Take A Step Back
In this growth engine daily I want to talk about corporate governance.
Now, before you all switch out because you’re all interested in the exciting stuff, like marketing and sales and new product launches and taking over the world, that’s all awesome and I’m all for that.
But just sometimes you’ve just got to take a step back and do a housekeeping check and when I use the word corporate governance, it could be governance, compliance, you’ll have different names for it and that’s absolutely fine.
But I just really want to get your thoughts and get this on your radar.
If you’re a sole entrepreneur, this might be the last thing back of your mind, if you’ve got a bit of a management team building up, then certainly this should be evident if you’re running board meetings or management meetings and things like that.
What Is Corporate Governance?
So what is corporate governance?
It covers a wide spectrum, everything from looking after shareholders, stakeholders, making sure that you’re acting as a responsible employer in the community and things like that.
- Making sure you’re filing your taxes
- Paying the government on time
- You’ve got a regulatory licence even.
So all things like this can come into corporate governance and ultimately who’s responsible?
Well, the MD, the CEO, the business owner is the person responsible.
It’s not something that you’re going to be able to delegate.
As you guys know, I do quite a bit of non-exec work, sitting on people’s boards, and one of the questions that I got asked in one board meeting was, “Mike, if something goes wrong, you as our non-exec, do you carry the can as our guide or as the person who was guiding us?”
No, not really, as, as a non-exec, I’m partly responsible as an appointed director, but I’m not technically accountable to the end result that you as the business owner would be, but I share that responsibility.
So given consideration for that, if you are running non-execs in your business, they do have risk, it’s not just about rocking up, doing a couple of calls in between board meetings, turning up for the board meeting, reading the board papers and contributing to the board meeting.
There is an element of risk involved and we are as a non-exec, somewhat powerless or rudderless to enforce anything that may be not quite right.
So let me get back to the point, corporate governance.
What I want you to do today, I want you to take a step back.
This isn’t a big job, I want you to take 60 minutes out of your day.
Ask Your Team What Are Your Responsibilities?
If you’ve got a management team, I want you guys to do that.
I want you to book a meeting room out.
If you don’t have a meeting room I want you to go in a quiet space, go hire a meeting room, go work at home that day, get your management team round and then sit down and ask them what their responsibilities are.
So again, using the fundamentals;
- Sales & Marketing
- Corporate Governance
Go through the finance, ops, sales, marketing people, all those types of areas and then just say;
- Do we have the right licences
- Do we have the right standard operating procedures
- Do we have the right insurances
- Do we have the filing completed on time?
- Are we right in the community?
- What’s our image, is it right?
Get all that sorted and understood, If you’re a venture capital backed business no doubt they will be holding you accountable through board meetings anyway.
- Am I creating board reports?
- Am I filing the minutes?
- Am I making sure the statutory returns are all done, like a company secretary role?
All these types of things, it is boring compared to going out there and changing the world, I get that.
But ultimately I’m not sure if it is in one of the Branson books, but it talks about companies being valued 10% more.
Certainly, if there’s a better brand, it’s worth more than if there isn’t an established brand and certainly if you are looking to exit, companies with good corporate governance are always going to get you a higher exit value.
They’re a higher multiple or a higher bid price, whichever strategy you’ve got for what the exit value is.
It is worth doing plus you get to sleep at night far easier.
For you guys out here, just as a quick tip and a quick warning, for you guys and girls out there who are potentially looking to raise venture capital, you may have been trading one, or two, or three years.
I’m not talking about seed start-ups or anything like that.
There’s a good chance as part of the venture capitalist due to diligence process, they’re going to ask to look at the board reports and the board minutes, to have a look at it, so if you’re not filing those and getting those audited and recording these right you could prejudice your deal.
I remember when we raised venture capital with Yorkshire Forward and PIF, we were asked to turn over the board minutes so they could have a look back and I don’t recall if it was six or twelve months, or whatever it was, but we’d got our house in order.
It was because as we were planning an AIM flotation, [Aternative Investment Market] flotation, that’s what the plan was prior to the crash in 2008.
But they asked for that and sometimes you think, wow, what did we say, what did we do?
Did we do what we say we were going to do?
If you did do what you say you’re going to do, your board reports are right, your governance is right, your HMRC accounts are all up to speed.
Then ultimately, I’m not saying that’s going to guarantee to get you funded, that would be a wild, ridiculous claim.
But it gives them a lot more confidence.
So I hope you found that interesting, I’d love you to leave me some comments below.
Score Yourself Out Of Ten
Two things that I want you to do today;
Number One. Tell me what your corporate governance levels are, score yourself out of ten.
- I’m a five out of ten, I’m an eight out of ten.
- I’ve got it absolutely nailed at ten out of ten.
- I’d love to know where you are governance-wise.
Number two. If you’re not sure about what corporate governance is and what you should be doing, ask questions at the boardroom, what type of corporate governance should I be putting in my manufacturing business or service business or my consulting business or my medical, dentistry business, or whatever it would be?
If you’re unsure about what type of corporate governance that you should be putting into finance ops, sales, marketing, people management, even down to banking, which I suppose comes under finance.
When somebody pays you, let’s say they pay you £1200, for a fee, which is £1000 plus VAT.
Are you actually stripping the VAT and putting it into a separate account and not spending it?
Now I know a lot of start-ups are chasing the cash flow and things like that, they’re using it.
Ultimately that’s a great place to start and you could even put that under best practise, corporate governance, compliance for not spending the government’s money.
I know here at our businesses, we love VAT return quarter and the reason we love the VAT return quarter is because it’s payday, not payout day.
That’s because the X thousand pounds in the HRMC account and then obviously when we’ve taken our claims against the VAT return now, we just reconcile it back and put it back into the reserve account, the dividend account, or we put it into the OPEX trading accounts.
Things like that, if you get into that mood, you get into that mindset, it’s going to really serve you well.
So thanks for continuing your journey with us, two things;
Firstly, tell us what your corporate governance level is, five out of ten, ten out of ten, somewhere in between.
If you’ve just not got started and you’re a zero out of ten, absolutely fine.
You can message one of the hosts and then we can do a private message to you and we can talk to you about that and get you going.
Secondly, if you’re unsure about what it is and you’re happy to share with a group, post it down below, we’ll get those answered.