As a company grows, the owner’s role begins to change. Increasingly more of the operator’s time is spent”in the store or at the field” tackling day-to-day operations as opposed to focusing on high-level planning and tactical issues. <!–More–>
Because of this, a business often reaches a plateau and finds it hard to keep on growing. This might be the time for the business owner to look at creating an external board of advisors.
Owners that don’t use a working outside board of advisors are missing out on a huge opportunity to enhance the management and profitability of the company. An outside board may provide business owners with valuable advice from people with years of business expertise.
An outside board of advisors may also play an essential role in the helping a business owner design and execute a long-term strategic business plan.
Besides serving as a sounding board, a board can help track 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 trades
· Lending credibility to the company as it targets larger balances
Originally, business owners may be unwilling to involve an external board in what had always been personal business affairs. The operator may fear that the interference of outsiders or with strangers involved in the”family business.” Even if an external board is made, the worried owner may not enable the board to work in a meaningful manner. The owner might have a tendency to select long-time friends, advisers, or subordinate workers to serve on the board. Unfortunately, these folks don’t have the independence required to supply the proprietor with the objective information he or she wants to hear. Alternately, some owners produce a board, but not hold regular board meetings. Other business owners feel threatened by their own boards and just consult with them on trivial matters. When this is true, the board of advisers can rarely, if ever, provide any value and must be disbanded.
Creating an Outside Board of Advisors
Create a Statement of Purpose for the Board. The business operator should meet and decide what role(s) the board will perform vis-à-vis company administration. The final result of this procedure is a written, detailed statement of purpose to the board. If you want to learn how a good handicap increases business value, visit Transaction Advisory Services in Calgary. For more detailed information, contact AB Exchange.
Choose the size and scope of this Board. Ideally a board of advisers should be small enough to be productive. If the board is a lot larger than this it will become hard to manage.
Decide on Attributes of the Ideal Board Members/Advisors. Spend some time deciding what types of people you want on your board. Some owners decide that expertise in the provider’s business, or a similar sector, is a necessity. You might also wish to add someone older and someone younger to represent the values of more than 1 generation. Some business owners appreciate having members with different professional backgrounds (i.e., attorney, business operations, accounting, business sales.) You might also want board members who can assist with a particular strategic endeavor (e.g., if you’re planning to expand into a new market you might want a board member who has successfully operate a business in that market).
Prepare a Member Prospectus. You need to prepare a”Prospectus for the Advisory Board,” to help display and recruit board applicants. The”Prospectus” describes the purpose and goals of the board. Additionally, it lays out details such as the board structure, time demands, fees to board members, and meeting schedules. Finally, it describes the abilities, qualifications, and features that the company is looking for in board members. The Prospectus need not be extended.
Identify Potential Board Candidates. If you’re like most business owners, your first instinct is to invite close friends and trusted advisors (i.e., your attorney, CPA, or banker) to serve on the board. You should resist this impulse whenever possible. The ideal board members are usually fellow business owners, entrepreneurs, business peers, and retired CEOs or CFOs. There are a high number of those people eager to serve on advisory boards. Many former business owners and retired executives are eager to serve on advisory boards for a minimal fee, simply to remain involved with the business world. These kinds of outside advisors have faced lots of the hurdles that lie ahead for your organization and can provide you with invaluable advice.
Meet with Candidates. You need to meet with and interview every board candidate. You should explain your organization’s needs and ask about the candidate’s credentials that will assist you meet those requirements. Always be sure to check references.
Ensure Support from Owners and Managers. Prior to making an offer to somebody to be a board member, have the candidate fulfill all the shareholders and key managers to be certain that everybody feels comfortable working together. Minority owners and key managers need to be able to express their opinions about the candidate – both negative and positive – but you must have veto power.
Fees and Costs
Board members deserve to get paid, but an external advisory board doesn’t have to be costly. Frequently for less than the price of hiring a business consultant, you might have a fully dedicated and committed outside board of advisors. The expense of an external advisory board is usually broken down into these components.
The Price of Preparing the Board. This may be as little as nothing should you organize and prepare the board yourself. On the other hand, if you opt to use a company that specializes in assisting business owners set up advisory boards, they expect to get paid. Their compensation can vary anywhere from a flat fee to a fee that’s like that of an executive recruiter. Under this situation they are paid a proportion of the whole compensation that is paid to the board.