Credit checking a company prior to doing business with them is a given these days. With instant access to payment data, financial history and much more it is quicker and easier to protect yourself from bad debt than ever before.
One area that companies often fail to check is the directors behind a business. The director or directors can hold massive influences on the performance of the business, and they could be heavily involved in the strategic planning and execution of the business plan. If the director(s) are the founders of a company it is valuable to know as much as you can about these entrepreneurs, as success often filters from the top. If the directors aren’t performing, the business could potentially deteriorate.
Directors will establish the company’s ethics, culture and morals and a lot of the time they will be heavily involved in the operations and financial side of the business as well so running a director search could help your due diligence into a business before you trade with them.
If you think it is worthwhile looking into the directors behind your closest customers, run a director search with Creditsafe.
Where to look
Director information is included in all Creditsafe packages, so you can quickly can determine who a company’s directors are via the company report. Select Directors/Shareholders from the top menu within the report, where all directors, their key credentials and share distribution is shown. If you already know the name of the director you want to check, search for them using Creditsafe’s People Search.
Size matters in business
There is a definitive link between a company and its directors. Small to medium sized companies are likely to have 1-3 directors, whereas larger businesses often have a board of directors than run the operations of the company. Be wary of any companies which deviate too far from the norm here. Yes, electing more directors brings in more expertise, but having too many directors in a small company can slow down decision making as well. On the other hand, larger companies bring about greater complexity, so they’ll need the extra expertise and diverse experience of a larger board.
Are they in for the long haul?
When conducting a director search, it’s worth checking how long the director has been at the company. If there is a high turnover of directors, it could mean something is going on within the company that could affect its future stability and performance. The problems could be that the directors aren’t getting on, or the business plan keeps changing or is unstable. It could be that the organisation of the business is failing, employees aren’t agreeing with the leadership tactics or even something like a director has more on his or her plate than they should. For a company with a high turnover of directors there is always a reason for it. Look for trends within the search that could pinpoint the reason.
How are they performing?
It is vital to follow the performance of the company while they have been a director, and not just taking a current snapshot. Check the company’s credit rating when certain directors joined, did they go up or down? Are the directors having a positive impact on the business or are they dragging it down? Look for other links in a company credit report too. If the company has any bad debts, CCJs, etc. always check when they were issued and who was directing the company at the time.
It’s equally important to know if a director has a lot of current directorships, as the amount of time and effort he or she invests in his or her companies could be questionable. If that is the case, it’s worth asking who you will be dealing with on a regular basis and who is running the operations and finances of the company so you can form a relationship with them on a personal level.
An insight to the past
A director search can show you all the past and present appointments a director has, and it can even link you to their other companies. If a director has a long list of previous directorships, it’s worth checking the companies out to see what went wrong and how long they remained active. Be especially cautious if a director has managed a lot of companies that have failed. A director that has been involved in a failed business in the last 3 years is 9 times more likely to fail again, compared to director who has never failed. Likewise, if the director has a reputation for taking start-ups and turning them into power house companies, this will show on his or her report.
Be aware of disqualified directors
A quick director search can also reveal any criminal activity or disqualification. Not only can you verify if your director is who they say they are by proof of address and date of birth; if they have been disqualified it will show up on their director search. It is illegal to deal with a director who has been disqualified so always double check they are legit.
Understanding the whole picture when it comes to vetting a potential new customer is important. You may be familiar with the company, but knowing who is running the shop behind the scenes is equally important. Speak to one of our team today for a free company and director search on any UK business.