Board materials take many different forms. There is no correct way of presenting material to your board. That said - there are certainly improvements that almost any company can make to their board materials.
I've sat in dozens - if not hundreds of board meetings in my lifetime - and I've looked at even more board decks. While I will cover other areas of board materials in future blog posts, one area that I often feel I could be better informed by the company is in the company's financials - so I will start there. The materials shared here are heavily influenced from some of the best board decks I've ever seen inside our own portfolio.
I'll preface this blog post by saying that on every board there is probably that one board member that is like the mouse in the children's book "If You Give a Mouse a Cookie" - the more you give, the more he will want. That said, I believe that if you add these materials to your existing financial slides you'll get better interactions with and better questions from your entire board.
One last point - if you aren't already including a detailed P&L, Balance Sheet, Statement of Cash Flows, Cap Table, and a few board approved KPIs - start there first. If you have those nailed down, and you are wanting to know what else your board is looking for, keep reading.
#1 THE REVENUE WATERFALL
You might have been wondering why the image tied to this blog post was of a waterfall.
The waterfall is used in financial slides to show incremental growth or contraction for period to period, across different segments. The period could be months, quarters, years, or something else. You may sometimes hear this chart called a bridge, because it is supposed to "bridge" the reader from one period to the next. A waterfall/bridge visually shows growth and contraction much more easily than what can be derived from starting at a P&L. A good waterfall should include detailed notes to detail what happened during that period to the entire business, as well as to each segment - and how those compare to the board approved plan.
Often times as operators we forget that our board members are not working inside the business week-in and week-out. These waterfalls help to tell the story of what happened since the last time we met.
#2 THE MARGIN BRIDGE
This is really where the word "bridge" came from. For some reason when talking about margin, the same "waterfall" is now a bridge". In any case - this follows the same principal as above, but I wanted to include it here as a separate slide, because it is THAT important.
The example used here is showing improvement in OpEx to illustrate how EBITDA is changing. You could use the same bridge to show EBITDA improvement on a dollar basis (starting with beginning period EBITDA, adding adjustments for revenue (by type), gross profit (by type), and your expenses (by type).
You could (should) also use this bridge to show and analyze changes in gross margin. In that case you might start with gross margin % for the beginning period, show an increase in gross margin attributable to price increases and volume, a decrease caused by product and/or channel mix, and another increase from sales region mix - ending at your closing period gross margin %.
This level of detail may seem tedious at first, but as you walk your margins through a bridge I can almost guarantee you that your board members will be better equipped to think through your business strategically.
#3 BAR CHARTS - WITH A TWIST
Not really a twist - but an improvement. I see a lot of bar charts like these in almost every board meeting I sit in. What makes these different? Look closely.
This bar chart was created for a Q2'19 board meeting. A basic Q2 bar chart will include the prior quarter and the following 2 quarters, for a total of 4 bars - representing an entire year. A slightly improved bar chart will include the prior 2 or 3 quarters and the upcoming 3 quarters. THIS bar chart includes Q2 of the prior year, the prior quarter, and the next 4 quarters. Why is that important? As a board member I can now compare performance against last quarter, against this quarter last year, against next quarter, and against this quarter next year. Pretty basic, but I can almost guarantee you that your current bar chart doesn't allow a board member to make so many comparisons that quickly. Don't be basic - try this one.
#4 THE WATERFALL FORECAST
Too many waterfalls, I know.