You need to know your numbers. Build the foundations as though you are building a skyscraper (ie. Rock Solid).
Background and statutory obligations
Take directorship responsibilities extremely seriously. If you get it wrong it can be extremely costly. Meet your statutory, fiduciary (legal responsibilities as mandated in company law) and tax obligations. To ensure you are making profits, to plan, to raise capital, to grow and to value the business.
Be careful. In different countries there are different structures that exist. Limited countries must have statutory accounts. Audit thresholds – your company may qualify if it has two of the following: annual turnover more than £6.5 mill, assets more than £3.26 mill and 50 or more employees.
Cash accounting models are probably best for most health-tech businesses. You must submit your accounts to companies house within 9 months of the accounting reference date.
Accounts systems and processes
You need someone who likes bookkeeping and cares about it. They need a clear understanding of the key information required to run the business. They need a system to produce clear information on which to base decisions and to monitor performance. Make sure you get on really well with them. Select a system that grows with you: http://www.softwareadvice.com/uk/accounting. Don’t leave this it will always come back and bite you.
You need information flow to and from the various disciplines in the business, so that managers all understand their role in delivering the business plan and when their area, or another, is causing imbalance.
You need to create balance. Fix the cracks. Take the team away every 3 months to try and iron out differences and maintain relationships. It’s perfectly normal that people get upset.
Board responsibilities and reporting
The board is there to set the ends. To define what the company is in business for. It is the job of the executive to decide which means those are best achieved. You need to have a good executive structure with rules and codes of conduct. There are key elements of good reporting structures: CIMA reporting structure to boards.
The best board decisions will be driven by customer data. What is going wrong? Then you need to have a quarterly management information review. What are the competitors doing? Is our revenue strategy working? How are the customers feeling?
Then use the data to drive the business plan.
Directors must manage risk – do you have a disaster recovery plan? You must have one! You must have the correct insurance – PL, PI, EL, Life, CI, Medical. Do not store data near electricity sources.
You should have a full shareholders agreement tied in to your articles. Have a plan for critical illness. Workplace pension scheme if you employee people.
Tight purchase and sales contracts which protect you from currency fluctuations an a range of potential issues. You must comply with the data protection legislation in all your local markets.
This is simply ‘how you plan to make money’
Synchronise your main client and distributor, discounting, freemium, up-sell, cross-sell etc.
Deploy a responsive and multi-channel strategy with different pricing models delivered against a common RRP, develop a loyal test consumer group to give immediate responses to product, innovation and pricing. Partner with a market leader to generate revenues to get the business started.
The 1 page business strategy. OGSM Mark Van Eck.
Banking and Investor Relations
This is a really important relationship – they can give you connections and discounts in all different sectors and industries. When you go international you need really strong investor relationships.
For the lender they are interested in balance sheet.
Secured lending or asset backed. Factoring.
Investors – runway – income and available working capital, proof of concept. NPV (Net Present Value).
Build a spreadsheet. Sales A, Cost of Sales – B. D2c, distributor, international, licence, franchise. Production cost, sales and marketing, human resources, operating profit. share capital and liquidity ratios.
Fixed Assets, Liquid Assets, Share Capital, Liquidity Ratios – a lender will look at all these. Current, Acid, Cash ratio’s.
EBITDA – 3 to 15 times multiple of this. Net profit + Interest + Taxes + Depreciation + Amortisation. You need STRONG legal advice here.
Watch out for ‘earn-outs’ – check for anything like this in a contract.
Be careful when being approached for your business to be bought out.
Great accounts and Great due diligence are KEY! When you get someone ready to buy or invest YOU need to be ready as well!
If you are an entrepreneur now you are probably ‘disintermediating’ a process. The data is all connecting. The data is coming into the hands of the patients.