Startup stakeholder management
Entrepreneurs mostly focus on the day-to-day of managing staff, dealing with customers and building product when building a new business. Building and maintaining stakeholder buy-in is one of those important but not urgent things that often falls by the wayside. The admin and processes of keeping a board, shareholders and advisors informed and interested in your business is critical to your long term success. Seasoned entrepreneurs know this, but first time entrepreneurs often don’t realise it until it’s too late.
The main thing to note when you’re updating shareholders and boards, is that the bad news is far more important than the good news. It’s great when things are going well, but when they’re not you need to communicate that as clearly and as early as possible. There is nothing worse for an entrepreneur to mislead a board into thinking that everything is ok when it’s not — in fact, thats called fraud and you have a fiduciary responsibility to keep them informed regardless of the consequences. On top of that, if you’re hoping to raise money further down the line your best chance of raising funding is if it’s led by one of your current investors — and if none of your current investors are investing again because they’ve lost interest, then it’s a really big red flag.
In this post I lay out a basic blueprint for founders to follow on how to ensure that you’re making the most of the experience and support that you have available around you. Every board or shareholders are going to have slightly different requirements— but these are what I’d define as the minimum standard and a good starting point if you’re not doing them already:
KPI doc
Have a single Google Sheet with the most important numbers for your business that can be easily updated and shared. How are you tracking your success? There should be 3–5 metrics that are very clearly the most important things that you track (your KEY performance indicators) with a number of other supporting stats. While these other stats are not the most critical, they add the context to why one of your main KPIs is going up or down. Total Sales might be a good KPI, but it’s helpful to know the breakdown by product or region to understand whats actually happening.
Update this document every month and notify key stakeholders (like your board) when you have. This allows them to check in at a high level and have a place to go to to check something ad hoc. It’s also valuable to put some high level targets on this document too so you can see how you’re tracking against them. Showing some key area’s in a graph is also very useful of making the trends visible.
This is important because: it allows people with a vested interest or fiduciary responsibility to have a place to go when they have concerns instead of waiting for a response from you. It also help them spot high level trends. (Bonus is that it helps you a lot too…)
Update email
While your KPI’s give the raw data, this email gives the background and context. These mails should be very short and concise — if someone wants to know more then they can ask in a follow-up mail. It should have a consistent format that contains:
- Top 3–5 KPIs (this month and last month)
- 3 points of interest (notable things that happened)
- Asks of how they can help & what you’re concerned about
This is typically not data heavy or very specific, but provides a regular update for them to stay connected. You should send these at least once a month, but can also do weekly or fortnightly as well as long as it’s regular.
It’s a nice format to send to advisors, mentors or other interested parties. You should have these data points on hand and it shouldn’t take long to pull. Remember that these people are typically pretty busy so don’t send long wordy emails — rather keep them shorter but more frequent.
This is important because: If you’re out of sight you’re out of mind. Short updates help keep people interested and engaged.
Board Pack
This is what you need to send out 5 days before a board meeting (absolute minimum of 3 days) in order to give busy people enough time to review the documents to have meaningful discussion in the meeting. If you don’t get this out in time you should postpone your board meeting as it’s going to be a waste of everyone’s time. This board pack should include:
- Minutes from last meeting (Short bullet points of decisions with actions assigned to people.)
- Agenda points of what needs to be discussed
- Updated financials Profit & Loss as well as balance sheet and runway.
- Contextual documents & data for discussion points. To get sign-off on a new product you’re going to need to show designs/plans and budgets; for a decision on a channel partner approval you should have financial forecasts, action list, pros and cons; for input on cancellations you need all the cancelation feedback data and customer comments; etc.
Board meetings are where the high level, big responsibility decisions are made and where the legal responsibility of the business rests. To run these effectively you need to determine whats important (the agenda) and give enough context to help the member make informed decisions. By preparing well, you’ll be far more likely to get the most value out of these meetings and can build investor confidence.
This is important because: What you need to realise is that in South Africa you’re legally less responsible for the business than the Directors. If you commit a crime (even unintentionally) then they need to prove how you misled them and why they let it happen — and saying that they just didn’t know doesn’t hold up well in court. You have a responsibility to keep them properly informed of the good and the bad!
Data Room
While these are typically only used for fundraising, if you’re not actively keeping it up to date then it’s going to be a nightmare to get it ready if you ever need it. It’s best to update it at least once a month when you are doing the KPIs to make sure you don’t miss anything.
It’s also great to have all of the important documents stored in a single central place (make sure it’s online and backed up) so that if board members need access to something they know where to find it. (This is particularly useful if something happens to you.) You should at minimum share it with the Chairman of the board. It should contain folders for:
- Company Documents:
These are all of your founding documents, MOI, shareholders agreement, funding agreements, Current share breakdown and any official paperwork. - Staff:
Is where you keep all of your employee and contractor contracts and agreements. A central staff list with ID and contact numbers are also useful. Make sure to clearly show where IP is assigned to the company. - Partners & suppliers:
Any contract or agreement that you’ve signed with a 3rd party that isn’t an employee should go in here. A register of which contracts are active and when they renew is also useful. - KPIs:
This is the historical data and tracking that you’ve done as a business. - Financials:
Make sure that you have everything that your accountant has signed off on in here, including correspondence with SARS and tax certificates, put an actively updated cashflow statement here too. - Operations:
This is pretty much everything else around your business, so have sub-folders for things like marketing, product, sales, legal, etc.
Make sure that you have a digital copy of anything that is paper based — and ensure that you’re storing the final signed copy not the editable draft.
This is important because: it’s really hard to put together if you ever want to pass a due diligence and haven’t been actively keeping it up to date. It’s also required by law to keep these records.
Investors are putting their money in your charge and the directors are giving you their time and taking a legal risk in getting involved. At worst you owe it to them to keep them informed. At best, doing this will keep them interested and aligned to the success of the business. They’ll have the context to make better decisions when you need their help and will be more understanding in shortfalls if they’ve been brought along for the journey.
Setup the regular calendar event to carve out some time and make sure you actually do these things. In the long run they’re probably going to have a bigger impact on your business than the fire you think you need to put out instead.
If you liked this article, you might enjoy some of my others HERE or my BOOK.
Thanks to Ernst Hertzog for providing feedback on this post.
