How do founders profit from restructuring experts?

‘What do start-up and restructuring have in common?’, you may ask yourself now. And what do start-ups have in common with business consulting? „Quite a bit”, says our Managing Consultant Jendrik Voss, „because the know-how of experienced restructurers can put a business idea on such a solid foundation from the moment it is founded that it pays off and expands in the long term. ” Learn more about the four pillars that can help a business model achieve sustainable success.Trial and error: In all the issues that are implemented in the start-up phase of a company, mistakes are made. That is natural. But what is it that actually causes start-ups to fail? Which four pillars can sustainably strengthen the success of a business model? Managing Consultant Jendrik Voss reports on the individual components that support start-ups in this regard.

What typically causes start-ups to fail?

Only one in ten start-ups survives the start-up phase and establishes itself successfully on the market within three years. What do the remaining 90 percent fail at? "No Market Need" is the first of 20 reasons listed in the CB Insights 2019 study - closely followed by "Ran out of Cash" and "Not the right team", just to name the first three reasons. As a performance management consultancy, we will focus on the second reason in this article:

"Ran out of Cash": The importance of financial planning

Despite all the euphoria about the good idea that is now to be put into practice: Experience shows that business basics should be implemented in the control tools of the young company right from the start. In this way, the foundation for a long term successful business can be laid. The transparency thus created is one of the decisive factors for the success or failure of a young company.

Nevertheless: Financial planning and the resulting controlling are often neglected in the start-up phase. And this despite the fact that - according to the survey results of the "German Startup Monitor - Innovation not Crisis" - two thirds of the 2,000 start-ups surveyed stated that the development of a profitable business was "important to very important" to them.

Financial topics do not have to be unwieldy or keep you from your daily business. Our experience shows this very clearly - also how sensible it is for founders to ask themselves the following three key questions about finance from the outset:

1. When and how do I reach the break-even point with my business model?                              2. How do I ensure that resources are used in a targeted manner and that the businessplan is      stringently implemented?                                                                                                                3. How can I keep an overview during the first, sometimes turbulent start-up months and            identify the cost drivers or cash cows?

From businessplan to operational controlling

From the development of a business plan to functioning controlling: Which levers reveal the full picture of the company and its finances? Which components can make up a sustainable success - up to the expansion of the business model? In the following, we will introduce you to four pillars that have proven their worth in one of our cases, a successful Hamburg start-up:

1. Validation of the businessplan development

At the beginning, the primary goal is to create a complete businessplan and to take all ideas into account - especially in an integrated financial planning. Price models, capacity utilization simulations, marketing plans, personnel calculations, right up to the final financial requirements: all the details of the business venture should be transformed into a valid holistic plan. This lays the foundation for an objective assessment of the business model - including the determination of the break-even point, which can also be presented to third parties.

2. Support of the capital procurement process

The detailed businessplan is crucial in attracting investors. Only the interplay of goals and visions, supported by a solid calculation, makes it possible to obtain funding for the project. The question that follows is: Can it be ensured that the required funds are available in the right amount at the right time? Transparency and communication play a very important role here and create trust: The results of the monitoring of the development phase must always be communicated clearly and regularly to investors, which leads us to the next pillar:

3. Implementation of investor reporting

Investors and founders need to have the same level of information at all times and be able to follow the progress of the business plan. We advise to design a tight and meaningful information package right at the beginning of the project. This will enable investors to ensure, among other things, that resources are used in a targeted manner. In addition, self-pressured decisions can be made quickly and reliably on the basis of the investor report.

The current situation shows us how important this is: The Corona crisis in particular makes us aware that entrepreneurs and investors have to react quickly and at the same time thoughtfully to permanently changing circumstances. The findings of the "German Startup Monitor 2020" study clearly show that even start-ups are reacting to the current situation by adjusting their business models and cutting costs. These are precisely the special areas of expertise in the actual restructuring process that also apply here.

4. Setting up an operative controlling

Even outside of investor reporting, the necessity for good commercial reporting quickly arises: As the number of employees and customers increases, so do the challenges of managing them correctly and deploying them optimally. A tool for controlling sales based on the cash register system provides a remedy. However, it is important to relate these figures to the variable and fixed costs incurred in order to differentiate between cost causers and cash cows. A precisely developed controlling tool should therefore focus on a multi-level contribution margin accounting. In order to draw well-founded comparisons, the arc to the business plan should also be drawn here. A tool that is accurate to the day displays all relevant key figures in a clear dashboard and thus enables rapid countermeasures to be taken if negative trends become apparent.

Know-how and structure from the moment of foundation

A complete picture of the business and its financial figures leads in the best case to sustainable success and expansion of the business model. In summary, our final recommendations to all up-and-coming entrepreneurs.

A well-functioning controlling system is essential to meet the current challenges around capital procurement, cash flow, liquidity and liquidity planning. Start-ups benefit immensely from the tools and know-how that experienced restructuring experts already apply in the context of the crisis.

Neither lack of time nor scarce resources should prevent you from relying on the right support right from the start. Look for the right support at the time of the start-up and don't let your success fail because a good business idea is not optimally managed from a business management perspective.

This article only highlights the founding process and individual components that lead to the success of a young company. Which topics are currently occupying you in the field of entrepreneurship? Let us think them through together. We look forward to hearing from you!