A cap table is a strategic marketing tool. Its main purpose is to provide tangible information about the financial health of the business or organization. A cap table enables organizations to obtain market insight without the need to rely on the financial statements. Most entrepreneurs often lack the basic knowledge of accounting systems and consequently are unable to create a cap table correctly. The purpose of this article is to share with you some of the basic skills that you need to master when creating a cap table.

A cap table management system includes all the financial information needed by the stakeholders in order to make informed decisions. A cap table also provides key information laid out in an easily understandable fashion such as current ownership percentages, debt and equity owned by the company, liquidity ratios, investment projections and the number of partners among others. Since most startups do not possess traditional private debt capital, the list typically includes data regarding the ownership percentages and total invested amounts of the stakeholders. The purpose of managing cap tables is to provide an opportunity for startups to receive advice from financial experts on the most suitable types of venture.

In order to create a good cap table management system, it is important to learn the basics of financial reporting. This skill can be learnt online. Learning the basics of financial reporting includes the process of valuing the shares. While a startup can use an equity plan to value its shares, it is often advisable to use simplified tools to make the valuation process simpler. Equity plans are designed to make financial reporting easier and should only be used as a guide in determining the price to sell your shares.

One way to simplify the process is to use capitalization table software. Capitalization tables are designed to provide startup companies with a tool to determine the value of the shares of their potential future investors. Capitalization tables are designed to help startups and new businesses determine the value of their shares. However, for law firms and other corporate houses, they may not be necessary at all. An alternative to cap table management is to hire an outside independent broker. While the cost of using outside independent brokers may be more than hiring a software program, it is important to use one since each independent broker has their own methodology and they can offer unique insights into the startup’s capitalization.

It is also possible to use simple cap tables on your own. However, because of the complex nature of startup financing and the different laws governing capital structure in various states, it may be preferable to consult an independent broker. Not all states have straightforward cap table management systems. For instance, some startups require specialized permits to fund their business operations in order to release equity from restricted partners, which requires the sale of third party assets.

Independent brokers who offer cap table management services can also offer support via a web-based cap table management application. This software is hosted by the independent broker and provides centralized support for managing startups. The service offers the same features as the web-based versions, including support for multi-sales and scenario modeling, but in this case it does not require the startup to install anything on their server. This allows for a simpler model that meets most startup needs.

Many potential uses for a cap table management application include determining the value of stock options for a startup. In some cases, these stock options can be purchased for far less than their true market value. To determine this value, the software can be programmed to make use of complex metrics and algorithms. In other cases, it can simply be done by following several steps, and then comparing the results to the company’s estimated average cost of capital over the course of its life. Using this information can allow a startup to decide whether to execute a stock option purchase.

A final use for a cap table management system is to help startups properly manage their financial situation. As we have seen, many companies that initially do not have significant funding can experience significant dilution. Dilation means that the ownership stake of one partner becomes significantly diluted between the other partners. This increases the risk associated with each partner’s investment, and can have a negative impact on the valuation of the startup. The startup can use data to detect areas of its business that could be adversely affected if dilution occurs, and can limit its exposure to dilution. These applications can help startups avoid the losses that come from dilution.