How to Develop a Successful Board of Advisors (...and Why You Should!)Written by Eric Graham
In today’s rapidly changing and highly competitive markets, many privately held companies are creating outside advisory boards to give owners and CEOs fresh, knowledgeable advice. Even for small businesses, setting up an advisory board can give you a significant advantage over competitors that are relying solely on internal talent. An experienced and well-connected board of advisors can help your business grow and prosper in ways you’ve never imagined. What is a Board of Advisors? An advisory board is an outside group that is informally organized to provide business owners and corporate leaders with support, advice and assistance. While formal boards of directors have legally defined responsibilities and fiduciary duties, advisory boards have no formal power or binding legal authority. They serve at pleasure of business owner or CEO. Benefits of an Advisory Board There are several advantages that companies with advisory boards have over their competition. A board offers your business:
Steps to Creating an Effective Board of Advisors: Analyze strength and weaknesses of your current management team. Look for critical areas of expertise and knowledge that your company could use help with such as marketing, legal, finance, eCommerce, and research and development or information technology. If your company is planning on going public within next few years, seek out advisors who have successfully taken companies down that path. Set clear, written goals and objectives for your board of advisors. Getting maximum value from a board of advisors begins with clear objectives and goals. Board members must know why they have been asked to serve and what is expected of them. Before establishing board, CEO and senior managers should sit down and ask some of following questions: 1. What are main areas we need advice and guidance in? 2. What specifically do we need board members to do for us? 3. Who are a few potential candidates for board membership? 4. How do we avoid giving away too much control to outsiders? 5. What will be powers and limitations of board? 6. What will setting up board cost initially? Annually? Will it be worth cost? Determine size and structure of your board. Advisory boards range in size from two members to over thirty. The right size depends on many factors, such as your company’s size, complexity, stage of development and individual skills needed. My experience and research has found that for most small to mid-sized, growing companies or start-ups, a 5 to 7 member advisory board is an ideal size. Smaller firms can start with just one or two members and add new members as they grow. Recruiting Candidates Determining whom you invite to join your board is one of most critical decisions in setting up a board of advisors. Often a business owner’s first instinct is to ask friends, family members or professional advisors to sit on their board. This is usually a mistake. Unless your friend or family member is a recognized authority in an area of expertise lacking by your management team or a highly successful entrepreneur, they are probably not wisest choice. Another reason to avoid asking family or friends to join your board is lack of objectivity. Often advice from a friend, family member or management insider is sugar coated to protect relationships. An outside advisor can give you a much more objective and honest assessment of situation. Using professional advisors such as your lawyer, banker or accountant as board members has it’s own pitfalls. These advisors are already working for you and may not be as objective as you need, due to having an interest in generating future business from your company. Some critical action steps for recruiting a dynamite board of advisors are:
- An unbiased outside perspective.
- Increased corporate accountability and discipline.
- Enhanced CEO and management effectiveness.
- Greater credibility with investors, vendors and customers.
- Help in avoiding costly mistakes.
- Rounding out skills and expertise lacking in current management team.
- A sounding board for evaluating new business ideas and opportunities.
- Enhanced community and public relations.
- Improved marketing results and effectiveness.
- Strategic planning assistance and input.
- Centers of influence for networking introductions.
- Crisis and transition leadership in event of death or resignation of CEO.
- Help anticipating market changes and trends.
- Develop a candidate profile. After you have determined areas of expertise your company is in need of, create a profile of candidates that successfully fit these needs. Take care to address knowledge and skills that your company will need to meet projected growth and future challenges.
- Seek out experts. Search online and offline for experts and proven leaders that meet your candidate profiles. Contact them and begin discussions about possible board membership.
- Ask for recommendations. Solicit recommendations from experts you speak with that cannot serve on your board, of collogues of theirs that they feel would be a good fit for your needs. Begin networking with your attorney, accountant and other professional advisors. Once you have successfully recruited an advisor, he or she can often lead you to another good candidate.
- Find your candidates motivation. Most of your candidates are not going to be motivated by money alone. In fact, if money is their primary reason for joining your board, they may not be what you are looking for. The most effective board members are motivated by challenge and intellectual stimulation of building successful companies. They serve because they are already high achievers and enjoy challenge.
- Have variety in your board. Try to include experts and successful entrepreneurs from several different disciplines. Often board members who are successful marketers, CEOs and business owners from different industries can bring a fresh perspective to your business. These individuals can often help you incorporate best practices from other industries, into your own industry, creating revolutionary changes and opportunities.
Technology Community Helps SMBs Focus on Their Core BusinessWritten by Betty Liang
If you’re starting your own business or currently work for a start-up, you wear a lot of hats. Any disruption in your business can eat up hours of your time and kill your productivity. Many start-ups are so focused on getting their business off ground, that they overlook technology considerations that can help increase their productivity and enhance their efficiency. Unlike mid to large corporations that have dedicated IT personnel, start-ups typically do not have in-house IT resources to evaluate and deploy new technologies to pre-empt unforeseen issues, such as virus attacks, and streamline processes to increase efficiency gains. This is due partly to time and partly due to budgetary constraints. Small businesses want to focus on next sale, not next purchase. Largely for this reason, many small to medium businesses (SMBs) are categorized as laggers on technology spectrum -- classified as conservative IT buyers and slow adopters of new technologies. This profile make it seems as if SMBs are risk adverse, when in actuality, SMBs are more risk takers than corporate employees – after all, they’ve started their own business or are part of a start-up where P&L is felt throughout company.
So why are so many SMBs behind on technology spectrum? As mentioned, without dedicated IT personnel making system recommendations, SMBs are on their own in terms of finding out latest and greatest products. They need small business solutions that are affordable and scalable, and most importantly, do not disrupt business operations. Without luxury of having dedicated IT resources, SMBs do not have time or desire to seek out latest gadgets or attend tradeshows featuring next-gen products.
This begs question: how do SMBs stay on top of new technologies that can help them run their business more effectively? The technologies have to come to them: bring new products to SMB community.
The big trend with major hi-tech vendors in past 2-3 years has been building marketing initiatives to tap into SMB market. To many companies, SMB space is still a gray cloud: how do SMBs behave and what are their demographics? Each company has its own definition of an SMB: ranging from less than 100 employees to less than 1000 employees. Many hi-tech manufacturers have beta programs, usability tests and focus groups to collect feedback on how SMBs react and behave. Many of these programs offer very attractive incentives such as free product, cash, corporate branded giveaways “tchotchkes” in exchange for some form of market validation: user feedback, quotes for a press release, or customer references to serve as real world proof points. These exchange opportunities are always available – one just has to know where to look.