In all honesty, do you run a one-man business?
If yes, how do you intend to mitigate key man risk?
You can have a hundred employees and still be a one-man business.
Can critical decisions be taken without you?
Can business move on without you?
Over the weekend we had a virtual meeting with two investors abroad on behalf of a business venture here in Nigeria.
They sought to know what happens to their investment should anything happen to the business owner.
When the business is a sole proprietorship and the investment sum is small, it is easier to take the risk, but not when the investment sum isn’t a small amount.
Typically, we say “God forbid. I cannot die. Nothing will happen to me”. It is okay to have faith, but the preservation of people’s investments shouldn’t be on the basis of your faith.
You need to have a clear plan on how to mitigate key man risk (a concern for most investors), especially if your business is incorporated.
What should you do?
1. Find an IDEAL co-founder or partner, IF YOU CAN and give some powers to the person.
The next one is more important in the context of this discourse.
2. SET UP A BOARD.
Set up a functional board of directors. I don’t mean an advisory board, but a board of directors that is listed with the corporate affairs commission.
A board of directors can take crucial decisions. The board can even hire a new CEO to continue with the business.
You don’t have to consider death to think about these things. Government can create a regulation tomorrow that says the CEO of a company shouldn’t serve for more than a period of time.
You may decide to establish another company that requires your attention while someone takes over as CEO to run the other company.
So when an investor throws that question at you someday, tell them you have a functional board of directors that will take decisions in the best interest of the company and stakeholders should anything happen to you.
This issue is one major reason why we are not building trans-generational companies in Nigeria. Our sense of control and power limits the potential of the company and our vision doesn’t develop deep roots for sustained growth.
If you have registered a limited liability company, what is keeping you from setting up a proper board of directors?
You know that the listed directors you have on your CAC documents were just to meet the criteria for registration.
When do you intend to do the right thing? Are you even considering it?
If you really want to go big and build a sustainable company, think about these things and ACT.