Fortune 500 companies have a group of people called the board of directors. These are typically experienced business professionals, often presidents or CEO’s of other companies who lend their experience and expertise to help the management team make strategic decisions to move the business forward.
Even small businesses need an advisory board
This external perspective is valuable for companies of all sizes, even a micro business with just one employee. Unlike big corporations, a small business board is usually more of an informal advisory board. Typically the board won’t actually oversee finances or make business decisions. Instead this group serves as a sounding board to bounce ideas off of, an accountability team making sure you follow through on tasks and a resource to fill in the gaps in your skill set. Let’s face it, you started the business because you were good at something, but in all likelihood you don’t have all the answers to every business challenge.
Who should be on your board?
There is no one-size-fits-all answer to this question. The right board members will vary based on the stage of the business, the skill set of the owner and management team and the objectives of the business. For companies in the start up phase, board members may bring investment or simply a deep Rolodex, address book or network filled with people you need to know. For companies in growth phase, board members bring experiences from having navigated the same path so they can help you avoid pitfalls along the way.
As you build your board, think about about your weak points and look for people who can fill in the gaps. If you know a lot about marketing but have little experience with financial planning, be sure there is at least one strong financial person on your board. It is tempting to ask your company attorney, accountant or marketing company to be on your board, but things get muddy when you do. How likely is the board to tell you to fire your marketing company if a representative is sitting there. Ideally, your board members should not be making a living from your business.
The board is also not a place for husbands, wives, children or your best friend. Their personal connections to you may prevent them from being too honest or direct for fear of hurting your feelings or damaging your relationship.
Define their role
Before you start inviting people to serve on your advisory board decide what you want them to do. Think about creating a job description, just as you would for an employee. Define the role each member will play in strategy, staff and resource planning, risk management and financial planning.
Will they have decision making authority or simply be an adviser? This is your company, you set the rules. Just be clear of your expectations with potential board members.
Define the time commitment
It is typical for a board to meet four times a year. These meetings may be a 2 hour long lunch, half day or day long session. They may take place in your office, off site or at an exotic location. If you are asking people to travel and stay over night it is customary to cover their travel expenses, so you may want to postpone that meeting in Maui until you have a really good year.
While large corporations do pay board members in cash or stock options, that is not required for small businesses. Many successful entrepreneurs are willing to lend their experience to mentor new business owners. It is nice, however, to show your appreciation for the time they give you. So if your board is a voluntary board, consider making a contribution in their honor to their favorite charity or giving them a gift certificate for a restaurant they enjoy. Or consider offering to serve on the advisory board for their business in exchange.
If you aren’t ready for an official advisory board with regular meetings think about joining a peer group. In these groups, you participate in round robin discussions with other business owners of similar size companies or industry. Though not as focused specifically on your business, these groups still give you the ability to talk to other business owners about common problems and opportunities.
Whether you create a formal board or join an informal network, the important thing is to begin reaching out to others to help you grow your business. You may own your own business, but that doesn’t mean you need to go it alone.