(Add to Favorites | View All Articles | Resource Directory)
|
|
|
The Advisory Board: A Business Owners Most Valuable Resource
As a company grows, the owner's role begins to change. More and more of the owner's time is spent "in the shop or in the field" handling day-to-day operations rather than focusing on high-level planning and strategic issues. As a result, a company often reaches a plateau and finds it difficult to continue growing. This may be the time for the business owner to consider creating an outside board of advisors. Owners that do not use a functioning outside board of advisors are missing out on a tremendous opportunity to improve the management and profitability of their company. An outside board can provide business owners with valuable advice from individuals with years of business experience. An outside board of advisors can also play an important role in the helping a business owner design and implement a long-term strategic business plan. In addition to serving as a sounding board, a board can help monitor and improve business performance by: · Networking to bring in new business · Reviewing financial statements and audits · Reviewing corporate mission and strategy · Reviewing and approving budgets · Monitoring business performance · Making recommendations regarding major capital expenditures · Assessing organizational structure and policies · Approving acquisitions and mergers · Approving major debt transactions · Lending credibility to the company as it targets larger accounts Initially, business owners may be reluctant to involve an outside board in what had always been private business affairs. The owner may fear the interference of outsiders or having strangers involved in the "family business." Even if an outside board is created, the worried owner may not allow the board to function in a meaningful way. The owner may be inclined to select long-time friends, advisors, or subordinate employees to serve on the board. Unfortunately, these folks do not have the independence needed to provide the owner with the objective advice he or she needs to hear. Alternatively, some owners create a board, but never hold regular board meetings. Other business owners feel threatened by their boards and only consult them on trivial matters. When this is the case, the board of advisors can rarely, if ever, provide any value and should be disbanded. Creating an Outside Board of Advisors If you are thinking about assembling an outside board, consider the following. Develop a Statement of Purpose for the Board. The business owner should meet and decide what role(s) the board will play vis-à-vis company management. The end result of this process is a written, comprehensive statement of purpose for the board. Decide on the size and scope of the Board. Ideally a board of advisors should be small enough to be productive. We recommend that a board be made up of between 3-5 people. If the board is much larger than this it becomes difficult to manage. Decide on Characteristics of the Ideal Board Members/Advisors. Spend some time deciding what types of individuals you want on your board. Some owners decide that experience in the company's industry, or a similar industry, is a prerequisite. You may also want to include someone older and someone younger to represent the values of more than one generation. Some business owners value having members with different professional backgrounds (i.e., lawyer, business operations, accounting, business sales.) You may also want board members who can help with a specific strategic project (e.g., if you are planning to expand into a new market you may want a board member who has successfully run a business in that market). Prepare a Member Prospectus. You should prepare a "Prospectus for the Advisory Board," to help screen and recruit board candidates. The "Prospectus" explains the purpose and goals of the board. It also lays out details like the board structure, time demands, fees to board members, and meeting schedules. Finally, it describes the capabilities, qualifications, and characteristics that the company is seeking in board members. The Prospectus need not be long. One or two pages are usually sufficient. Identify Possible Board Candidates. If you are like most business owners, your first instinct may be to invite close friends and trusted advisors (i.e., your lawyer, CPA, or banker) to serve on the board. You should resist this urge whenever possible. The best board members are usually fellow business owners, entrepreneurs, business peers, and retired CEOs or CFOs. There are a large number of these people eager to serve on advisory boards. Many former business owners and retired executives are willing to serve on advisory boards for a nominal fee, simply to stay involved in the business world. These types of outside advisors have often faced many of the hurdles that lie ahead for your company and can offer you invaluable advice. Meet with Candidates. You should meet with and interview each board candidate. You should explain your company's needs and ask about the candidate's qualifications to help you meet those needs. Always be certain to check references. Ensure Support from Owners and Managers. Before you make an offer to someone to become a board member, have the candidate meet all of the shareholders and key managers to make sure that everyone feels comfortable working together. Minority owners and key managers should be able to express their opinions about the candidate - both positive and negative - but you should have veto power. Fees and Costs Board members deserve to be paid, but an outside advisory board does not need to be expensive. Often for less than the cost of hiring a business consultant, you can have a fully committed and dedicated outside board of advisors. The cost of an outside advisory board is usually broken down into the following components. The Cost of Setting Up the Board. This can be as little as nothing if you organize and set up the board yourself. On the other hand, if you choose to use a firm that specializes in helping business owners set up advisory boards, they expect to be paid. Their compensation can range anywhere from a flat fee to a fee that is similar to that of an executive recruiter. Under this scenario they are paid a percentage of the total compensation that is paid to the board. Annual Board Fees. These are the annual fees that are paid to each board member. These fees compensate the board members for the work they do behind the scenes, networking on behalf of the business, reviewing plans and documents, brainstorming, and generally being a resource for the business owner. For middle market companies, these fees range anywhere from zero to as much as $20,000 per year. The average seems to be around $12,000 per year per member. Meeting Fees. In addition to the annual board fees, it is common to pay a board member for the time invested in attending the actual board meetings. This is intended to compensate the member for his time and expense in attending the meeting. For middle market companies, meeting fees range from zero to around $1,500 per meeting. The average meeting fee is approximately $500. As a result, assuming the averages presented above, and an outside board of five advisors that meets four times per year would be as follows. Obviously, this is only a rough indication. In many cases the costs are much lower than this. In a few cases, the costs are higher. Use this as only a starting point. Consider deferring the specifics on a board member's compensation until after you've selected the member. It is important that members do not join boards simply for the pay. As an owner, you want to see that working on the board is something a board member will find fun and exciting to do. Share your business goals and objectives and see if the person responds enthusiastically. Then discuss the specifics about compensation once you have found someone who is excited about your company and shows an interest in serving on your board. Author Bio: Rich Jackim, former Wall Street attorney and experienced investment banker has helped over 60 business owners successfully exit their companies and realize their personal goals. He is the author of the recenly published book, "The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners." Available at http://www.exit-planning-institute.org Rich is the president of The Christman Group LLC, a boutique investment bank that specializes in selling privately owned businesses. Visit http://www.christmangroup.com to learn more. Rich received his BA from Colgate University, his JD from Cornell Law School, and his MBA from the Kellogg Graduate School of Management. He is a sought after speaker and has either published articles or been quoted in Business Week, Chicago Tribune, Chicago Daily Herald, Indianapolis Business Journal and numerous other regional and national publications.
MORE RESOURCES: News provided by Yahoo! News and Google News Proposed Regulation Grants Agencies the Discretion to Waive Small Business Set-Asides, According to the American Small ... Small biz and targeted tax breaks moving in Fla. House - Bizjournals.com 5 tax tips for small biz - El Paso Inc. #1 Amazon Web Marketing Bestseller, Content Is Cash, Nominated For 2012 Small ... - PR Web (press release) Small biz loan demand up, Federal Reserve says - CNNMoney Small Business Hiring Intentions Best Since January 2008 Bill Aims to Simplify 1099-Ks for Small Biz - Reuters Small-Business Owners More Optimistic About Growth -Survey |
|
|
|
RELATED ARTICLES
North County San Diego Small Business North County San Diego has had some significant growth, and it appears to be a wonderful place to run a business. It has a strong middle class upward bias and plenty of opportunity and employment. Deciding what kind of franchise to buy You'd like to go into business for yourself, and believe that the best way for you to become your own boss is to buy a franchise. You know it will takes time and money to be successful, and that's OK. Staying afloat until your business turns a profit How many "get rich schemes" have you joined? Or have you invested in numerous legitimate business endeavors only to have them not work for you? Have you started you business and now facing a complete shut down? Do you consider yourself a failure? Are your loved ones pressing you to give up?Risk-taking is a large part of entrepreneurship, in fact it is what drives it, and it's why so many people avoid small business, despite its many potential rewards. Those of us who have tried it only to have failed may find ourselves right back where we started, which could leave us feeling like total failures. What people believe about your business directly affects your chances of success Pardon my enthusiasm, but a large part of your small business' success is somewhere else. Namely, out among the company's important external audiences. So You Don't Believe in Outsourcing Entrepreneurs are hardy stock. But sometimes hardiness can get you into trouble. A Look at Incorporating a Business in Florida As you may know, there are many ways to incorporate a business in Florida. While companies exist to do the legwork and paperwork for you, the most direct way is to contact the Florida Department of State, Division of Corporation's website itself. Don't become a statistic - Get business advice on a regular basis It's a commonly quoted statistic: 80% of all small businesses will fail within the first five years of running. In fact, in Internet marketing, this figure can be as high as 95%. The Types of Skip Trace Accounts First, we need to define the different kinds of skip trace. There are three basic types of skip trace accounts, they are:The Typo AccountThis account is really not a skip trace account. How To Start A Blind Cleaning Business Quickly And Easily Starting the blind cleaning business is one of the best marketable business ideas you could latch on to. If you give the requisite amount of time and dedication, there will be no cap on your earnings. Excuses Franchisees Make; When They Violate Exclusive Territory Agreements One of the biggest excuses franchisees of home based and serviced based franchises make when violating their exclusive franchise agreement with their franchisor and fellow franchisees is: My Family Works There. As a franchisor, I cannot believe how many times neighboring franchisees steal each others clientele or work outside their exclusive franchise area. Outsourcing and Virtual Assistants: Small Business Saviors Work smarter, not harderWhat is one of the best ways to work smarter without working harder? The answer is outsourcing. Whether you need occasional or ongoing assistance, outsourcing can save you money and time. Successfully Adding a Service To Your Business There will come a time in your business where you feel ready to add another service offering. To make this successful, there are ten tips to consider before moving ahead. Employee Induction - Are you Inducting your People - A Practical How To In today's fast paced marketplace it is easy to neglect the small important things!Recently we assisted an organisation prove they had complied with their obligations in inducting their employee. The employee tried to bring a claim for severe stress against the business. Make Your Business More Profitable More sales and more profit. Isn't that what you want from your business? It's not hard to achieve if you follow these 4 simple tips. Power Tools for Business How do we keep track of our business deals?If you are only working with one or two deals, keeping track of them is a simple matter. However, most of us have far more than two deals on the plate and even more coming down the pipeline. Starting a Mobile Auto Detailing Business; Dry Wash or Pressure Wash? Many experienced auto detailing professionals who have started out using a pressure washer rarely use Dry Wash n' Guard. Most would say this is a matter of preference more than anything else. Don't Wait for the Perfect Plan 1. Don't Spend Too Much Time PlanningWhen you are entering a new market, you won't know the hidden problems and challenges you will face. Can Your Business Run Without You? What would happen if you decided to take an extended vacation? Would you still have the same business results when you returned?I met a business owner recently who told me an interesting story. His business was 15 years old and he had approximately 50 employees. Patient Records - Your Responsibilities As a practise gets larger & larger the associated problems that you inherit increase with that growth. The Practise Manager finds it increasingly difficult to tend to his duties and look after the administration of the Practise. Prioritize key audiences - which one is of immediate concern? Yes, that IS security when nobody can downsize you because you OWN that small business of yours! But preserving that special advantage is a never-ending job. In fact, do you know what needs to be preserved more than anything else?Well, since they hold the future of your business in their hands, I believe that an outside group of people whose behaviors can effect your business' survival more than any other, deserves your rapt attention.
|
| Home | Site Map | Privacy Statement | More Articles |
| © 2006 |