Developing governance structures that increase the value of your company
When I started my business, advisors and mentors stressed the importance of good corporate governance and how developing robust structures would not only help me in the everyday management of the business still, it would result in a higher sale price when I decided to exit. They were right.
I sold my business earlier this year. I did not have a clear exit strategy when I founded the business. There were two explicit scenarios, however. I was set to scale or sell it. Either way, I knew that the business needed clear, stable and strong foundations to enable it for its future destiny. A diligent corporate governance structure is one of the core components of a fundamentally robust business. SMEs often do not distinguish between management and ownership, but that goes not mean governance is irrelevant.
There are many benefits to incorporating a solid governance structure within your business.
- Funding – lenders will be more willing to fund businesses with the correct governance structures. It gives them additional confidence that you understand business principle.
- Effective management – It is easier to manage an organisation with clear employee roles and structures that comply with defined responsibilities/authorities.
- Forward planning – a board that meets regularly to discuss the business is essential to plan for the future and mitigate risk.
Governance is not reserved for large corporations. It should be incorporated into the decision-making process for every business, regardless of its size. It helps you by developing structures within the business, developing foundations for future growth, and makes managing a business simpler.
The buying decision by the company that acquired my business was made easier by having these structures in place. It gave them a good understanding of how the business worked, that it was run according to national law and regulation and that the business was run efficiently. This resulted in a favourable evaluation and made the due diligence easier.
Directors need to clearly understand their responsibilities and how this can impact the future of their business. The IoD aims to improve directors, allowing them to run better organisations.
It would be great to hear your story. Please contact me at [email protected].
Author: Dorian Isaacson, Innovation & Entrepreneur ambassador, Surrey
