Credit and Finance
Why is a director search so important?
Posted on by Cindy Yip
Estimated read time: 4 mins
A director search is simple to do and can be valuable and useful towards helping you make informed business decisions. Director information can give you an insight into the management and ownership structure of the business as well as listing any of the UK director’s current and previous companies including failed ones from the past. So why should a director search be so significant and how can it help you make business decisions?
A director is the pivotal person within the organisation
Small to medium enterprises (SME) will have 1-3 directors and larger companies could have a board of directors whom run the operations of the company and make all the important decisions. A company is made up of its people, and this is especially so for smaller businesses, so it’s important to establish precisely who you’re dealing with. The director(s) can hold massive influences in the performance of the company as they’ll be heavily involved in the strategic planning and execution of the business plan. They’ll also be the ones establishing the company’s ethics and morals so running a director search can help with your due diligence before deciding to trade with them.
The impact of the directors
Take a look at how long the directors have been at the company, as directors shouldn’t be changing frequently. If there is a high turnover of directors, it could suggest you need to delve deeper into the details of the organisation. Are there potential relational conflicts within the company? Does the business plan keep changing? Is there something wrong in the business that means it’s affecting the generation of new business? Look for trends of when there was a change in directors and do a search on the internet to see if this corresponds to any news or events. Check the company’s credit rating at the time the director joined or left, did this have a negative or positive effect? If the company has any bad debts, check when they were and who was directing at the time.
Insight into the past
A director search will show you all the past and present appointments a director associated to that company has had and you can look into other companies they hold directorships in. If the director has a long list of previous appointments, it’s worth checking to see whether the company dissolved or if the director just moved on. A lot of failed companies in the past could indicate poor management and consideration must be given as to whether this problem may be carried onto the company you’re looking to trade with. On the contrary, if the director has turned a few start-ups into successful business then this tells a different story.
Busting the myth
The more detail you get about the directors and their past, the easier it may be to jump to conclusions. Just because they’ve had one or more failed businesses in the past, this makes them incompetent or untrustworthy. It could be down to external factors rather than the ability of the director themselves, like the financial crisis of 2008 which affected so many. This may have even helped them to learn from past experiences for them to become a better leader now and make better decisions.
The judgment as to whether or not to trade with a business should be an informed one with as much detail as you can gauge. A director search gives you the insight and transparency to make informed decisions so you can help protect yourself and your business against the risk of dealing with inappropriate people or organisations.
Check and monitor any UK company and their directors with our Experian business credit reports.