You’re a small business but aiming to be something much more; you’ve got a great small team around you and you’re looking to grow at a frenetic pace. Life is exciting and you have a million things you need to do just to make money and keep going but where should good corporate governance sit on your list of priorities?

This is my third article recently about preparing your business for a long term exit plan and this topic is one that most people really don’t pay enough attention to as their business scales.

So why is good corporate governance so important?  Why should a small company have a board of directors or a finance director?   Why if you only have 3 people or 10 people or even 50 people should you run decisions past your board?

Firstly I’m going to make this a little bit personal and talk about my own experience, when I set up Forster Chase Corporate Finance with Leo Meggitt nearly ten years ago the first thing we did was hire a board of directors.   Our chair back then was Rodney Baker Bates and we had Babloo Ramamurthy and Benny Higgins as our NEDs. Babloo has since stepped up to being Group Chair in the wake of Rodney’s retirement.

Our board have been incredibly supportive over the years through good times and bad, they’ve given incredibly helpful advice and brought business to us.   The rigour and professionalism they have demanded has meant that we have relevant data to make all decisions with as much insight as possible, it’s given us the confidence to really push ahead with plans knowing that we have genuine oversight and challenge.

Hiring a financial controller, Alison Simon, has given us fantastic insight into real time data and also through our quarterly board packs. Whilst sometimes one can feel frustration at the work of having to populate a board pack, the data contained within it is invaluable to the running of a business.

What does this have to do with an exit you might now be asking?  Well you’d be surprised! No matter the scenario – whether you are intending to appeal to external investors selling a minority stake or a full sale to private equity or a trade buyer, this matters a lot.  The fact there is an independent board of directors overseeing the business and it isn’t just run by one person is a huge green flag to potential buyers and investors and will be reflected in the multiple you achieve.

Think about the signal it sends – during the process you will have every number available instantly as you’ve been sending them to your board multiple times a year. Your minutes will be available to give genuine colour to decision processes over the years. You can literally show how decisions have been taken and how they will be taken in the future. If you’re an investor looking to buy this business that is huge comfort that the high level of governance practices will continue into the future and their investment will be in safe hands.

Many businesses pay lip service to good governance and whilst directors may think it can be an occasional road block, when used in the right way it is a genuine asset to your business that will actually help you to unlock the real value you’ve built on exit.

Part of the reason Forster Chase runs both a corporate finance business and an executive search firm is that good governance, talent and your exit are all completely intertwined. Our search business has on numerous occasions built boards from scratch and has over the years found a real niche in finding the best talent who can both help your business scale and grow but also and just as importantly keep it on the right track.