Last month, I wrote about the interest of business owners in developing a business advisory board to help them grow their companies. In this article, I want to focus on the how-to’s of this process and getting started.
It fundamentally begins with the purpose of the board and composition of the group. The business owner or ownership group needs to be very specific on the purpose and objectives. Is it a very narrow purpose (that can have its benefits) or much broader and flexible? The owner or ownership group also must decide what types of people should be on the board. This often includes specific expertise (like finance, legal, marketing, etc.). It is also vital to identify advisers who would be a good cultural fit and keep information confidential. In certain businesses (i.e. family owned businesses) a decision needs to be made about whether there will be family as well as non-family members on the advisory board.
It is also important to identify how long of a commitment this will entail and how much time someone would be involved with this advisory board. There is no “one size fits all” for this area. Another critical issue is who will run the board meetings and set the direction for the group. I typically recommend that the company president and/or owner be “formally” designated as the person who facilitates the group. However, that person typically has so much on their plate that they can’t feasibility handle this well. Therefore, a consultant or another adviser who is skilled in meeting facilitation can be very effective in this position or at least in assisting the president in running the meeting.
It is also very critical to consider the advisory board member responsibilities. In other words, what expectations do you have for them? Among others, is this a group that you’re comfortable with tolerating absences from time to time?
Once these decisions are made, it’s prudent to create advisory board by-laws. They do not have to be formal and very detailed. However, they will provide clarity for the group and also show that there is a level of seriousness to the work.
Lastly, it is very important for the owner or ownership group to talk about the role of this group in the succession planning process. In other words, will this advisory board act in a more formal way to advise the trustee of the shareholder or LLC members interest if that person is unable to act due to health issues or unexpected passes? This can be a critical role in this transition and in particular to aid an owner’s spouse who is not an active participant in the business. I have often times designated this advisory board in a business owner’s trust so they “formally” have authority to set the direction of the business if the owner is not able to.
If you would like more information or are interested in establishing a business advisory group, feel free to reach out to me.