Financial Literacy Month in partnership with Scotiabank – Taking the Fear Out of Finance

*The following content should not be considered financial advice. Before acting upon the following information, we recommend you seek the guidance of a qualified financial or business advisor who can take your unique needs into account.

Financial management and funding are consistently the number one pain points for Canadian entrepreneurs. Powered by Scotiabank, in recognition of Financial Literacy Month, Startup Canada is shedding some light on this complex, multifaceted hurdle countless founders face across the country. Through the curation of specialized financial resources for small businesses and speaking to leading early-stage entrepreneurs across the country about their financial journeys, we can take the fear out of finance together!

In a 2018 study, it was found that less than 20% of Canadians believe they have strong financial literacy – with over 40% rating their financial literacy as poor. Financial literacy is something that impacts all Canadians, including entrepreneurs.    

This four part series will take a deep dive into four key topics of financial management and planning for startups: 

1. Feasibility and Foundations.
2. Financing That Works for You. 
3. Performance Monitoring and Optimization for Profit. 
4. Retirement and Succession Planning. 

Performance Monitoring and Optimizing for Profit

Without analysis and strategic planning, data is just data. But with proper performance monitoring and strategic action, small business owners can capitalize on strengths, gain a competitive advantage, and optimize for profit. 

Business sales and marketing plans are an entrepreneur’s lighthouse – a wayfinding mechanism to keep us focused and goal-oriented. These plans are our best estimates on the future of our ventures well informed by thorough market research, testing and validation. However, things can change and markets can shift. This is why consistent performance monitoring and financial forecasting is vital – these processes can help us adjust our plans, see new opportunities, and boost our profits.  

Here’s a high-level look at what you should consider for your financial statements:   

ELEMENT	WHAT IS IT	WHY IT’S IMPORTANT
Stock Turnover	The rate at which a company’s goods are sold and replaced. Specific “good” turnover rates are dependent on the benchmark for a given industry.	Measuring the number of days it takes to sell inventory allows you to adjust your pricing or marketing. A low number means stock is being sold quickly.
Debt Turnover	Counting the average days from sale to accounts receivable collection will tell you if your company needs to improve its debtor policies—for example, you may need to reduce customer credit terms.	A low debt turnover ratio means accounts are being paid reasonably fast. It’s an important figure to monitor because the timing of receivables impacts your cash flow.
Current Ratio	A liquidity ratio that tells an organization their balance between current assets and liabilities (debt, payables, etc.) in order to cover short-term obligations.	Equips executive teams to maximize current assets on the balance sheet in order to satisfy payables. A good rule of thumb is a ratio of 2:1, meaning your company is in decent financial shape if it has $2 in current assets to meet every $1 in current liabilities during any 12-month period.
Return on Investment	Measures the return that an owner receives on their investment in the business.	For example, an 8 percent ROI might be what an investor expects. This number lets an investor or owner compare returns available from other forms of investment.
Gross Profit Margin	This metric is used to understand your company’s financial health by looking at the revenue remaining after accounting for cost of products sold.	GPM informs a venture of their income per unit sold (or per service offering sold). It can assist in pricing adjustments or reevaluations. An example of GPM: Let’s say your business makes $200 on a single sale. It costs you $80 to create the product. Your gross profit is $120 and your gross profit margin is 60%.
Break-Even Point	The break-even point indicates the amount of sales that must be generated to cover expenses.	For example, a consulting firm may need to sell 500 hours of consulting time each month to pay for salaries, rent, telephone and other costs. It’s an important ratio that should be monitored each month in case you need to adjust your sales strategy.

For this segment, Startup Canada was pleased to sit down with Bronwyn Bridges, CEO and Co-founder of PragmaClin Research, to learn more about her financial journey – how she determined the right revenue model and markets, her iteration and success indicators, and her advice for other early-stage founders just starting out with performance monitoring and optimizing for profit.

SC: Tell us about you and your business! Who are you, and what does your business do?

BB: My name is Bronwyn Bridges, I’m the CEO and Co-Founder of PragmaClin Research. We founded two years ago almost to the day – it started off with myself and my Co-Founder, Gord, who is a Parkinson’s patient. I had just moved to St. John’s to do some research on Parkinson’s disease when I met him and then almost instantly COVID-19 hit, so we spent a lot of coffee dates thinking about how we could improve the healthcare system so that patients wouldn’t have the terrible experience that he did. One of the ways we thought we could improve it was by having a system that could monitor Parkinson’s disease from a remote location – more frequently and more objectively – so that patients feel more in touch with their disease and so clinicians have a better understanding of care for their patient.

SC: Speak to your experience with finances and funding in your business – was it something that scared you? What were your biggest worries or anxieties associated with money?

BB: Oh, definitely. It still keeps me up at night but I think it’s really just about understanding that there are support systems that can help you and it’s not as scary as you may think it is. I’m a very anxious person so I’ve always been concerned about, you know, money and not wanting to go into debt at such a young age. When this opportunity came up to start my own business, the first thing I instantly thought of was “oh my gosh, I can’t be in debt at the age of 25… that’s not good”. I know that so many young people were not taught financial literacy in school – it’s a topic that unless you do a finance degree, you don’t learn a whole lot about. So as somebody coming from a science background, I definitely did a lot of extra work myself on the side to learn about finances and investing and trying to start off on a good track from a younger age. Because of that knowledge, it wasn’t as terrifying thinking about larger numbers and how I was going to pay people.

But, in saying that, every non-dilutive funding program comes with an in-cash contribution from the company so it really came down to finding smart ways to not go into debt while also trying to fund an idea..because at the time it really was just an idea. It definitely took a lot of maneuvering and a lot of pitch competitions but I think having people behind you believing in the same idea and having the same passion is really helpful in securing those finances.

It’s been a learning curve and I’m still learning each and every day. One of the biggest fears was “what if I can’t make payroll” – I know what it’s like to be on the other end of the paycheck and I really don’t want my employees to ever have to feel that way. This is also something I have devoted several years of my life to, so to see it go under would be devastating. Finding new programs, new opportunities, new people and new advisors that can help along the way has definitely been a key factor for us in the early days.  

SC: PragmaClin is a B2B SAAS company focused on improving patient outcomes and reducing clinician burnout. How did you land on the SAAS model you did – monthly subscriptions – and why did you think this was the best approach to your specific offering? Walk us through your ideation process.

BB: There was definitely a lot of thought that went into it and a lot of pivots. Still to this day we’re changing what that model looks like and what the cost of it looks like. But, ultimately, I think the way the world is now SAAS companies are everywhere. It’s the best way to know that you’re going to have a returning customer with a returning revenue and to be able to really look at that budget line and know this is what’s going to come in every single month or every single year. From a financial perspective, it made the most sense for us to know that we’re going to have recurring revenue and, specifically for us, there’s only so many neurologists and patients in the world so once you capture them once how do you capture them again? The best way to do that is to have a SAAS model.

Being a software company, I feel it makes the most sense – that way we can constantly provide upgrades or opportunities for our customers, for patients to have different portals, to have clinicians be able to treat different diseases, and it allows us to constantly upgrade our system with this recurring revenue. Moving forward, the future is tech. I think we all recognize in ourselves how many subscriptions we pay for every month or every year so I feel like people, especially in healthcare, are becoming more familiar with the idea of a SAAS model. Back in the day, you would not picture a healthcare organization purchasing a SAAS subscription for their services but I think now it’s nothing to them putting it as a budget line once a year – it might make the most sense for them anyways.

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SC: You and PragmaClin are now past the point of product development and are moving on to trials and validation studies in a very heavily regulated industry. What challenges did you anticipate going into this phase from a financial perspective and how are you dealing with said challenges?

BB: How are we going to pay for it? I think that’s the number one question that comes up every single time we talk about our trials – given the size of them, their complexity and the expertise that is needed – is “how are we going to fund these”? I know one trial that we’re doing is overseas and it has some of the top neurologists and researchers involved – instantly the first thing that myself and my Co-Founder thought is how are we possibly going to pay for this?

We’re lucky that we live in Canada where there are non-dilutive opportunities, ways that we can pay for export development and research, as well as partnering with other companies. There is also a lot of programming that we search out across seas. For example, we pay a $12 registration fee to become a UK company but can then qualify for UK funding. So that’s one of the hurdles that we’ve tried to jump over in regards to these trials and the funding that comes with them. Aside from that, the cost of the trials has made us have to look at external investment as well. Due to these funding programs requiring in-kind contribution, and the cost of these trials being so heavy, we’re now at the point of having to seek investors and investment externally, so that’s really a whole new ballgame for us and providing equity into our company in such an early stage. It really comes down to finding the right partners – somebody who understands the Medtech landscape. Like you said, it is complex and heavily regulated so that means longer timelines and returns on investment can be a bit slower. So really just finding those strategic partners who, like I said, have the same passion and the same vision and believe in what we’re doing.

In the beginning days, we believed in what we were doing but maybe didn’t know if we’d make it this far this fast. It’s all just been a bit of a whirlwind trying to figure it all out as we go, but I think we’ve done a pretty good job of navigating the financial landscape of it. There’s always opportunities, there’s always funding calls, and there’s always investors looking to put money into a good project. I think that’s really how we’ve managed to handle these challenges in the forefront. However, we haven’t had to fully pay for the trials yet, either. So as the time comes and those final bills go out, I’m sure that we’ll seek out further opportunities.

Ready to learn about boosting capacity to boost profits? See the following from Scotiabank: Featured Resource: How to Boost Your Capacity.  Speed up production or improve your systems and processes to build capacity. Featured Resource: How to Form Strategic Alliances.  Teaming up with another company to pursue common goals is a smart way to grow your company. After all, two heads are better than one. Featured Resource: Research & Development to Build Your Business.  Spending time and money on research and development is not reserved solely for big businesses. Featured Resource: Pros and Cons of Partnerships.  Partnerships have helped establish successful businesses, but they can just as easily go the other way.

SC: Given your unique situation as a mid-trial product backed by non-dilutive funding, how do you go about monitoring and analyzing your performance, whether that be financials, your team, or anything in between?

BB: Good question. It’s fascinating now to be able to look back and see the progress that we’ve made. In team meetings, we will pull up old software and take a look like “wow, it looks nothing like what it does now,” which is a great thing and all based on feedback from patients.

With non-dilutive funding comes reporting, so each reporting period we have to write down what was accomplished, what goals were hit and what milestones we achieved.  It’s a good way to keep track of how we’re making progress with the funding and what that looks like. Even from a cash flow perspective every single month – non-dilutive funding is great and super helpful, but you have to have the cash flow to be able to manage the time where money is gone out for payroll and doesn’t come back in until the claim is filed. That can be a bit tricky, especially when your payroll gets quite high and that’s all you’re leveraging on. I think that’s been a tricky navigation for us, it’s definitely been a learning curve.

We’ve figured out where we need to put our funds, what’s a priority for us, and what that looks like moving forward. Really over the last couple of months, we have honed in on all being here as a team collaborating in the co-working space, being able to track how each individual person is doing and how we can support them, and so on. It just comes with the non-dilutive funds – money is always tight, so how can we make sure that we’re making the best use of our funds that we do have and putting them into the people that we believe in? We are very specific on who we have on our team – it’s all a very close-knit family and making sure we all have the same vision and passion because… startup dollars are startup dollars.    

Curious about monitoring performance & optimizing for profit? Scotiabank can help:  Featured Resource: What’s Your Break-Even Point?  Your break-even point is the number of units you have to sell to offset expenses and begin making a profit. Featured Resource: How and Where to Save Money.   If it’s been more than a year since you’ve reviewed your business plan, it’s likely time for an update. Featured Resource: How to Monitor Your Business Performance.  You don’t need to be a math wizard to understand which numbers can tell you how well or how poorly your business is doing.

SC: Let’s get into the nitty-gritty – when it comes to your financial statements, what do you look for? What are your success and/or iteration indicators?

BB: It’s really just that cash flow perspective of money in versus money out. Are we spending more every month than we’re bringing in? We’ve been super heavy on pitch competitions lately so the money coming in has been great for the last six months, but now there’s not many competitions coming up – now the focus is how we can balance all the cash that’s about to come out. We’ve spent a lot of time focused on applying for funding programs and for more non-dilutive funding, and actually speaking to investors about what that looks like. When it comes down to it, when you see the budget lines and they aren’t matching up with what you anticipated, or you’re spending more or less on development than we should be, those hard conversations and transparency surrounding where the money needs to be focused on are so important.

Even having those open, transparent conversations with your team is so important. One thing that we have found is that working in a co-working space costs money, but we also want to be here because we feel like we collaborate better in person. So it’s about explaining to the team that we know the option to work from home is there. Still, we really would appreciate them being in the office because we are spending money on this every single month – it’s a budget line that goes to waste if we aren’t utilizing it. So really spending the time and energy on those open conversations with the team and letting them know the dollars we are spending, why it’s important, how much money we are putting into development, and the outcomes we need to see as a result. Transparency is key – it’s about people understanding that the finance side shouldn’t just be an executive conversation, it should be a team conversation so everybody understands that wasted dollars are wasted dollars.    

SC: What specific tools do you utilize for monitoring performance and forecasting whether action is needed?

BB: Great question. For the executive side of things and really our in-office work (marketing, etc.) we have to-do lists – we accomplish them and if they’re not getting accomplished, it’s a clear sign that either we have too much on the list for how many people we have and we need to hire, or maybe we’re just not working hard enough. Normally it’s the former in that there’s not enough capacity on the team. We then have to be really specific about what we’re taking on and what we can feasibly take on with what we have. It all comes down to money, so at the end of the day, can we afford to hire somebody else?

In these early stages, a lot of the wages and the funds go to the development side of things which makes sense for us and our business. So maybe we don’t bring in a salesperson or a business development person, we are just focusing on bringing in developers. Some people are like, “don’t hire too heavily on the developer side” but really, without them we have nothing. So that’s a decision we have made internally – that’s what we need, how we are going to get ahead, and what’s going to set us apart. Specifically, on the development side – which I am not in-depth into myself – they actually have specific task performance lists. They push and pull based on who’s completed tasks. We set timelines and deadlines, and, like I said, we monitor those task lists and timelines and weigh if we need to adjust things. Monitoring performance is key. It helps us to forecast: A. Is this employee right for us or B. Do we just need more power on the team and have to, somehow, work in a budget line to be able to hire somebody else, use a work term student, or whatever else it takes? 

SC: There is nothing like your product currently on the Canadian market, meaning competition is relatively low, and potential customer volume is quite high given the demand for a solution in this space. Walk us through how you developed your sales strategy. What does it look like, what’s included, and why did you build it this way?

BB: Not all sales plans look or function the same – not at all, especially in heavily regulated areas. If you’re trying to break down those barriers, it can be nearly impossible in a space like healthcare sometimes. So obviously, knowing people and having the right conversations is always helpful. For us, it’s really about being strategic about who we partner with and who can provide us with value long-term. We do trials in order to get a sale at the end – we don’t just do trials for data points.

For us here locally, we have an organization, Eastern Health, and they also partner with CAN Health which is an across-Canada network. The way the programming with them works is that you apply to a “call” and if you get the “call” they will run the trial with you and try to reach certain key performance indicators at the end. If you reach those key performance indicators then there is typically a contract and a request for proposals signed. From there, you can actually be adopted across the CAN Health Network – your product can spread automatically as a contract. Other organizations that are in CAN Health can just sign on with the same contract as an early adopter. So that really takes down a lot of the barriers to entry to a large number of organizations.

I think having programming like that is crucial for, first of all, any healthcare company that wants to come into the market – it’s a heavily regulated one with a lot of barriers that can be quite difficult with a lot of things to consider, especially as a startup who might not have the expertise and hasn’t been in the field for very long. This programming allows companies to actually stay here in Canada as opposed to seeking out other markets. I think that’s one large problem we have – because it’s so difficult to enter, a lot of people head to the US or Europe or other markets where they think it will be easier and less regulated.

SC: PragmaClin is currently planning for PRIMS to undergo trials in the US and UK. How did you go about selecting the global markets you did? How have your go-to-market strategies set you up to optimize profit?

BB: The US and the UK are two very different markets – similar to Canada and the US. The UK and Canada have quite similar markets, they work on mostly public but some private healthcare. The reason we targeted the UK was, well, there are actually some Newfoundland-specific connections to the UK. We availed of some programming that existed in that space that allowed us to go over and create connections and find our trial partners. We have had the most success, actually, with said trial partners so far. It is a smaller market – about 100,000 patients, so very similar to Canada. We figured that if we were able to tackle Canada or tackle the UK, it would be a similar strategy.

The US, on the other hand, is a totally different beast – totally different approval processes and everything that comes with entering that market. The reason we picked the US market is like most companies: it’s the largest market, the most profit-driven market, and a lot of people are willing to pay for healthcare there as well. It’s really just a whole different opportunity for us with a nine-fold amount of potential patients, so it’s really hard to justify not looking at that market. We are completing trials in all three markets, and that’s really to truly scope out said markets. Hopefully, from here, we’ll be able to get the first adopters based off of those trials.  

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SC: How do you ensure your sales and marketing plans are aligned, up to date, and working to help achieve your organizational goals?

BB: We actually accessed a free intern that we got through Bounce Health here in Newfoundland last spring. This student worked for us for the entire summer up until the end of August, and it was intended to be for purely marketing purposes. At the time, we were like, “well, we don’t need a full-time marketing student because we don’t even know what we are marketing at this point,” so he really became our ‘marketing/business development/does everything around the office that we don’t have the capacity for’ employee. At the end of the summer, when the contract was coming to an end, we knew we needed to find the funding because we couldn’t afford to let him go. He’s, truthfully, a pivotal part of the team that has gotten us this far. He’s been with us since day one of taking off, and he’s how we are able to line up the marketing and overall business plans, making sure that everything is up-to-date and optimized for us. He works incredibly hard day in and day out and shares the same passion as the rest of us.

In the beginning, I didn’t think we’d spend marketing dollars, but it’s been some of the best dollars we’ve ever spent. I think just because you’re not in sales yet doesn’t mean that you shouldn’t spend money on that marketing purpose – you also need to market yourself to be able to get trials and to find partners and investors. You need everything set up in a way that allows people to want to approach you first and to ensure your venture looks professional. Hiring marketing from the beginning is a really great idea for a startup – there’s typically funding that can support that role, and it really can make all the difference in the world.

SC: If you could talk to your younger self about the anxieties surrounding money and financial management you discussed above, what would you tell her?

BB: I think if I could tell my younger self anything surrounding this topic, it would be to educate yourself. I didn’t come from a super well-off family, so I learned very early on how to budget and how to pick and choose what I wanted and what was necessary – I think that was very helpful in my younger days and into my early adulthood. Then the day you can get a credit card is a very scary day for a lot of people – they’re really excited and typically spend a lot more money than they actually have but for me, I used that as an opportunity to be able to spend, pay off and build credit so that I could buy a car or simply build my credit score so I could access lines of credit in order to pay for my education. It made a big difference. To this day, I am always “money in, money out” and very conscious of money. I used to create budget sheets, plan out my week and what that would look like from a financial perspective, and so on. To a certain point, I don’t feel the need to be so nitty gritty on what I spend and what I don’t anymore, but I definitely make a conscious effort to this day. If I am shopping, I catch myself thinking, “okay, this is two hours of work for one pair of pants”. I think having those thoughts in the back of my mind has helped me not spend on things I don’t need and also to be able to set aside money. 

During COVID-19, when the stock market became super popular through things like TikTok – everyone was talking about it – I thought, “I should educate myself on this, I’m just sitting at home anyways”. You can learn from absolutely anywhere, you don’t need a finance degree. So I learned about the stock market, I learned about crypto (whether that was a good thing or not), and I learned about other passive ways to make money. So to my younger self, I think I would say never stop searching. People say, “the money flows” but you do need to find it, and you do have to work hard for it.

SC: Why is financial literacy crucial for founders to get a good grasp on early? How does it give you a competitive advantage? 

BB: Maybe other founders wouldn’t agree, but I think one mistake is taking out loans and lines of credit early days before you have the validation in the market that it’s going to succeed. Try not to put yourself in a hole before you have a hill to climb. Having financial literacy from the beginning and understanding that debt is debt and, regardless, it has to be paid back is crucial. So whether you learned about it in school or not, it’s something that you need to understand as a founder.

It’s crucial for founders in their early days to have a good grasp that there is free money out there, but you have to find it, work hard for it, put yourself out there and find the connections. Debt isn’t always the best way to start off a company because then you will have that debt until the debt is gone. A lot of the time, investors will come on, and they don’t want to pay off the debt from the early days. Remember that starting out from zero is better than starting out from minus something. Just going into those larger investment conversations and other conversations with non-dilutive partners and being in the positives and not having any debt on the equity side – on the cap table – so there’s nothing really alarming for these investors is definitely a good competitive advantage. 

SC: What’s the most actionable piece of advice entrepreneurs can take from this conversation and implement in their businesses immediately?

BB: The most actionable piece of advice from this conversation would be that from the beginning, understand your landscape – understand the market size. When people ask for Total Addressable Market (TAM), they really want to know what the TAM is. It’s really important. Financial literacy, like I said, is something not taught in school as much as it should be. However, it doesn’t mean there aren’t ways to find out about it. There are podcasts, books, shows, and even TikTok nowadays. I think that scouting out those ways to be able to get ahead is so important because as much as everyone supports one another, it still really is every man for themselves. 

At the end of the day, you need to be able to seek out those opportunities because there are so many opportunities out there. They may seem hidden to some people, but if you search for them, they are widely available. In Canada, there is a benefits finder – you can go on and search every type of funding that applies to you as a company and can filter through options. There are so many non-dilutive opportunities here in Canada that I feel so many people don’t take advantage of or know about. If you have a vision, a mission and you understand the pathway to market, you can definitely succeed. But, understanding the finances and how you’re going to approach that aspect is crucial. So read, listen, understand and study financial literacy not even just as a business but as an individual. I think it will help you go all the way.   

Finding and creating opportunities for your venture is vital. Explore Scotiabank’s: Featured Resource: 5 Ways to Spot New Opportunities.  Adding something new to your existing product or service offering can significantly increase your business revenue. Featured Resource: Market Research Tips for Busy Business Owners.  Market research doesn’t need to be expensive or time consuming. There are plenty of ways to conduct good research without breaking the bank. Featured Resource: Using Customer Segmentation to Identify Your Target Customers.  If you’re starting up a new business, breaking your market into customer segments will give you a sense of the different groups of customers you can target.

SC: Thank you so much for your time today, Bronwyn!

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