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 wink, of course, the term control come up. These statements are only partially correct. Controlling is neither boring nor is it only concerned with numbers, Excel tables or diagrams that are difficult to understand.
With the help of controlling, start-ups receive valuable information:
Controlling can be divided into different categories or areas. The most common is the division into operational and strategic controlling. These complicated sounding terms are very simple with regards to content. As soon as you start dealing with your business idea, you are already in the middle of strategic controlling.
Without consciously using the term, you are dealing with strategic topics, such as
Effective controlling is as exciting as a thriller and may inspire, because it provides many answers to the following strategic questions.
The answers to these strategic questions are ideally defined in goals that are to be met in operational controlling. Accordingly, strategic controlling shows whether you are doing the right things and operational controlling whether you are doing things right.
Operational controlling has a time horizon of one to three years and fixes the goals for the respective functional areas within the framework of an annual budget. Functional areas are the departments or organisational units in a company.
Start-ups don't talk about functional areas yet, because team members simply take on the tasks they do best or which simply need to get done. As soon as the founding team realizes that it can no longer effectively manage the company via face-to-face meetings or phone calls due to the company's growing size, 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. Typically, the start is made with engineering and customer service. In the further course, marketing and sales are established. Finances also become increasingly important and the desire arises to allocate costs more appropriately. The founders and investors want to know with which products money is earned and whether new employees can be hired. Budgets are allocated to the respective departments, of which they can freely dispose of.
These activities can no longer be coordinated with Excel alone. Intelligent ERP systems help track organisational issues such as time tracking, file storage and team activities. Accounting activities and payment activities can be automated. Furthermore, such ERP systems include special functions, such as project management and travel expense tracking.
However, start-up coaches and mentors recommend that every start-up begin collecting and documenting information about its processes, customers, competitors, market developments, and potential risks and opportunities at a very early stage.
In the process, the founding team generates valuable knowledge about regularities and interrelationships in their own company. They develop company-specific rules of thumb that confirm their competencies and enable communication at eye level with investors.
If the start-up fails to meet these challenges, chaos can quickly break out. Those who lose sight of the big picture make unnecessary mistakes. Liquidity bottlenecks can occur. In the worst case, employees have to be laid off or the entire young company is on the brink.
Controlling is an essential component of entrepreneurial success. By setting and monitoring goals, start-ups are able to react to deviations in any business situation. Controlling in start-ups should still give you a lot of freedom and flexibility for your young company and ideally grow with the company. It is a tool for start-ups that are serious and want to be successful in the long term.