Thursday, November 15, 2012

Accepting a Position as a Director in a Company

Being invited to join a promising young startup is certainly a boost to the ego. Clearly, your qualifications and experience have impressed someone enough to offer you a position as director. However, you have to think like a business professional. Put aside the compliments and ask “Do I know what I’m getting myself into?”

Because you might be taking a radical change in your career path it’s vital that you do research before accepting a position as a director. The following are some key areas you should thoroughly understand about the start up.

1)      Their Finances

Start with asking, “How much money do they have in the bank?” and build from there. What you should be looking for are actual funds and not the promise of investors coming on board. A line of credit is a good thing for the company to have but without working capital, that credit can quickly exhaust itself and add to the red ink in a ledger. Beyond the working capital, you also want to examine the company’s valuation. This will include income projections versus expenses. Bottom line: You need to get the complete financial picture.

2)      Their Competitors

Every startup begins with the notion that they are better than their competitors. It’s your responsibility to take off the “rose colored glasses” and garner a true look at the marketplace. Their competitors wouldn’t be in business if they weren’t doing something right. What exactly are they doing that your startup can’t do? The opposite question applies as well when asked about the strengths of your potential company’s abilities. Not only are competitor’s sales important to review but also their approach to marketing strategies. How will your startup do things differently?

3)      Their Investors

In your new position as director for a startup you might be charged with the task to bring in new investors. Hopefully, that company will already have a few investors supplying capital and intelligence. You would be at an extreme disadvantage if there were no investors already on board. That might prove to be too daunting of a challenge.

4)      Their Board of Directors

Who will you be working with in this new venture? This is crucial to understand because engaging in a startup will have your mettle tested. You might be asked to work long hours with this group in addition to making other sacrifices in your personal life. Will it be worth it? It’s hard to judge that until you have some tangible sales figures but you certainly don’t want to invest your time and energy with a group of directors who aren’t up to the task. Don’t ever forget that the solid reputation which earned you the offer to join the startup is the same reputation that will be at risk.

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