Many studies have been conducted into the differences between large and micro businesses. How is that some small businesses grow and some, stay micro?
One of the most convincing findings from these studies is the difference in strategic direction and decision making. Most large businesses, and all listed companies have a clearly defined control process through a “board of directors”.
The board members have clearly defined roles and together make the decisions required by the enterprise. Often, members of the board also have an equity stake in the business and they collectively make decisions to maximise shareholder value.
Almost all large companies have accurate, audited financials and a clear valuation of the company at any time. This type of “simple” business information seems rudimentary, but when asking most small business owners: what their business is worth and how they’ve established their valuation, their answers range from: “I’m not sure“, to “A number” – which is almost always unsubstantiated by a proper valuation technique.
But when you’re in business on your own, who does the leader turn to for leadership advice? Most micro business owners spend their days wrapped up in operational issues, doing everything from making tea, to doing deliveries and processing invoices. There’s hardly time to work on the “important” when the “urgent” makes so much noise.
What’s the solution?
The problem is easier to solve than it sounds. Most small or micro businesses could use a board or panel of advisors, to assist them and develop a clear strategy. A good idea would be to establish a “semi-formal” board for your business.
Invite between three and five people that you trust to form a board of directors for your business. Who do you choose? Look at people that you know that already run a successful businesses of their own. Maybe someone that holds a position within a corporation that you need help in, for example: an accountant where you require financial assistance. When you select members for your board, choose people from a diverse range of backgrounds and skill sets, but all people that have you, and your business’s best interests at heart. (Note: Sometimes people that are completely unfamiliar with your industry area good choice as they have no prior knowledge of the markets in which you operate and might have a fresh and new approach).
Approach these potential board members and let them know your plan, and why you want to set up a board for your enterprise. Let them know that board meetings will follow a formal and structured approach, and shouldn’t last more than a few hours four times per year. (Quarterly board meetings should be sufficient)
This panel of board members, along with agenda of the meetings will go a long way in getting your business’s strategic direction right, making you accountable for the decisions that you make and also ensuring that you start to run your business to maximize shareholder value – even if you’re the only shareholder.
For help on setting up a board, board meeting agendas and meeting processes reply to this email – we’ll be more than happy to assist you put a board in place for your business.