As your start-up evolves from a team of founders with a good idea into a real company serving real customers, and as you start taking in external capital to fund continued expansion, board level reporting starts to become extremely important. Not just for the founder/CEO and senior leadership team (who needs to have a data driven view of what’s going on), but also for investors and other stakeholders so that they can calibrate their understand of what’s happening inside the business (which is the best basis for them to be helpful. How can your board help? That’s an important topic, and I have written a separate blog post on that here. )
At SuperSeed we invest at Seed stage (for companies that are in the market and are looking to develop go-to-market fit). Here is an overview of a board pack that’s helpful at this stage
- Strategic review / summary
- Restate current strategic mission / objective
- List of next set of milestones (more on those below)
- Challenges we need to overcome to hit milestones / objectives
- Outline of policies / principles we plan to deploy to overcome challenges
- sales & sales pipeline
- At the early stages, and review of pipeline and a review of recent wins and losses
- Once you have product/market fit, the focus shifts to sales-productivity. These are typically captured in SaaS metrics. Here is a good article on some of the most important ones.
- tech and product
- Product roadmap
- Tech milestones
- Challenges to hit milestones
- Strategy to overcome challenges
- HR / hiring
- Forward looking org chart that shows where you are looking to hire in the next 3-6 months.
- HR issues that can benefit from (or even require) board attention
- Monthly management accounts
- Balance sheet
- Budget for the year (by month and by quarter)
- A forecast. I cover that in more detail below
Financial reporting and forecasts evolve with the business.
It takes a bit of time to produce a good board pack, especially in the beginning where you are working through the best way to capture the information that’s critical to your company. Your board can help, so don’t hesitate to get their input on the format.
Ideally your pack contains mainly content that you already use to run your company, and a lot of this will be produced by your functional leaders. For instance the head of sales puts together #2, the CTO or head of product put together #3 and so forth. However, the strategic roadmap for the business is always owned by the CEO. It is important that this is used to surface the real challenges. No point in trying to make things look pretty or in “marketing to the board”. The more of the real challenges your board knows, the better we can help think about how to solve them.
Board reporting is a key topic as start-ups think about how best to engage their investors and other stakeholders. With a bit of investment, these can form valuable tools both for internal audiences (leadership team and general employee discussion) and also for board and investors. It’s easy to go overboard and spend too much time on reporting, but in general a group of start-up founders should probably spend at least a few hours every month tracking their KPIs and analysing these in a deck – both for themselves and also for their board and investors.
Depending on the stage of your business, different levels of reporting will be valuable. But whatever stage you are at, an outline of your next strategic milestones is essential.
Investors back your business, because they believe you are on your way to create a great company, which will give them a healthy return on their investment. You are creating this return every day by moving the business towards hitting the next set of milestones. Examples are:
- First user
- First paying customer
- Launch of new enterprise feature [X]
- First $100k in revenue. First $1m
Spell them out in your board pack, and provide a comment on progress made and when you are likely to hit them. If done right, this will provide a great tool for the founders as they steer their company, and for their board as they think about how to help the business grow and succeed. And if you keep pushing and pushing and the milestones are not coming closer, then you know it may be time to consider a rethink of the strategy and pivot to the business.
When you are just starting out, the most important forecast is your cash-out date, which you find by dividing the amount cash you have in the bank, adding or subtracting any major one/offs you know about (e.g. major third-party payments, R&D tax credits) and then dividing the remainder with your projected monthly burn. So if you have £200k in the bank, and if you expect to get a further £50k in R&D tax credits in the next few months, then your starting point is a £250k balance. If your monthly burn is £50k, that gives you 5 months before your drop-dead time (and if you haven’t already started, it is probably time to get started on your next funding round!)
Make your forecast like a waterfall. That helps keep everyone calibrated as the prospects of the business evolve. The waterfall model is described more here: https://vcwaves.com/2011/01/18/the-single-best-financial-reporting-tool-ever/
As you evolve, your forecast will become more sophisticated. I have written more about forecasts and general financial reporting here: KPIs and Financial Reporting for Startups