October 13

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All SMB Owners Need an Advisory Board

By Patrick Millerd

October 13, 2021

advisory board role, advisory board vs board of directors, board of advisors, small business owner, SMB owner

An Advisory Board, or Board of Advisors, is an affordable, low risk and cost effective arrangement and can make the difference between the success or failure of a SMB.

Too many small businesses fail! The Bureau of Labor Statistics has reported that about 20% pf small businesses fail in their first year, and by the fifth year about 50% will have shut down.  

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We know that this lack of success is certainly not as a result of a lack of effort, will, grit or taking risks. So what can be done to eliminate the pain and stress of failure? 

One option is to find the who not the how. So what does this mean? 

Simply when you want to accomplish something, stop asking, “How can I do this?” Instead follow the teachings of legendary entrepreneur coach Dan Sullivan and ask, “Who can do this for me?”

The problem is that most small business owners do not have the complete skillset to build a business. They have a number of missing 'how's' and no 'who's'. They struggle to know what are the right things to do. Wasting valuable time involved in trying to learn skills that they could outsource. At the same time ignoring important elements that they don't understand!

Spending hours, days and weeks tangled in the weeds. While the business slowly dies.

So, here's the solution?

A Board of Advisors or Advisory Board

An advisory board has selected members having defined roles and focus. Their primary role is to help the founder, the owner or the leadership team make better decisions. So the chosen members will have specific and complementary skills and knowledge.

Besides facilitating business decisions they will also hold the founder, owner or leadership team accountable. Both for what happens and what doesn't happen. 

The Advisory Board are not shareholders or investors and hold no real power in the business. Yet their input makes a critical contribution to the business success.

John Francis, better known as "Johnny Franchise", has spent many years and shed much sweat and tears helping to set up and organise advisory boards. These were for franchisors and founders, or brand CEO's, as well as for franchisees. Francis says:


“I see the power and value that comes from these advisory boards builds a tremendous advantage”. 

The concept of external support is underestimated and under-utilised by founders, owners or CEOs wanting to build a better business faster. 

The Board of Advisors forces focus on the issues that matter. Whether this is strategy, prioritization, people, risks, opportunities or infrastructure. It also ensures that there is accountability and the delivery of agreed action and results.

The Board demands structured and formal accountability. 

This is not merely an overnight function as it demands time and it takes effort. John states:


"I see the value. I've seen it before, putting a board in place and then looking at it a year or two later. The transition or transformation of that business is effectiveness."

 Eliminating Founders Syndrome

The Board goes a long way reducing the drama and the frustration that happens when a founder gets in their own way.

Many owners are stuck in an unconscious state called "founders syndrome". This is a major problem as the founder thinks they need to control and touch and handle every single thing that that happens in the business. Soon they become the bottleneck.

This can generate a lot of frustration throughout the operation. Which will drive away high performing staff because they're not allowed to do their jobs.

The Advisory Board can reduce the threat of an over controlling, bottleneck owner. They will simplify the strategies, the execution and the accountability and unleash the power inside that organization.

The Role of the Advisory Board

The Board members provide perspective and views on issues that the founder may not see or be aware of. It should be emphasised that while these Boards are informal they should have the trust and respect of the business owner. 

This structure should be used in all phases of a the business life cycle from initial business planning and justification to the sale of the business.

It is important that the board is not just a bunch of friends but skilled professionals hand-picked to add value.

Advisory board members should leverage their knowledge and network. Providing other vantage points and viewpoints. Thinking about their role along the lines of that of a non-executive director. 

Advisory Board Performance

As this Board is a value adding element of the business it goes without saying that members will be paid. 

Their performance and value should be evaluated and members changed to suit the circumstances. Within a year or two the Board should have made a significant impact on the business performance. With a structured operation with all the required internal workings in place. Resulting in a business delivering consistent and exceptional performance. Francis says:


"It's very satisfying to see the impact of setting up the board and then serving on the board. But really rewarding is looking at the results a year or two later. Saying to the founder, 'now look at your company, look at what you've done here'. The founder has transformed into a CEO." 

Conclusion

The Advisory Board is a mechanism to help make this happen. It is an affordable, low risk. high impact performance multiplier. With high potential for positive impact. 

The result of having an effective, competent Board of Advisors will result in more successful small and medium sized businesses. Avoiding the financial and emotional pain that goes with a failed business.

If you think that an Advisory Board will benefit your business or you would like to discuss this concept further then please contact me.

Patrick Millerd

About the author

I help small and medium-sized business owners drive success by managing the financial health of their business through understanding the numbers.
Set goals and action plans for cash and profit and customer management.

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