Entrepreneurial Leadership and Management . . . and Other Stuff


Communicating with Your Board: The Summary

This is the fourth and final post (for now) in my series on communicating with your board.  You can find the previous posts here, here and here.

As a corporate director, I wince when I get a board package that opens up with a stack of detailed group-level reports and loads of spreadsheets containing every piece of financial data possible about the company’s past, current and future state.  To be sure, such information is a necessary part of running a successful business and should be included in the board package, but when information about the company is only presented this way, it’s difficult for anyone to absorb the key facts and figures about the company so that they can perform a relatively informed advisory role as a board member. 

It’s even more difficult when the audience for the information – think the VCs on your board – get such a package from a large number of companies prior to each of their board meetings.  It’s just not possible to, 1. spend the time to decipher what is going on and, 2. recall how the data presented is related to many of the programs, goals and initiatives that were previously agreed to.  For these reasons, and the fact that it’s easy to get data from various companies confused, such a comprehensive report will often be ignored.

To quote Winston Churchill,

This report, by its very length, defends itself against being read.”

Dealing with this is simple, of course.  Just summarize the information, relating it to previous discussions, goals and objectives and put that document at the beginning of your board package.  It shouldn’t need to be said, but what I mean by summarize is to make it concise and short.  Again, quoting Winston Churchill:

Please be good enough to put your conclusions and recommendations on one sheet of paper in the very beginning of your report, so I can even consider reading it”

Sometimes, it will be the only part of the board package read by some of your board members prior to the meeting.  Sad but true, I’m afraid.

So, the summary should be the first thing in the board package and should contain:

  • High-level sales statistics, including major or important deals
  • Rollouts of products or services
  • Changes in key customer, partner or channel relationships
  • Important legal or accounting issues facing the company
  • Changes from the staffing plan – major hires and unexpected departures that will impact the business
  • Unexpected changes to the financial position of the company
  • Unusual market or competitive moves
  • Status of major initiatives within the company

You get the idea.  Additionally, any item that was reported on before should also include a note making it clear if there has been a change.  This is especially important for items that have specific, timed deliverables.  The key is, again, that if it takes more than one page, you’re not focused enough. 

I’d bet you’ll find that summarizing your board material in this way will not only make the board package more convenient for your audience, but it will also help you discern and focus on the important parts of your business.  There’s nothing quite like trying to make things short and complete when explaining things to others in helping one understand the material for themselves.

 May 16th, 2007  
 Boards, Management, Startups  
 Comments Off on Communicating with Your Board: The Summary

Communicating with Your Board: At-A-Glance Financial Information

This is the third post in my series on communicating with your board.  You can find the previous posts here and here.

Consolodating key financial information on a single page is a great tool for communicating some of the most important data about the company in a quickly-grasped snapshot.  Because of this, it’s not only good for your board, but your employees as well.  Presenting the data this way makes it much easier for an audience to understand the financial health of the company without pouring over the complete set of financial statements.  It also gives you the chance to make clear to your audience what you believe are the highest priority financial metrics for the company at any time.

Creating such summary information doesn’t let you skip the troika of financial statements (P&L, balance sheet and statement of cash flows), but it’s no additional work either – another page in your spreadsheet refering to data in the complete statements almost always does the trick.

While the exact format of such a one-page statement should be discussed with your board, the format below describes one that is used in a company that I work with, proposed by another director.  I’ve come to like it a lot and always keep the spreadsheet on my desk a few days before and after the respective board meeting so I can quickly refer to it as I think about the progress of the company.  It has three sections:

  1. Finance
  2. Headcount
  3. Subjective updates that either have an impact on the current period or will likely have an impact on future periods

I’ll go into each one separately . . .


As is true for much of the operating life of companies, the focus should be on cash.  As such, you should list the key spending areas of the company – the big line items – and sum them up to come up with the gross burn rate for the previous period.  As I mentioned in my previous posts in this series, it’s good to have numbers for previous periods as well.  You should include the last two (for a total of three) to five (for a total of six) months as a minimum in this table.

Once you’ve established the gross burn, you should summarize any cash infusions into the company.  Generally speaking, these will only include a few line items, like investment income, financings and collections.  By subtracting this sum from the gross burn, you’ll derive the net burn for the company.  Again, this should be reported for the previous months as well.

In this section, it’s also a good idea to list the key balance sheet entries and any bookings numbers (so the forward potential for revenue is observable).  For the balance sheet items, I like to see accounts receivable, accounts payable and any deferred revenues.  Of course, given the structure of the company and accounting methods, other data may be important in this section.  Capital equipment should be included if you’re running a business that requires a lot of it.

Finally, for bookings, you should list the bookings for the previous month, quarter and year-to-date.  It’s also a good idea to list the similar data for comparable periods a year earlier.


In this section, you should summarize headcount by department.  There is no reason to break your small company into too many small departments here, you can simply lump them together by function if departments don’t work out.  In the cart, you should list the actual headcount as of the time of the last report, any additions or deletions since then and the current headcount.  You should also list the headcount plan per department and indicate any delta between the numbers.


Finally, you should add a few lines of important data that either had an impact on this current summary or will ikely have an impact on future performance.  Items like tax filings, lawsuits, delayed products, loans being called, key people leaving or being hired, etc, should be listed here.

So, in the end, the consolodated report will look something like this (Google Spreadsheet):

Again, it’s short.  At the most, it should cover a single page.  It’s also easily derived from the financial statments that you already have – your spreadsheet editor will do all the heavy lifting.  In the end, it will improve communication with your board and your company and it will help to make sure your board is up to speed at all times.

I’ll state again that you should discuss the format of this type of information with your board.  It doesn’t make sense to present a summary that doesn’t fit the specific needs that the group has and the format can be easily changed to make it work well.  As Chris Wand over at Ask The VC says in his recent post, Concluding Thoughts About Good Board Packages,

While it’s tempting to look for an example of a “perfect” board package and then replicate it, the perfect board package isn’t something that can be easily copied because it’s company specific and requires a thoughtful case-by-case approach.

 May 4th, 2007  
 Boards, Management, Startups  

Communicating with Your Board: Equity Grants

As your company grows, you’ll find yourself frequently seeking approval for grants of equity from your board.  Most often, the desired grants will be for new employees, but you’ll also want to use equity to recognize and retain existing employees, consultants, advisors and even your board members.  Since many grants will be made, it’s important to be able to present a request for equity,

  1. In a standard (for your company) format so the basis for making decisions between meetings is as consistent as possible.
  2. Relative to other similar grants whether being done at the same time or having been made previously.
  3. With as much contextual information as possible about the people and the grants, themselves.

First, I’ll take a step back by saying that in almost all cases, your board needs to approve any grant of equity to anyone.  When you’re starting out, it may be the entire board who approves such grants.  Later, though, there is likely to be a formalized compensation committee of the board that will be responsible for review and approval.  Even though the compensation committee is responsible for being closer to the compensation information than the general board, it would be a mistake to believe that the members of the group remember what has happened before or understand the state of things in the company the way that you do.  There is just too much information to remember when they are not exposed to it on a day-to-day basis. 

The good news is that it’s relatively easy to present all the information needed to bring your board up to speed on the critical and contextual data in this area.  First, always include a cap table with your board package even if it hasn’t changed since the last time one was distributed.  The cap table gives the board/comp committee a great picture of who has what and makes it easy to make sure that there is some consistency in how grants are made.  Additionally, board members, especially those who are also investors, will be thinking about how any grant is going to affect their overall ownership in the company, even if they don’t admit it.  By giving them an up-to-date cap table, they can do the math themselves.  After all, it is all about me.

Second, have a table like the following in your package [note: I include the concept of options to acquire shares as part of shares]:

Name Position # Shares % Ownership # Existing Shares/% Vested Range

 Where the columns are:

  • Name: the name of the person who will get the proposed grant if approved.
  • Position: their current position in the company or the position that they will take when hired or retained.
  • # Shares: the number of shares and type of equity the person will receive.  Are they options, restricted stock, performance shares, etc?
  • % Ownership: what percentage of the company is being granted on a fully diluted basis.
  • # Existing Shares: how many shares of the company does this person already have (applicable for existing or former employees or consultants).  It’s also good to include what percentage of their options, if any, have already vested.
  • Range: what is the range of shares previously granted to people in this position or, if the position is new, what is the range of company ownership for this position in other companies at the same stage of development.

Third, be prepared to discuss the background and/or performance of anyone on the table.  In my experience, detailed descriptions are generally only required for people getting big grants, but it really looks bad if you can’t explain why someone is on the list in the first place.

This may seem like a lot, but it’s really quite easy.  It’s likely that you process all of this information already and just don’t formalize it.  The key, of course, is to not just do this one time, but to keep it up.  Consistency is important and will become increasingly important as the company gets larger.  By showing the proposed grants with context and making the comparison to previously approved ones straightforward, you increase the likelihood that you’ll get the grant approved without issue while making the entire process as smooth and fast as possible.  After all, it’s not fun having to go back to a new employee and tell them that their grant was not yet approved because the board needed more information . . .

If this stuff is interesting, you should also check out Chris Wand’s How to Create a Good Board Package series over at Ask the VC and my previous post, Board Meetings – A CEO’s Point of View.

 April 13th, 2007  
 Boards, Management, Startups  

Communicating with Your Board: Sales Numbers

I’ve mentioned before that it’s likely that your board remembers less about your business between meetings than you think.  As much as you think that your business is the most important thing in the world to them, your directors are probably on more than one board and many are on several at any given time.  So, with all the various pieces of information they are dealing with, they may not remember everything or sometimes get some facts and figures mixed up between companies.  As such, it’s important to remind your board about the relative nature of what you report to them each time you give them updated information.

What do I mean by this?  All information, especially numbers, should be given in context.  When new numbers are being reported, they should always be linked with plans, forecasts, and previous results.  As always, any communication tool that’s good for your board is likely to be a good one for the company in general, allowing people less familiar with the inner workings of the day to day business to grasp the significance of the data being presented.  You shouldn’t have to do a lot of extra work for your board, but you may want to consider the presentation of data with the board’s unique circumstances in mind.

In this post, I’m going to give some examples of how to report sales numbers.  The problem with sales reporting is that they come in multiple forms and have to account for many components.  There are planned, forecasted and actual sales.  Sales by territory and by channel.  There are sales by product and service and, further, by product line or service area.  There are probably half a dozen other ways to cut the numbers as well.  The goal is to put as much of this data into as condensed a format as possible.  Here are some charts that do that.  Please excuse my obvious US territory bias in these charts.

 Territory  Q1 Plan  Q1 Actual  Q2 Plan  Q2 Actual  Q3 Plan  Q3 Actual Q4 Plan  Q4 Actual  Year Plan   Year Actual
 US East                    
 US Central                    
US West                    

The rows in this chart obviously represent each territory that you sell into.  The columns give a view of the plan, presumably set before the period and likely before the year began, and the actual data for completed quarters. If a quarter is not yet over, you can use “actual” column to show the results of the quarter to date.  If you run your business on periods other than quarters, you can, of course, change the headings of each column to whatever period fits.

Presenting the data this way gives the reader a full view of where you are, where you were planning to be and what the future should look like.  If you adjust your plan during the year, you can, optionally reflect it here or on a chart that compares the old and new plan.  Too often, the old goals are tossed when a new plan is adopted.  In my mind, this is an error because the original numbers are too quickly forgotten.  You can’t learn from or remember why the plan changed if it is left in the dust.  It’s good to reflect on the original plan after the individual periods and the year is over.

Many companies sell their wares through multiple channels.  Ideally, this would be another dimension to the report above.  Since that presentation is difficult, though, we have to settle for an additional chart in which we break down the numbers by channel.  The chart looks just like the one above with “channel” replacing “territory.”    Of course, you may need to further break down each channel by territory.  I leave this extrapolation to the reader <g>. Again, showing plan vs. actual both forward and backward in time is critical to understanding the meaning of the data.

The final use of the basic chart outline above is for product line reporting.  For this, “product line” replaces “territory.”  While small companies will not always break down bookings per product line (although they should as soon as it’s applicable), it’s a good idea to separate product and service sales very clearly.  This basic division of numbers (which will probably also be found on the P&L) tells a lot about the business.

Forecasting sales is fundamental to making good investment decisions inside a company. If you don’t know where and when revenue will be coming in, you won’t be optimizing your use of capital.  Forecasts can come in many forms, but should at least include the following information:

 Customer Territory   Pipeline Stage  Expected Close Date  Sale Value  Prev. Close Date

For more information on the “pipeline stage”, see my post here.  The “expected close date” is the currently forecasted date for closing the deal and the “sale value” is the total bookings expected for this sale.  The “previous close date” is a very important part of the forecast.  It tells the reader that this sale was previously forecasted to close at another time.  Like the other charts, any data on what should have been or what will be substantially increases the value of any data being given.  Without this, there’s no accountability for the forecast unless the reader remembers the previous forecast or asks further questions about every deal.

The final sales-related chart that I like to see as a board member with a failing memory describes the deals that took place during the previous period.  These are deals that closed and the company reported as a booking.  A chart like this one contains all of the critical information.

Company  New  Add-On  Renewal  Total
   Total  Total  Total  Total

Here, the closed deals are listed by company name and amount with whether the deal was the first sale into that customer, an add-on to an initial deal or a renewal of a subscription-based earlier sale.  Obviously, the terms aren’t important, but any concept that applies to your particular business is.

  • A new deal is just that, a first sale into that particular customer.  Whether you include different divisions of the same company as the same customer is up to you.
  • An add-on deal is where you’ve sell additional product or service into a customer as a follow-on to an original deal.
  • A renewal happens when either a time-based license is renewed or, perhaps, a service agreement is extended.

These charts can usually be condensed into a few pages.  Small companies with a handful of deals will probably even be able to get them all onto a single page (aside from the huge forecast that might take additional volumes <g>). 

Of course, these are just examples and they may not all completely apply to your business.  They represent the way that I have seen reporting done successfully and in a compact form.  You should discuss the representation of information with your board and decide on the best way of getting comparative data communicated.  I highly urge you, though, to find a way to not only show current period data, but to do so in context, showing comparative data for other periods and versus plan as well.

 April 5th, 2007  
 Boards, Management, Startups