit, etc. They can't read a balance sheet or a cash flow statement. This is fine, generally speaking. Although everyone might be better off with such knowledge, most of us don't really require it to get through our day." "In the end, what probably matters most is whether customers believe that your company is building its success on their backs, or whether they're your partners in growth. And really it's hard to see how disclosing financial helps with that perception, and easy to see how it might hurt." Source: http://spencerfry.com/disclosing-your-finances#c-2171928 http://spencerfry.com/disclosing-your-finances#c-2171928
- lsc 17y ago
  What could be a more effective means of communicating the health of the company to your customer base?
  - spencerfry 17y ago
    Off the top of my head... 1. Talk/show your user growth. 2. Blog about how you're all working full-time. 3. Hiring people. Usually (at least in self-funded companies) the more people you've got the healthier you are. 4. Talk about your server infrastructure and about how you just upgraded your servers / added more servers to keep up with the "amazing growth". 5. Be active on your blog. Talk up about your plans for the next year. If you've got plans for the next year... you're probably not going anywhere. 6. Keep producing updates to your product. Nothing shows the health of your company like continuing to release updates.

evanjacobs 17y ago

Hey, after this we only need to publicly publish the frequency and variety of our sexual intercourse and we will have finally opened up every last previously taboo subject.

lsc 17y ago
so you are saying that we should keep our revenue numbers secret not out of selfishness but because it's impolite to discuss money? But then, I guess I'm just crass... I never understood why workers tend to keep their salaries secret from their peers; it seems to contribute to asymmetrical information distributions, in the employer's favor.

grellas 17y ago

A few observations based on having dealt with countless startups over the years from a legal perspective and otherwise: 1. Officers and directors owe a fiduciary duty to their companies to perform their duties in the best interests of the company and its shareholders. Divulging company confidential information such as finances easily could be construed as a breach of such duties. Thus, in any company having shareholders besides the founders, public disclosure is a step to be taken only with caution. Whatever is happy and upbeat today might be otherwise tomorrow and shareholders may be only too keen to second-guess management if they think some disclosure ultimately left the company vulnerable (e.g., by helping a competitor). 2. You can't ultimately raise money for your company without making disclosure of financial information to prospective investors and a company would, in my view, have potential liability risks from legacy public disclosures that might have been made before the funding itself. What if such disclosures were inaccurate, as they would be if tainted by puffing or by any other depiction of the company's situation that appeared to be accurate on the surface but was in fact misleading. In such a case, what is to prevent an investor from claiming to have relied in a material way on such information to his detriment? There may be other legal risks as well. There certainly are business risks: giving competitors useful information on where to target their resources based on your numbers; giving adversaries in a lawsuit added leverage in their settlement negotiations with your company; giving potential vultures ammunition for when to close in for the kill in an acquisition (e.g., you disclose "happy numbers" in a couple of good years and then go silent when you get overextended as a company and become vulnerable). In general, one of the great advantages of being a closely-held company is the privilege of keeping the financial information within a very tight-knit group inside the company. To give that up gratuitously will in most cases be a big mistake. Of course, it may make sense for some founder groups to opt for such disclosure for some of the reasons cited in the post and in this thread. But this should be the rare exception and not the rule.

auston 17y ago

One point I would like to add / disagree with: "Suffice it to say that I don't think that the press you're going to receive outside the entrepreneurial community is enough to justify exposing your finances to the public." I believe the opposite, most people (outside of tech) do not know much about products in tech, so they often come to people in tech for recommendations on everything from cell phones, to computers, to websites for fun / etc. The same way you might ask a girl what flowers would be nice to get for your mom. Recommendations exist in the real world & I personally think that putting yourself in front of a group of influencers (like the people here on HN) is a great way to gain word of mouth marketing.