Take A Step Back
I want to discuss the often-overlooked topic of corporate governance.
Before you tune out in favor of more exciting subjects like marketing, sales, or product launches, let's take a moment to focus on something crucial for the sustainability of your business.
Sometimes, you need to step back and conduct a housekeeping check.
Corporate governance encompasses various aspects, including governance and compliance.
While you may not give it much thought as an entrepreneur, if you have a management team, this should be front and center, especially if you're running board or management meetings.
What Is Corporate Governance?
So, what exactly is corporate governance? It covers a wide spectrum, including:
- Looking after shareholders and stakeholders
- Acting as a responsible employer in your community
- Ensuring timely tax filings and compliance with regulatory requirements
Ultimately, the responsibility for corporate governance falls on the MD, CEO, or business owner.
This is not something you can delegate away.
As someone involved in non-executive roles, I often get asked,
“Mike, if something goes wrong, do you carry the responsibility?”
While I share some accountability as a non-exec director, the ultimate responsibility lies with you, the business owner.
Ask Your Team What Are Your Responsibilities?
If you have a management team, it’s time to gather them for an important discussion.
Book a meeting room or find a quiet space to sit down with your team and ask them to clarify their responsibilities.
Use the following fundamental areas as a framework:
- Finance
- Operations
- People
- Sales & Marketing
- Corporate Governance
Go through each area and ask:
- Do we have the right licenses?
- Are our standard operating procedures up to date?
- Do we have the necessary insurances?
- Are our filings completed on time?
- How do we present ourselves in the community? Is our image right?
Getting these details sorted is essential. If you’re a venture capital-backed business, you’ll likely be held accountable during board meetings. Ask yourself:
- Am I creating board reports?
- Am I filing minutes properly?
- Are all statutory returns completed, similar to a company secretary's role?
I understand that discussing governance may seem tedious compared to the thrill of launching new initiatives, but it’s crucial.
According to some sources, companies with solid governance practices can be valued up to 10% more.
A Quick Tip for Raising Venture Capital
For those looking to raise venture capital after one, two, or three years of trading, this is especially relevant.
During the due diligence process, venture capitalists will likely want to review your board reports and minutes. If these are not well documented and audited, it could jeopardize your funding opportunity.
I recall when we raised capital with Yorkshire Forward and PIF; they requested access to our board minutes to review past decisions and discussions.
Ensuring that your governance is in order provides confidence to potential investors.
Score Yourself Out Of Ten
Now, I’d like you to reflect on your corporate governance levels.
Score yourself out of ten:
- Are you at a five?
- An eight?
- Or have you nailed it at ten?
I’d love to know where you stand governance-wise.
If you’re unsure about what corporate governance entails, don't hesitate to ask questions during your board meetings. Inquire about what governance practices should be in place for your specific business type, be it manufacturing, consulting, or medical services.
For example, when receiving payments—say, £1,200 for a fee (which includes £1,000 plus VAT) - are you properly setting aside the VAT in a separate account and not spending it?
Many startups chase cash flow and may use these funds prematurely, but it’s crucial to treat government money with care.
At our businesses, we look forward to VAT return quarters because they represent payday, not payout day.
We ensure that funds collected for VAT are reconciled properly, either into reserve accounts or operational expenses.
Adopting this mindset will serve you well.
As you continue your journey with us, remember to:
- Share your corporate governance level in the comments. Are you a five, ten, or somewhere in between?
- If you’re just getting started and find yourself at a zero out of ten, that’s absolutely fine! Reach out, and we can have a private discussion to help you get started.
