This is number 7 in an 8-part series especially for new subscribers to Creative Finance & Management. Every week we are sending you an article aimed at helping you to think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter. We are doing it to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

Here we go again: ...

---

Stakeholder management - the importance of keeping people happy

You already know this in all probability, so I will try not to labour the point, but there are many relationships involved in running your business. A lot of them you could call stakeholders. Stakeholders are people or entities that have an interest in your business.

The term is used really to make it clear that businesses do not just exist for shareholders - those who own the business. There are other people and organisations that are affected by and/or interested in the success of the business. They can also affect the success of the business, and you need them on board to help you achieve your vision. So they should be given some attention as well.

If you want examples, stakeholders would be the likes of: customers, suppliers, shareholders, lenders, bankers, employees, local residents, landlords, insurance agents, recruitment agencies, HMRC, pensions providers, auditors, tax advisors, corporate finance advisors, company secretary, non-executive directors, other board members, (maybe the media, your competitors and industry regulators could be others).

Here is another area where you need to be intentional and analytical. Relationships need to be managed. You can't leave them to chance. If you are not managing these relationships right now, why not? Is it because you don't like others interfering in your business? If that's the reason then here's my suggestion for a mindset change - why not see these stakeholders as your teammates, with different skills, abilities, expertise, network contacts, access to funds, wanting your business to succeed and ready to help? Twenty heads are better than one?

And when I say that relationships need to be managed intentionally, I am not saying that you have to be on the phone every week to every single person you identify as a stakeholder. But you have decide intentionally whether you are going to give them any attention and if so, how much and of what sort.

So here's what I think you should do now:

First, brainstorm a list of the stakeholders in your business (and I mean each one, not each category - so each customer and each supplier). Then, for each person or organisation, make a note of:

What do they get out of your business?

Why is your business important to them?

How would you classify their relationship with you (customer, supplier, advisor, investor, etc)? There could be more than one answer.

What do you and your business get out of them?

What else could you get out of them?

How important is this relationship to the success of your business (rate 1 to 10 or High, Medium, Low)?

What is likely to happen if they didn't like you (and on a scale of 1-10 how disastrous would that be for the business)?

What could happen if they liked you more?

How good is your relationship with them (1-10)?

Given the importance of the relationship noted above, how good should your relationship be (1-10)?

What is your relationship strategy for this person or organization (actively develop, regular update on business, mine for leads, no proactive management, etc)?

Finally, there are some stakeholders that are so important that they need extra special attention. Those would be shareholders, customers, lenders, employees, (perhaps some key suppliers and contractors), landlords, bankers and auditors. If they withdrew their funds or their services, or published an adverse comment about your business, you would be stuffed! Perhaps it's worth thinking whether a little bit of extra effort on your part might keep them happy. Perhaps you could give them a little more information than they request, or phone them with an update when they haven't asked, beat deadlines, offer a tour of your facilities, etc. Some things don't cost anything, but they buy lots of goodwill. You never know when you may need them to be understanding!

The next CF&M new subscriber newsletter is the last one, and we'll be looking at internal control - 3 fallacies that add risk to your business.

---

See you then...

If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009