How hands-off is a “hands-off” investor?

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A potential investor has told me that he will be “hands-off”. What does that mean in reality? Will he be looking over my shoulder every five minutes?

The relationship between you and your and investor is as important as your relationships with your staff and customers.

It is essential to establish the “rules of the game” with your investor before any cash is invested, and before you incur any legal agreement costs.

I suggest that you sit down with your potential investor. Create an agreement documenting the contacts and communications (formal and informal) you each expect.

In other words, you both need to define in writing what is, and what is not, “hands off”.

An outline of such an investor contact plan might look like this:

  • A weekly five to 10 minute phone call to discuss current issues and KPIs.
  • A monthly meeting in person (or by Skype) to review the financial results and operational performance for the past month, as well as any key short-term goals.
  • During the monthly meetings, a range of documents will be discussed including financial statements, management reports, and sales forecasts.
  • A bi-annual visit to the office to meet you, and the key staff, to discuss mid-term goals.
  • An annual business performance review and budget planning session.

If you set and agree the level of “involvement” with all your investors, there will be less room for dissatisfaction later.

It will be tempting for an investor to call you with ideas, feedback or comments almost every day unless you establish the schedule for formal phone calls and meeting times.

A good and professional investor will be able to walk the line between showing interest and providing support while not meddling or wasting your time.

As Theodore Roosevelt once said:

“The best executive is one who has sense enough to pick good people to do what he wants them to do, and self-restraint enough to keep from meddling with them while they do it.”

 

This article was first published in StartUpSmart.

© 2013 – 2014, Philip Alexander. All rights reserved.

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