“Maybe it’s time for you to get a Controller.”
Entrepreneurs who experience significant growth in their business may eventually hear this advice. Financial management in a growing business can become strained, and eventually it can become time to upgrade your team. What exactly does a controller do in a business? And how much will one cost me?
The titles bookkeeper, controller and CFO can get tossed around rather loosely in small and growing ventures. But, these titles have specific meaning. And which type your business really needs can vary from situation to situation.
A bookkeeper performs basic financial record keeping and can create simple financial reports. A bookkeeper does the following basic tasks:
– Keeps accurate records of financial transactions and can create basic financial statements (Income Statement and Balance Sheet) using accounting software.
– Performs basic A/P management — makes sure bills get paid and records these entries into the accounting system.
– Performs basic A/R management — if the business has to send invoices to customers to get paid, sends out invoices usually once a month.
Moving up to a controller adds more power to your financial management. In fact, a good controller can often pay for herself in a growing company that needs more advanced systems by helping to keep costs under control and by helping to better manage cash flow. A controller does the following tasks:
– A controller will either perform all of the functions of a bookkeeper, or supervise the staff that does.
– They can create customized daily, weekly and monthly financial reports to meet the specific needs of your business.
– They have the knowledge to choose and maintain financial software.
– They can take over the basic cash flow management of the business. Major cash flow decisions will still be up to the entrepreneur, however.
Some businesses eventually need a Chief Financial Officer. But many very large organizations don’t have one, so don’t assume that your business will. We never had one in our business even though we got quite large and complex. A CFO does the following tasks:
– Performs all functions of a Controller.
– Is able to structure and negotiate complex financing, including debt and equity.
– Can create complex financial projections to aid in strategic decision making, and is an active player in the strategic management of the business.
– Manages banker and other financial relationships for the business.
A senior bookkeeper can cost between $30 – $50,000, depending on the local market and their work experience. A controller can cost at least twice that. And an experienced CFO can cost twice as much as a controller. Again, salaries can vary widely between various cities, and experience levels will also be a major contributor. So talk to other entrepreneurs in your area who have larger businesses than yours to get an idea of the local market salaries for these positions.
Use your CPA firm and your network of fellow entrepreneurs to find a pool of applicants. Placing a general ad should be your last resort, as it will be difficult for you to differentiate between the actual skills and competencies of the candidates.

During the growth of a business, you as the entrepreneur must face some basic questions about how to successfully build a team while at the same time redefining your role in the business. It is a transition from a business led by an entrepreneur to a business led by a professional team.
The first step in this process is to understand the difference between operational and strategic leadership. Many entrepreneurs start their businesses because they like the hands-on part of their business. Engineers like to engineer. Furniture makers like to build stuff. However, at some point in the growth of the business the entrepreneur begins to move away from the hands-on part of what they company does. This can be a painful and frustrating period. Keep this in mind when you decide how far you want to grow the business. It is alright to keep it at a size that allows you to stay involved in the hands-on. But if you intend to grow, be ready to move away from the operational part of the business and become a strategic leader. Lead and manage using your vision for the business, and create a team that can fulfill that vision at the operational level.
Just what this strategic role looks like will vary from company to company, and from entrepreneur to entrepreneur. For many entrepreneurs, this may be their first time as a CEO of a company of any size. That title means very little in the early days, but as the company grows it takes on more meaning. Defining your role and your style as the CEO of your company takes planning and specific effort on your part. It may even feel a bit awkward at some point, but you have to establish what your role will be as the CEO.
Carefully review your strengths and weaknesses vis-a-vis the needs of the growing business. Use your management team to bridge the gaps that are created by the role you define for yourself. Assess the potential of current employees to fill those gaps. But be ready to bring in outsiders, as it is rare that all the talent you will need is already on your staff. Create a plan to develop current staff and recruit new talent with clear priorities for their roles and objectives. Set specific milestones, most likely tied to sales growth, for when you will need to be ready to hire new members for the team.
With each person we hire, our culture can change just a little bit. And over time, this can lead to a business that does not look like we had intended or envisioned. One area that you must keep control of as a strategic leader is your culture. Your values shaped the culture of your business as it began, but to maintain that culture you must actively manage it during growth. You do this through who you hire, what you reward, what you celebrate, the structure you create for the business, and your communications to employees. Be deliberate about the culture you intend to build in the business and think about how each action you take over time can effect this culture.
Be ready to delegate key roles to your team. Letting go is tough for most of us. We have been with our business all the way through its growth — through the good and the bad times. But at some point, if we want our business to grow successfully, we have to begin to delegate. At first it will seem that no one can do what you do as well as you can. But just like raising a teenager, at some point you have to begin to let go so they can learn and grow up. Your business will go through this same difficult transition. If you don’t begin to let go your business may never successfully move into its next stage of development.
Finally, as you grow your business and your team remember that ultimately it is still your business. I remember how at some point in the growth of our business it seemed that I was chasing everyone else’s goals. Our banker, our CPA, our attorney, fellow entrepreneurs, and our management team all seemed to have their own vision for what we could become and ideas for where we could take the business. While it is good to listen to such advice, the most fundamental aspect of becoming a strategic leader is to be ready to establish a clear and compelling vision and set a course to take the business toward that ultimate goal.
(Thanks to Eric Tam from McMaster University in Canada for suggesting this topic).

Two young entrepreneurs came into our classes this week and talked about growth challenges they are currently facing in their businesses. Both focused quite a bit on the human resource challenges that come with growth.
Matthew Wilson and his father own Gateway Construction in Brentwood, TN. Gateway is a commercial real estate development company. They have seen significant growth in their business since they recovered from the huge hit that commercial real estate took after 9/11.
As they continue to grow, Matthew is finding the need to step back from the day-to-day aspects of construction management. That is, like many entrepreneurs he can no longer spend time “working in his business”, but needs to shift to”working on his business.” At the same time, his father is beginning to step away from the business — not retire, but clearly backing off from his role in the day-to-day operations of the business. So Matthew has to take on more of a strategic leadership role in Gateway, while hiring people who can handle managing the operational level.
“People say real estate is location, location, location. At this point in our business growth, I would say that the key has become people, people, people,” Matthew told our class.
They have tried to keep their overhead low — a lesson learned over the years from riding out the ups and downs in their industry. And while their current growth creates the need for more people, they are trying to develop strategies that will keep all of the people they are adding busy and productive even when real estate takes its next downturn.
They are firm believers that the key is not just finding the best people, but finding the right people for the right job.
Matthew also is thinking about the need to some day expand his team to include more expertise in IT and financial management. They are not large enough now to support this this type of an addition to the team,, but may well get there some day soon.
Nicholas Holland, is Founder and CEO of a web design business in Nashville called CentreSource. Nicholas has also faced human resource challenges in his growth.
CentreSource has a business model that is driven primarily by billable hours. One challenge from the very beginning has been to have staff who have the skills to meet the latest technology need in the market. Finding the right people for his business can sometimes be a daunting task.
Nicholas said that managing key staff for a business like his when it grows can be difficult if it results in a power/dependency relationship. He recommends that all entrepreneurs have the mindset that no employee is irreplaceable, especially if you plan properly.
A challenge they faced as they grew was the expense hit that each of his early hires created had on the income statement. Expenses never grew in a straight line, but in significant steps as each new programmer was added. This created a major cash flow challenge. He met this by being very conservative in cash management. He never hired until he had the money already coming in to pay for the new employee. Also, he always keeps 90 days of cash reserves to cushion any unexpected downturn. During growth keeping this reserve took careful planning. Both of these tactics restricted his growth to some degree, but they also helped him to grow at a pace that he could afford to pay for.

Eric from Canada e-mailed me the following question:

How exactly would you answer the question: “why should I work for your company when there is a bigger company offering me a great salary?”

I found that just listening to what the employee really wants and being flexible in how you structure the offer and the job can be very effective.
There was a manager I wanted to hire to run a new program we were starting, as he was one of the best in our industry. He worked for a large, national company. I knew I could not match his salary, but I did not give up.
I got to know him and found out what he was really looking for in his career and in a job. He wanted to have more control over his department. That was easy as we were small and our structure was quite decentralized. He could run the new program like it was his own business.
He wanted to have some real ownership in the business he worked in. We could do that, too, as we set up separate corporations for each new program we started and we had already planned to offer a small ownership stake for the right manager. Equity or equity-like incentives can be a way to defer compensation until you can afford it, and create an incentive that gets everyone pursuing the same goals.
There was one more thing he wanted, however, and it was clear it was a deal breaker for him. His current employer had very strict rules on vacations and holidays. He was a Viet Nam veteran and had wanted to go to Washington, DC each Veterans Day to remember his fallen comrades. His current employer’s rules did not make it possible to guarantee that, and he had missed the last two Veterans Day observances. So, in my offer I promised him that he would be guaranteed Veterans Day and one work day on either side of it off each and every year (they were counted as vacation days). That was all it took to convince him that we were the best place for him to work. He came to work for us taking a significant cut in base salary from what he had been making before.
I also find that being able to work in an entrepreneurial company with a team that is excited and committed to what they are doing attracts many managers to smaller companies. So when you interview prospective management candidates make sure to use your team as not just part of the interview process, but to sell the prospective employee on the benefits of working in your company.
Finding management talent in the first place can be a daunting challenge. For example, where should you look to find a Controller, a Marketing Director, or a Human Resource Manager for your company? I recommend using your network. Talk to your CPAs and your attorneys. Talk to your advisory board. Talk to other entrepreneurs that you know. Talk to people you trust in your industry. That is usually the best way for entrepreneurs to get a good pool of candidates for their growing businesses.
To attract them to your business you need to listen to what they want beyond the salary, and find creative ways to put it all together. Once you know who you want, get into the selling mode and use all of the important attributes you know are important to them in your pitch.

StartupNation recommends ten steps to help grow beyond the start-up mode:
1. Measure and Analyze Current Status
2. Get Efficient through Technology
3. Enhance Your Customer Experience
4. Cozy Up with Vendors
5. Maximize Your Niche, Expand to a New One
6. Develop New Channels
7. Acquire Growth Capital
8. Create a Culture
9. Ramp Up Awareness and Demand
10. Improve Sales Techniques
For each step they offer short articles and other resources to help apply these steps to a business.
Remember, however, that starting the growth process is only the first part of the process of moving your business ahead. Growth will create a new set of challenges:
1. Beware of the Growth Myth. Focus on growing profits, not sales! Too many entrepreneurs assume that profits always follow sales. This is not always the case. And even when profits do begin to follow sales, cash flow can lag even farther behind.
2. Vision Drift. Don’t lose your way. Stay focused on your core business. It may need to adapt and change, but these must be deliberate and planned choices.
3. Cultural drift. Managing the culture of your business is your job! If you don’t manage it, your culture will take on a life of its own, which is almost never a good thing.
4. Resource crises. Securing the fuel to support growth can be a constant strain…cash, staff, space, equipment, etc., etc.
5. Systems crises. The mundane and the complex all need development. From accounts payable to planning, all systems must be updated, enhanced, and made ready for growth.
6. Muddled structure. Make sure your structure makes sense for your strategy and your culture. We make small decisions on how to organize our employees that may make sense as we make them, but they may create an overall structure that can choke future growth and profits.
7. Disjointed strategies. Your business and your strategy need to be in harmony. All aspects of your business must be consistent and geared toward meeting customer needs and expectations.
Once the business begins to grow, both the entrepreneur and his business need to begin a transformation. If not properly managed, the entrepreneur can grow himself right out of business.
(Here is a link to a summary of all of the posts I have made about the challenges of growth).

We are introducing a new seminar for entrepreneurs of growing companies. Over eight evenings, the course explores the challenges faced entrepreneurs who own growing ventures. I developed this class as a result of my own experiences in managing growth, and look forward to working with entrepreneurs who now face the same issues in their businesses.
There is a challenging point in any business’ development when its owners must further develop the skills necessary to successfully grow the business to the next level. This transition includes improving systems, bringing in new talent, and enhancing the infrastructure of the company. The owner also begins a transition into very different roles. This seminar gives you the tools to enhance your skills and make growth transitions more effective.
If you are an owner of a growing company in Middle Tennessee please visit this web site for more information.

A pilot will tell you that there are two critical times for a safe airline flight: the take-off and the landing. These are the two time where there is the most strain on the aircraft and when the most things can go wrong.
Entrepreneurial ventures have two similar critical points for success. The first is aligning your business to the market properly before you even open the doors. This is the process of opportunity assessment. The second critical point is when the business hits its growth phase. StartupJournal has a good case study of the challenges entrepreneurs face when they try to prepare a business for successful growth.
During growth, both the business and the entrepreneur have to go through transitions. For the business, the entrepreneur has to build systems and processes that can handle processes that the entrepreneur managed himself when the business was smaller. And that leads to the second transition. As the entrepreneur builds more and more of the day-to-day details into systems and delegates responsibility to the expanding team, his job must change. As seen in the case at StartupJournal, the transition from being mostly a “doer” into becoming a “real CEO” can be one of the biggest challenges an entrepreneur can face.

When it is time to grow your management team it can be a frightening experience. How do we know if this person will fit in? How do we know if this person will help build the kind of culture we want to create?
There are a few tricks of the trade that have proven to be effective. You just need to create situations where people show their true character.
A common technique that I have found to be effective is the “waiter test.” You can learn a lot about how a person really treats other people by taking them out to eat and observing how he treats the waiter or waitress. USA Today credits the first official documentation of this technique to Raytheon CEO Bill Swanson in his book Swanson’s Unwritten Rules of Management.

Among those 33 rules is only one that Swanson says never fails: “A person who is nice to you but rude to the waiter, or to others, is not a nice person.”

I had an entrepreneur in a growth management seminar I teach offer his “bowling test” as an example of how to judge character. He and his partners in their engineering firm wanted to create a culture that was not too stuffy. They did not want a firm that was populated by engineers who were “full of themselves.” So part of the interviewing process was to take prospective engineers bowling. If they had a good time and enjoyed themselves, they passed the first screen. If they seemed uncomfortable or even embarrassed, they probably would not fit in.
A local coffee shop owner has applicants fill out an application that includes two questions:
If you could have a 1-hour conversation with anyone living or dead, who would it be and what would you talk about?
If you were to write an autobiography, what would the title be? Explain.
He understands that his coffee shop is as much about the atmosphere as it is the coffee. So he wants to fill his stores with interesting people. I doubt Starbucks pays that close attention to its hourly employees.
We had our “receptionist test.” I gave our receptionist veto power over all major hires who came in for an interview. If they were rude or condescending toward her, they never came back for another visit. If she gave the thumbs up, we would invite them back for the “real interview.” We wanted staff who could work in a flat structure where all employees play a key role. (The receptionist was considered part of our marketing team due to her close interaction with customers day-to-day).
Know what is key to your culture and find ways to assess all hires that come into your business to assure that they will fit in. (And by the way…yes, it is legal to screen for fit with culture as long as you do not use it to discriminate against a protected class of people).