How to Develop a Successful Board of Advisors (...and Why You Should!)Written by Eric Graham
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Look for a proven track record. Find leaders in their field. The best board candidates are successful CEOs, business owners, professionals, university professors and consultants who have achieved success in their own businesses and careers. Clearly communicate your goals and objectives. Invest time in talking to and meeting with potential members. Communicate to them what your goals and objectives are. Let them know that you are not looking for “yes men” and that you want advisors who will challenge you and hold you accountable for your businesses growth. Board Compensation Board members expect and deserve to be compensated for their time, efforts and advice. Typical advisory board compensation includes a stipend from $5,000 to $25,000 per member, per year. Some companies pay their board members per meeting, with payment ranging from $500 to $3,000 per meeting, with a monthly retainer of $500 to $2,500. Companies should also cover transportation, meals and lodging for members when attending meetings. Most successful boards also give or require members to buy stock or some form of equity in company. This gives board members equity participation and a vested interest in growth of company. Pitfalls to Avoid Some potential problem areas to avoid when setting up or working with your advisory board are:
Keys to Board Effectiveness
- Members missing meetings. Because board members are usually running successful businesses of their own, they may not always be available for every meeting. However, board members should be made aware that attendance of board meetings is important and expected. If a member is chronically absent, value of their membership on board should be reviewed.
- Insecurity of senior managers. Some company insiders may feel intimidated or threatened by involvement of outsiders. The CEO or owner must make every effort to communicate to his staff benefits and importance of having a board of advisors.
- Incompatible personalities. This is a challenging situation, because most members of your board will be strong willed, achiever types, who have gotten where they are by taking charge. Many will have strong convictions about their opinions and may find it hard to defer leadership of meetings to CEO. You must determine when a member’s personality is “too strong” and becoming disruptive.
- Excessive number of board members. Because of their strong personalities, if you have too many members on your board, more assertive members often dominate debates, depriving you of contributions quieter members may have made.
- Lack of CEO communication. Withholding company information or not regularly communicating with members of your board of advisors destroys trust and effectiveness. Regular communication between meetings is essential to maintaining an effective board. Inadequate compensation. As I mentioned, you do not want compensation to be determining factor in a candidates membership on your advisory board, however successful individuals of caliber you seek expect to be fairly compensated for their time and knowledge.
Annual assessment of board performance. Periodically assessing board’s effectiveness is a critical factor in ensuring a good return on investment. Each year board should set performance goals and define their criteria for success. At end of year CEO and board should assess it’s performance, compared to its goals and criteria for success. Over 80 percent of all private companies are operating without a board of advisors or board of directors. Odds are your competitors do not have one. Because of this, developing a board of advisors can give your company a distinct advantage over your competition. This is particularly true for start-ups and family run businesses. There is tremendous value in receiving objective, knowledgeable advice from a board of advisors who share in financial and equity growth of your business. I encourage you to begin recruiting your advisory board today!
- If you build it, use it. Owners and CEOs who invest time and money in creating a board should be committed to soliciting and using its advice on important issues and decisions.
- Value their input, even when they disagree with what you want to do. Sometimes a board is at it’s most valuable when it recommends against a course of action CEO wants to take. If you recruit a good board, often they have already been down path you are on, and their experience (and past failures) can help you to avoid costly mistakes.
- Communicate with your advisors. Keep members of your board informed about what is happening in your company and industry. Counsel with individual members on phone at least monthly and send them information well in advance of your meetings, to help them prepare and keep meetings productive.
- Hold regular meetings. Most boards meet once per quarter. However, boards should meet more often during times of rapid growth or if company needs merit additional oversight and guidance.
- Have an objective for each meeting. Your board members are busy people and their time is valuable. Make most out of your meetings with them, by having a clear agenda and objectives for each meeting. Make sure to cover most important items of business first, in case discussions take longer than planned or some members have to leave early.
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Technology Community Helps SMBs Focus on Their Core BusinessWritten by Betty Liang
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Here’s a testament to kind of exchange opportunities that are available all around us: in July 2005 edition of Runner’s World, there is an ad from Factory Outlets (http://www.factoryoutlets.com/) promoting its pre-launch site. Factory Outlets needs traffic to test its ordering, fulfillment and customer service systems and is giving away $350 worth of free merchandise in exchange for time. If you don’t believe it, pick up a copy of Runner’s World to get an authorization code into site – and shop your heart out (the merchandise is limited, but it’s free).
Manufacturers invest millions of dollars into marketing to SMBs and yet there has not been a centralized place where SMBs can get an aggregated listing of exchange opportunities offered by manufacturers. Until now.
SMBxchange, Inc. is a new technology community geared to providing exchange opportunities to SMBs, including useful tools and resources to help them run their business. By this, we don’t mean resources on how to get a loan, where to get legal advice, etc. There are plenty of small business portals that do job. The tools, resources and exchange opportunities featured on www.smbxchange.com are around useful technologies that can improve way SMBs work -- perhaps even introduce products that people never knew existed. SMBxchange is a relatively new community and exchange opportunities are in near horizon. Types of “exchange opportunities” will include: focus groups, beta programs, whitepaper campaigns – where there would be some type of incentive (free product, cash, etc.) in exchange for user feedback.
Membership into SMBxchange is free and there is no obligation or commitment. By joining, members get access to SMBxchange newsletters and a secure members-only site where there will be a listing of opportunities that match member’s product interests. Members only participate in programs for products they’re interested in. SMBxchange is first community that bridges these two audiences (SMB and manufacturer) into a symbiotic environment. This is a community that brings technology to SMB, and aggregates opportunities and offers tailored to SMB’s product interests.
To join SMBxchange, complete online form at www.smbxchange.com
Betty Liang, spent most of her professional career in various marketing management positions with companies such as Ricoh, Cisco, and Oracle. She is now focused on her own small business helping other small and medium businesses advance their technology capabilities through exchange opportunities.