How to Run Your Business Effectively

The role of a director at the top, or holding-company level is different from that of a manager. You have to have the confidence to go into this new role knowing that you have much to learn. But you have your reputation as a manager behind you, so all you have to do is learn the new roles and think about all the people in­volved with the board. But let us start with a valuable lesson derived from a person who started on a board that was not true to themselves and discovered.

Do regular stakeholder analysis

Most companies have four stakeholders: customers, suppliers, shareholders and staff. (Bankers would probably want to add lenders who are not shareholders, but bankers are tedious and common so they can shut up.) You should regularly review how your business is treating each of these. Ask yourself what would these people say about your company.

Suppliers will give better service to customers with whom it is easy to do busi­ness. Look for ways that you can help them with their problems and keep your relationship and transactions with them as simple as possible. You never know when they might come up with the killer idea that makes you, as well as them, rich.

If your people are indeed the greatest asset that you have then treat them right, since logically they are a huge source of competitive edge – they are unique. Don’t fudge soft issues such as job satisfaction and development and training. Put hard measures in place to make sure that you are taking these as seriously in actions as you are in words. It is unlikely that a human resources department will be cost-effective until you are a fair size. In any case your managers should carry out most of what the HR department would do, and for the technical issues, tax and cars and so on, use your accountant until he or she is stretched to carry out the role. At that point you may consider outsourcing the specialist bits, or, if you are growing rapidly get a headhunter to join the board as a non-exec.

Choose the right accountants

Almost everyone I spoke to mentioned this. To be honest many of them had learnt by taking on the wrong one to begin with. The right accountant is a terrific asset, while the wrong one is potentially a huge liability. This gives us some clues to the best advice:

  • Look for an accountant who is appropriate for your size of business. They are unlikely to be able to add industry knowledge because they have clients in your area of operation, but they can give you good advice based on experience of companies going through the same type of growing pains as you.
  • From this we can gather that you must not be afraid to change your account­ant when he or she has become less appropriate. If you have grown to twenty or thirty people the accountant who is brilliant with start-up companies may no longer be right for you.
  • As you change your geography too you may have to change to an accountant who is able to support your premises all in different locations.
  • The time may come when you need the ‘branding’ of one of the big boys to assist you in raising finance or buying businesses. One person gave this advice. If you are going to an outfit like KPMG, choose an office that is local to you but not in one of the big business metropolises. Once again this is because the local office away from the main trading centres will have more experience of smaller, growing businesses and also have more time for you. His example was to choose Liverpool rather than Manchester.
  • Accountants basically charge time and materials for as much of their work as you will let them get away with. When you pick up the phone on them they are like your telephone company and charge by the minute. Negotiate a fixed cost for as much of the list of items they are going to perform as possible. Keep reminding them to tell you when you are asking them to do something that is not on the list but will cost extra.
  • The fees for doing the due diligence part of an acquisition or merger is a diffi­cult area. Fundamentally you do not have time to negotiate with them and they will charge you royally for their advice. You may very well have them working at nights and at weekends and they will charge accordingly. The only good news is that this money does not come out of the profits of the business when you have bought it, but comes off the goodwill at the time of acquisition.

Understand your roles and responsibilities

There is a lot of legislation covering the roles and responsibilities of directors of both private and public limited companies. Make sure you have a passing knowledge of these. If one of your companies does fail and someone, anyone, has been involved in wrongdoing, you can have a blot on your escutcheon for a long time, and a reputa­tion that never goes away. Pay attention to this at all times. Read the board minutes with a legal eagle eye, and you should not go wrong.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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