How to successfully manage your start-up – with controlling!

When founders attend my Controlling & KPI workshop, I ask them in advance what they understand by the term controlling . As a rule, the terms KPIs, business plan, turnover, liquidity, cash flow and, with a twinkle in the eye, of course, the term control are used. These statements are only partially correct. Controlling is neither boring nor does it only deal with figures, Excel tables or difficult-to-understand diagrams.

Start-ups receive valuable information with the help of controlling :

• About your Your bank account does not show the true picture of your liquid assets. Some things such as tax payments, supplier liabilities and, depending on the legal form, your income are paid on a deferred basis. This means that the money in your bank account is not necessarily at your full disposal.
• About your sales reporting: Which products do you earn your first money with? How high is the turnover and contribution margin per product group? Which services are particularly popular with your customers and which are not so popular?
• Via your cost and income reporting: A simple cost type and cost center structure can be set up here with the help of your tax advisor’s financial statements. You can use this information to build up your budget plans, which you will ultimately also need for your investors.
• Your customer reporting: How much money do you earn with which customers? Is there a cluster risk, i.e. a great dependence on a few customers? How long do your customer relationships last and are your customers satisfied with your service?
• Investor reporting: Your investors want to know whether you are really “serious” before they give you their money. And the best way to prove this is with figures. Use numbers to tell the story that your investors really want to hear.

Controlling can be divided into different categories or areas. The most common division is into operational and strategic controlling. These complicated-sounding terms are actually very simple. As soon as you start thinking about your business idea, you are already in the middle of strategic controlling.

Without consciously using the term, you deal with strategic topics such as:

• product development
• the sales markets in which you would like to offer your products
• customer and competitor analysis
• the development of a scalable growth strategy,
• the establishment of company processes, etc.

Effective controlling is as exciting as a thriller and can inspire because it provides many answers to the following strategic questions.

• What does your company stand for, what are your particular strengths?
• What problems does your start-up solve and what can you do better than the competition?
• How big is your market and what market share would you like to achieve by when?
• Why is your team in particular able to successfully position itself on the market and master the challenge?
• Who are your customers and what are they interested in? Are there synergies with other products?
• What marketing measures will you use for customer acquisition?
• Which KPIs would you like to use to manage your company and which data sources are necessary for this?
• How high are the costs for customer acquisition and how high should the price for your service or product be in 5 years?
• What processes have you established in your company? Which ones are running optimally, which ones would you like to improve?
• Which general risks, such as the company’s location, employee recruitment or procurement risks, will come to the fore in the future?
• Will you protect your business idea with patents, or how will you deal with the infringement of your “intellectual property”?
• What financial forecasts have you made for the next three years?
• What financing rounds will be necessary in the future and are participation options planned for employees?

Ideally, the answers to these strategic questions are defined in targets that are to be met in operational controlling. Accordingly, strategic controlling shows whether you are doing the right things and operational controlling shows whether you are doing things right.

Operational controlling has a time horizon of one to three years and sets targets for the respective functional areas as part of an annual budget. Functional areas are the departments or organisational units in a company.

Start-ups do not yet speak of functional areas because the team members simply take on the tasks that they are best at and that need to be completed. As soon as the founding team realises that it can no longer manage the company effectively via face-to-face meetings or phone calls due to the growing size of the company, it becomes clear that clear management mechanisms are needed.

As a rule, new employees are hired, new sales channels are opened and more money is invested in marketing . Real departments are created. As a rule, we start with Engineering and Customer Service. Marketing and sales are established in the further course. Finances are also becoming increasingly important and there is a desire to allocate costs more appropriately. The founders and investors want to know which products will earn money and whether new employees can be hired. The respective departments are allocated budgets that they can dispose of freely.

These activities can no longer be coordinated with Excel alone. Intelligent ERP systems help to track organisational issues such as time recording, file storage and team activities. Accounting and payment activities can be automated. Such ERP systems also include special functions such as project management and travel expense recording.

However, start-up coaches and mentors recommend that every start-up starts collecting and documenting information about its own processes, customers, competitors, market developments and possible risks and opportunities at a very early stage.

In the process, the founding team generates valuable knowledge about the laws and interrelationships within their own company. They develop company-specific formulas that confirm their expertise and enable them to communicate with investors on an equal footing.

If the start-up fails to meet these challenges, chaos can quickly break out. If you lose the overview, you make unnecessary mistakes. This can lead to may occur. In the worst case, employees have to be laid off or the entire young company is on the brink of collapse.