A board of advisors magnifies the chance of survival and financial success of a small or medium-sized business.
Also known as advisory boards, advisory panels, or advisory councils, they offer an affordable, low-risk, flexible, and cost-effective addition to any business.
Undoubtedly, all small and medium businesses are under-resourced in some functional areas. At the same time, they also lack critical skills, accountability and perspective.
The solution is for the owner to structure a support group to fill these gaps. To pave the way for the business to have a complete package of skills and resources to build a profitable and growing enterprise.
Why they are Needed by a Small Business
Larger businesses do not have this problem. They have departments with all the required skills and knowledge in specialist areas like marketing and sales, finance, product creation and innovation, supply chain, people, strategy and planning, risk and regulations.
However, in a small business, these functions are managed with limited cash and people, often with only the owner.
The business owner is under relentless pressure when trying to juggle all these functions, vainly trying to identify the critical priorities in each area. Doing day-to-day firefighting as they try to filter the essential tasks out of their list of 150 outstanding to-dos!
Then once they find this needle in the haystack, they need more time to work out how to execute it.
Followed by wasting time trying to learn skills they should outsource. Blind to critical issues that they don't recognise or understand!
The owner is tangled in the weeds while the business limps from crisis to crisis.
It is essential to realise that a board of advisors is invaluable in overcoming many challenges a business owner faces.
Board of Advisors or Just One?
The board will typically consist of 3 to 5 members selected with defined roles and deliverables. However, in many cases, a small business will only have one advisor. With one being many times better than going it alone!
In general, the two primary roles of an advisor are:
- Assist the business owner in making better decisions.
- Hold the owner accountable for delivering the planned results.
Equally important, they are a sounding board for ideas and plans. As well as providing an objective, critical evaluation of the owners' ideas and plans. To provide value, they should not be a group of "yes" people and should ask many "why" and "how" questions.
Advisors provide objectivity, creativity, accountability or guidance as the circumstances demand.
Their input leads to better decisions for the business. Knowing that if the company prospers, so will the lives of the owner and employees.
With a board staffed with gap-filling skills and knowledge, the members should change as the business changes.
Although the members of this board are not shareholders or investors and hold no real power in the business, their input makes a critical contribution to the business's success.
John Francis, better known as "Johnny Franchise", has spent a lot of time and energy helping to set up and organise boards of advisors.
"I see the power and value that comes from these advisory boards that build a tremendous advantage".
"I see the value. I've seen it before, putting a board in place and then looking at it a year or two later after a board has been in place."
The Role of the Board of Advisors
Despite being critical for helping business owners make faster and better decisions, using a board of advisors is underestimated and underutilised.
The board must guide the owner to focus on critical issues: strategy, prioritisation, people, risks, opportunities or infrastructure.
An effective board will provide opinions, perspectives, and specialist knowledge, leading to better decisions.
The next step is to ensure that the company takes the agreed actions to achieve the planned results of these decisions. To manage the activities, the company must implement a structured accountability process. A process that ensures that the owner prioritises "eating the frogs". Taking the agreed steps and not getting lost in day-to-day firefighting.
This process should encourage the owner to work towards the future business, "keeping the end in mind" and not stuck in the present!
Advisory board members should leverage their knowledge and networks. They broaden the perspective and provide other vantage points and viewpoints. Their role is similar to that of a non-executive director of a public company.
Preventing Founders Syndrome
The board can go a long way to reducing the drama and frustration in a business when the founder gets in their own way with "founders syndrome".
This an insidious condition where the founder thinks they need to handle and control everything that happens in the business.
Consequently, the owner becomes the bottleneck, creating many destructive outcomes.
- It generates an excessive amount of frustration throughout the operation.
- The illogical behaviour drives away high-performing staff because they are not free to do their jobs.
- Strategies that worked previously in the organisation are clung onto, even if they do not work anymore
- There is resistance to any changes that will result in a (perceived or actual) loss of control.
- Threatened by new ideas, new staff and outsiders are seen as threats.
- There is a (perceived or actual) fear that the organisation will become "something I no longer recognise."
The board of advisors must give the owner a broader and more balanced perspective of themselves and the business. Their input reduces the threats of a frazzled, nit-picking bottleneck owner.
In doing so, they can zero in on simplifying the strategies and improving execution and accountability and unleashing the power in the organisation.
The Structure of the Advisory Board
Often, I'm asked this question;
"Times are tight; We don't have much money. Are advisors worth the investment?"
My reply to this question is,
"What will be your cost of failure?"
This answer might seem trite, but owners must make a choice.
While having an advisory board is not a guarantee of success. It should guarantee that the owner will focus on building the business rather than being stuck in a stressful, frustrating survival trap.
Member selection is as critical for company advisors as employees, accountants, or lawyers. With the flexibility of the structure, initially appoint members for a probationary period. Also, from the start, the owner must clarify that this is not lifetime employment.
Extend arrangements once it is clear that a member fits the culture and adds real value to the business.
While these boards are informal, the members must have the trust and respect of the business owner. This relationship is vital as the role sometimes demands tough negotiation and constructive conflict.
A board must not be a bunch of friends, but skilled professionals hand-picked to add value.
With the ability to see and communicate issues, the founder doesn't see or understand. They should provide input through all phases of the business life cycle with members appointed to suit the changing circumstances.
As board members are a value-adding element of the business, it goes without saying that they should receive remuneration. On the other hand, they must be held accountable through regular performance reviews.
The board should significantly impact the business performance within a year or two as they facilitate a structured operation with all the required internal workings.
Their input makes sure that the business delivers consistent and exceptional performance.
The Advantages of an Advisory Board
"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 you've turned yourself from a founder into a CEO of a successful business".
The board of advisors is a mechanism to help make this happen. It is an affordable, low-risk, high-impact positive performance multiplier.
An effective board will multiply the effectiveness of the business many times. Their return on investment should be high, with returns measured both financially and in the well-being of all the business stakeholders ... especially the owner.
The result of having an effective, competent board of advisors will be to increase the probability of a more profitable growing business. Their support can avoid a failed business's financial and emotional pain.
An advisory board is a long-term solution.
It takes time, and it takes effort. However, to make an initial impact, the board should look for any "low-hanging fruit." Take quick and cheap actions immediately impacting the company's performance and demonstrating their value.
If an advisory board or advisor could benefit your business, or you would like to discuss this concept further, don't hesitate to contact me.