Size matters in business
There is a definitive link between a company and its directors. Small to medium-sized companies are likely to have 1-3 directors, whereas larger businesses often have a board of directors than run the operations of the company. Be wary of any companies which deviate too far from the norm here. Yes, electing more directors brings in more expertise, but having too many directors in a small company can slow down decision making as well. On the other hand, larger companies bring about greater complexity, so they’ll need the extra expertise and diverse experience of a larger board.
Are they in for the long haul?
When conducting a director search, it’s worth checking how long the director has been at the company. If there is a high turnover of directors, it could mean something is going on within the company that could affect its future stability and performance. The problems could be that the directors aren’t getting on, or the business plan keeps changing or is unstable. It could be that the organisation of the business is failing, employees aren’t agreeing with the leadership tactics or even something like a director has more on his or her plate than they should. For a company with a high turnover of directors, there is always a reason for it. Look for trends within the search that could pinpoint the reason.
How are they performing?
It is vital to follow the performance of the company while they have been a director, and not just taking a current snapshot. Check the company’s credit rating when certain directors joined, did they go up or down? Are the directors having a positive impact on the business or are they dragging it down? Look for other links in a company credit report too. If the company has any bad debts, CCJs, etc. always check when they were issued and who was directing the company at the time.
It’s equally important to know if a director has a lot of current directorships, as the amount of time and effort he or she invests in his or her companies could be questionable. If that is the case, it’s worth asking who you will be dealing with regularly and who is running the operations and finances of the company so you can form a relationship with them on a personal level.
An insight into the past
A director search can show you all the past and present appointments a director has, and it can even link you to their other companies. If a director has a long list of previous directorships, it’s worth checking the companies out to see what went wrong and how long they remained active. Be especially cautious if a director has managed a lot of companies that have failed. A director that has been involved in a failed business in the last 3 years is 9 times more likely to fail again, compared to a director who has never failed. Likewise, if the director has a reputation for taking start-ups and turning them into powerhouse companies, this will show on his or her report.
Be aware of disqualified directors
A quick director search can also reveal any criminal activity or disqualification. Not only can you verify if your director is who they say they are by proof of address and date of birth; if they have been disqualified it will show up on their director search. It is illegal to deal with a director who has been disqualified so always double-check they are legit.
Understanding the whole picture when it comes to vetting a potential new customer is important. You may be familiar with the company, but knowing who is running the shop behind the scenes is equally important.