Preparing for Exit Part 2: Good Management Practices
Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect. This post is not a substitute for legal advice and is intended to generate discussion of various issues. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel. Cara Stone, LLP. and the author expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post. The views expressed herein are personal opinion.
In the second part of our Preparing for Exit series, we’re talking about the relationships that help business owners scale their business and tips to manage those relationships. It can be hard for business owners to balance all the personalities that they encounter as their business grows, from employees to investors, to board members. Knowing when to listen to advice and when to hold true to the business owners believe can be a hard balance to find.
Below we discuss some practices to help you gain and manage the relationships that will ultimately enable your business to succeed.
Tip 1: Get Out of People You Know, and Talk to People Who Know
When you’re starting a business, it can be hard to find the right people to look to for advice. While there are likely smart people in your existing network, it’s important to also look beyond your current network to people who are experts in the area you are pursuing.
This advice can apply to businesses in multiple ways. It can mean looking for advisors who are familiar with your specific industry, or it can mean talking to people who are familiar with start-ups and growing a business in general. Most cities have a host of resources who are happy to help founders starting on their own venture with introductions or advice. These resources are great when you’re getting off the ground.
As your business grows, make sure your network includes people who have been in real deals before. Community support is important, but when it comes time to raise money or identify your exit strategy, you want advisors who know what it’s like to be at the table, know how to negotiate deal terms, and know what terms are reasonable for companies to expect.
Identifying the people who have this type of experience and reaching out to them will help you expand your horizons and meet new people who can help you with your venture.
Tip 2: Run Real Board Meetings
If not run correctly, board meetings can feel like a time-suck that founders and board members dread. Simply going through the motions of setting up and running a real board meeting can produce ideas and insights that are pivotal to running a good business.
When it comes to running board meetings, the CEO should drive the agenda. Keeping everyone on point with key items to talk about is important. Board meetings should not be a lengthy open discussion. They should revolve around the key metrics and decisions the company needs to make.
Here are some tips for running an effective board meeting:
- Schedule monthly or quarterly board meetings and stick to the schedule
- Prepare and send a PowerPoint and financial materials 2-5 days before the meeting. This gives so everyone time to think about the discussion points the meeting will involve.
- Limit the board meeting to 2 hrs max (1 hr for presentation and 1 hr for discussion)
These tips will help keep your board meetings productive and allow for constructive feedback that is relevant to moving the business forward.
Tip 3: Always Be Talking to Your Board Members
The board is there to help the company succeed. As a founder, your interaction with the board should not be confined to just board meetings. Soliciting feedback from board members outside of the board meeting allows to get candid advice and keep your board meetings more focused. Informal discussions will also help you shape the board’s decisions and the company’s direction.
Talking to the board outside of board meetings will allow you to cut down on the abstract discussion and unnecessary distractions during board meetings. For instance, it’s often incorrect to assume that the board must vote on every measure that comes up. Instead, changes can get done by written consent outside board meetings, allowing more time in the board meeting to be spent on discussion. Getting feedback from board members ahead of the board meeting will help relieve the feeling among board members that every measure requires a vote.
Tip 4: Boards Should be Positive and Constructive
As CEO, driving the agenda and mood of the board meeting, it is often your responsibility to keep board meetings constructive and positive. You can do this by bringing all participants back to the preplanned discussion points and keeping the meeting focused on the wellbeing of the company. You can also create a positive environment by setting the example of being open to feedback. When board members see that you can let your guard down and contemplate different ideas, they will naturally do the same.
It can be hard to know when to incorporate feedback and when to stick to your guns. The more open you are to feedback, whether you incorporate it into your business model or not, the more your board members will model your behavior.
Tip 5: Build Relationships Where Possible
In business as in everything, good relationships make a big difference. Get to know your board members, investors, and employees as people. This means truly listening to people’s concerns and incorporating positive change where you can.
Another key to building good relationships is keeping your board members, investors, and employees up to date on the decisions being made within the company. Even if you’ve decided to go a different direction than where your advisors were leading you, go back and explain your thinking. Knowing that you have considered their idea and explaining why you came to a different conclusion will garner goodwill. Creating this continuous feedback loop will help people understand where you are coming from and prevent them from feeling isolated and out of the loop.
Cara Stone, LLP works with companies at all stages of their life-cycle on setting up a corporate structure to ensure their exit goes smoothly and successfully. For more information on what you can do now to prepare for your exit, check out Part 1 of our series Good Corporate Hygiene and look out for Part 3 of our series Continuous Adaptation.
You may also like:
Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect. This post is not a substitute for legal