Splitting the 'Pre-read' From the 'Discuss Live' in Your Board Materials
The Children's Laughter (aka The Finance Update)
Write Your Best Board Meeting Finance Update Ever.
At Moosejaw, all our shop managers opened their shops the same way. Or, they were supposed to do so. Actually, better chance no one opened their shop based on our plan. But, we definitely had a plan.
At CrowdRise, we had a template for charities that were raising money in the Boston Marathon that worked pretty well. My flag football coach had a playbook that didn’t work so well so we mostly just gave the ball to Calvin, who outran everyone. You have a process for onboarding new staff. You have a system for your OKRs. I could go on but I’m sure you get it.
The challenge is there’s never been a map for your board meeting and investor updates. That’s one of the challenges we’ve solved at Zeck.
Like Vespucci, we spend most of our time at Zeck in a giant map room. It’s a virtual map room though. With so many boxes of virtual cereal.
Having said all that, one section in the board meeting that is more templatized and consistent than any other is your Financial Update.
Based on lots and lots of feedback from CFOs and board members, we break the Zeck Financial Update (which is one hundred percent customizable) into the following sections.
- What You Need to Know
- Key Initiatives
- What’s Keeping Me Up at Night
And…consistent reports (again, you can customize any way you want, but staying consistent from board meeting to board meeting is invaluable)
- P&L Year-to-Date vs Plan and Prior Year (plus Key Takeaways)
- P&L Prior Quarter vs Plan and Prior Year (plus Key Takeaways)
- Cash Runway (plus Key Takeaways) with click through to Sensitivity Analysis
- Updated Forecast if different than Plan (plus Key Takeaways)
Please note that in the interest of wasting time, I typed out (plus Key Takeaways) every time (including this one) instead of copying and pasting it.
What You Need to Know
Just for fun, let’s assume your board is going to read your ‘What You Need to Know’ and nothing else. So, include your two or three most pressing and important notes. Could look like this:
1) Q3 Revenue was up 9% over plan and up 85% over prior year.
2) YTD Gross margin is up to an impressive 45%, leading to $5.2mm in EBITDA this year.
3) Q3 Marketing spend was 45% higher than plan (but worth it) and Q3 inbound and outbound shipping costs are 100% higher than plan (we’re ready to discuss options).
Guessing that highlights are pretty self-explanatory. Write about the big wins from the previous quarter. Start with a concise heading. Something like:
Q3 Crushed It, Building on an Amazing Year. Strong demand across all categories coupled with less discounting led to our best quarter ever.
- Q3 Revenue grew 9% over plan and 85% over prior year.
- Gross margin is up to 45% on the year, versus plan of 43% and prior year of 41%.
- Our new ERP platform is live, integrating our financial, supply chain, operations, and reporting data.
Also, pretty self-explanatory but I’ve been in sixty-two thousand board meetings that didn’t mention any bad news or challenges. That’s a miss on the operating team’s part and creates a mess. Lowlights should surface anything that didn't go so well over the past quarter. Same format…Headline and then a couple notes. Could look like:
Shipping and Marketing Costs are Way Up.
- Shipping costs (inbound and outbound) are way up (double plan).
- Marketing expense is 43% higher than planned, but salaries and other G&A are lower than planned, so we still beat our Q3 EBITDA beat plan but definitely a tough environment right now.
Always good to include a couple of the key initiatives you’re working on over the next quarter. Also, it’s not necessary to address your key initiatives from your prior board meeting but you may be asked about ‘em so be ready. Could look like this:
We’re working through lots of small initiatives that add up to be meaningful.
1) We are working on adding pre-paid shipping labels to each customer package. We will make $3 each time someone uses our label, and it will still save the customer time and money.
2) We are about to use our 2% cash back credit card to pay for 25% of our inventory purchases, worth over $200k next year. Our goal is to get to 50% of inventory paid on credit card.
3) Starting next quarter, we’re confident that, for the first time ever, we’ll be able to take advantage of vendor discounts for paying in 30 or 60 days instead of 60 or 90. We estimate this will save us an additional 2 points on all vendor payables.
What’s Keeping Me Up at Night
Quick side note: I’m a terrible sleeper and if my dog isn’t waking me, something else is. I’m actually writing this at 2am and may watch Band of Brothers again when I’m done.
We’ve gotten a lot of great feedback about this section. This is an opportunity for your board to get into your head a little bit. Seems to be a focus of live conversation in the board meeting so be ready to discuss. Could look like:
Our Q4 Plan is Really Aggressive
We’ve been beating our plan all year, but the 70% planned growth in Q4 is at serious risk due to inventory shortages (Click Here to see the Q4 P&L Forecast).
We are working hard to get more inventory for the holidays so we can hit our top line numbers, but we will likely miss on gross margin and EBITDA due to the increased shipping expenses.
Next come your financial reports. These are pretty typical and you’re likely already making ‘em happen. The key is to stay consistent so your board members can easily calibrate themselves in advance of the live meeting. A few notes…
1) Unlike a traditional deck, Zeck allows you to use links, as easily as every website. That means you don’t have to include every piece of supporting data in the finance section, which typically balloons the section into something indigestible. Instead, embrace links so you’re surfacing the high level reports your board members will care about most, but still allow ‘em to click through for more detailed data. This works brilliantly btw (that stands for ‘by the way’). We like to use the texting abbreviations but then explain them to defeat the whole purpose and take up more space).
2) Again, because Zeck isn’t a deck, you don’t need to email seventeen additional attachments with your financial update. You can upload your reports into your Zeck exactly in line with the content that relates to ‘em. So much easier and better. And if you want to include a few excel files for the board to dig into, you can upload those too. That way you aren’t sending an email with a long, boring deck plus a bunch of unorganized attachments. Your board will instantly appreciate this change.
3) Include key takeaways with each report. Write your key takeaways so your board will get exactly what you’re trying to say without necessarily needing to dig into the actual report. Your key takeaways could look something like this:
- YTD Revenue up 17% over plan and up 100% over prior year.
- YTD Gross Margin is $5mm better than planned, driven by order growth, new customers, and less discounting.
- Expenses only up 3% versus plan (marketing increases offset by lower payroll and other SG&A).
- EBITDA up to $5.2mm through September 30, crushing plan of $900,000.
What else? Well, I believe the children are our future. Teach them well and let them lead the way. Show them all the beauty they possess inside. Give them a sense of pride to make it easier. Let the children's laughter remind us how we used to be. Everybody searching for a hero. People need someone to look up to. I never found anyone who fulfill my needs. A lonely place to be. And so I learned to depend on me. I decided long ago never to walk in anyone's shadows. If I fail, if I succeed at least I'll live as I believe. No matter what they take from me, they can't take away my dignity.
Because the greatest love of all. Is happening to me. I found the greatest love of all inside of me.
I think that covers it.
Decent Humans of Zeck