Governance applies to all Company's regardless of their size. Businesses with a more formal structure tend to develop more quickly, and with a better and more clearly defined direction than those without.
To carry out the governance model you need Directors. Ideally an independent Director with the necessary skills and expertise is required. They have no financial interest in the success of the business; therefore their objective independent advice is more valuable.
Some compelling reasons why a good governance structure is needed:
1) It means you achieve the things you want to achieve, rather than get sidetracked on things which may not be that important.
2) It means you can adapt quickly to change whether it be to capitalise on an opportunity or steer the ship away from adverse conditions.
3) It is essential for a business that has a high debt ratio to ensure the business keeps that debt under control and not let the business deteriorate into a situation where the shareholders lose everything.
4) Banks will look at a business with a good governance structure more favourably than one that doesn't know how they are going until the Financial Statements are prepare the following year.
5) It helps keep you within the agreed overdraft limit and can reduce your interest rates if the bank can see you follow agreed plans and show discipline.
6) It helps enormously if you are going to have a successful succession plan. That can mean that if anything happens to the key person, there will be a clear path to follow for those left behind.
7) Better still good governance will address the succession issue and aid in realising the maximum value from the sale of your business, or it can become a legacy.
8) Finally, it is likely you will make a lot more money.
The usual reasons given for not putting a good governance structure in place are that it might cost too much.
"If the cost of something is considerably less than the reward, the cost is irrelevant.