In the US, Tuesday 21st November marks Entrepreneur’s Day and as we mark the end of our financial year, I thought I’d share some insights into our business growth story here at Red Badger.
When we reflect on the past seven years, there were various inflection points that mark the stages of Red Badger’s growth. One of these happened in 2012, when we started working with our non-executive director Mike Altendorf, or ‘Dorf’, as he’s affectionately known. We brought in Dorf’s help to provide advice at board level and to help us mature our sales and marketing functions with a specific target of winning large-scale direct clients.
In just six months, he’d introduced us to our first direct client, Sky (previously, we’d been working on clients via strategic partnerships). Sky remained a client for 18 months due to the great job we did of delivering and proving value, and as a result, we were able to get in front of Tesco and Fortnum & Mason with brilliant credentials to back up our conversations. In 12 months, our revenue tripled from around £900,000 turnover to around £3m, and this kick-started a period of rapid growth that we continue to see today.
Before this goes to his head, this growth wasn’t just Dorf’s doing. We still had to deliver on the clients that he introduced us to, to an exceptional level. But it’s likely we wouldn’t be anywhere near the size we are, or have the focus we have today without Dorf’s advice and help.
If you’re thinking of starting up, we’d recommend buddying up with someone who has been there and done it. To help you find and work with the right person, here’s some advice from us, gleaned from years of working with Dorf.
(Disclaimer: none of the Red Badger founders are seeking non-executive director positions, although I’m told Dorf, is always open to a chat about these roles.)
Start with ‘Why’
We didn’t start out working with Dorf immediately. Our business had been running for two years, with three of us working out of our bedrooms for the first year, financing the business through our savings. But after two years, we understood that there were challenges that we faced – a ‘feast or famine’ revenue pattern, low margins (because we worked via strategic partnerships rather than direct with clients), flat growth, and a business without any clear value proposition.
We decided we needed someone to help us reach the next stage of growth, which would be securing direct clients. With a limited reputation, we recognised that we needed help to achieve this, so we started the search for our non-executive director.
For anyone considering this route, we’d recommend creating a unified definition what’s the most important to the business at that moment. For us, it was getting to direct clients.
What to consider when selecting a non-executive director
Having defined why we needed help, our selection criteria was very straight-forward. It may surprise people who know our business to learn that Dorf wasn’t the only option on the table. We met with several potential non-executive directors, but Dorf stood out as the person who could help us most with connect with direct clients, due to his experience and contacts.
In addition to this, his experience of building and running the 350 people-strong consultancy Conchango (our previous employer), also meant that he came armed with the battle-scars and experience that would help us as Red Badger grew.
Options for structuring the deal
In our experience, non-executive directors do not work for free. If you’re thinking about working with one, there are several options available for remunerating them
- Investment – part of the reason to bring a non-executive director on board could be investment. In this case, so they’d have a vested interest in helping the company grow to grow the value of their investment
- Equity – non-executive directors may be happy to accept share options in return for their work. This is a useful option if cash-flow is poor.
- Retainer – if cash-flow is strong, then a retainer could be an option
- Sales bonuses – if part of the role is sales, then a structured incentivised bonus scheme, based on sales or profit could be an option
These are just some considerations. They could be combined to make a package, depending on what the focus of the role is, and the cash situation of the business at any given time.
The right option will depend on the business and the non-exec - make sure you find a package that suits your current and intended growth plan as well as the chosen non-exec.'
What are the other benefits of working with a non-executive director?
Dorf quickly helped Red Badger establish its value proposition, which meant that it was easier for clients to identify the benefits of working with us. But working with Dorf has provided several other benefits beyond winning clients.
He’s been a great mediator between us founders, and he’s helped us maintain buoyancy if we’re facing challenges related to clients. His experience is like another layer of armour, and helps us maintain a long term view of the business.
But perhaps the most valuable thing he does is simply acting as a sounding board for us. We speak to him around three times a week (often around 10pm, while we’re mulling over a particular problem or opportunity) as well as meet him once a week.
Having him on the end of the line has helped us make the right decisions quickly.
What should you know about maintaining a successful working relationship with a non-executive director?
First of all, make sure that you are communicating with them all the time to ensure that they’re delivering the value you expect from them.
Trust is key. We trust Dorf implicitly, and he trusts us. There are times when as a founder, you’ll face some hard truths from your non-executive director. Our advice is to accept it wholeheartedly, and get on with doing the right thing, and doing the thing right.