 I moved from working in my business to working on my business!
Jim White, Founder Savor Dallas http://www.savordallas.com |
 I found a community of business leaders who make being in business a lot more fun and less lonely.
Jeannine Sandstrom, CEO CoachWorks International, Inc. http://www.coachworks.com |
 I now have a place to be open about my business success and future challenges.
Debbie Mrazek, CEO The Sales Company Author The Field Guide to Sales http://www.the-sales-company.com |
Posts Tagged ‘Advisors’
Dixie Yonkers Special To The Business Review
Getting some outside advice can make the difference between going it alone and going under, or making an idea work. For small businesses, this translates into soliciting advice and guidance from a board of directors or advisors. Some are trying it and finding the results more than worth the effort.
Kathleen Godfrey, sole proprietor of Kathleen Godfrey Financial Planning of Colonie, was in business four years when she heard about the idea of assembling an advisory board. She invited five professionals whom she knew and respected from various fields to serve for one year. They would meet once every two months and listen and comment while she presented her marketing plans and financial statements. In turn, Godfrey committed to donating one-quarter of her net profits at the end of the year to a charity of the advisory group’s choosing.
"When you are on your own, it is so easy to procrastinate, to get sidetracked, so your business isn’t growing the way it could be," Godfrey said. "They gave me someone else to be accountable to. I couldn’t risk losing credibility in the eyes of people I really respected."
That accountability did the trick. Godfrey’s bottom line increased 37 percent in the year since the advisory group began. On May 9, she handed a check for $2,500 to the Legal Project, a nonprofit group that assists victims of domestic violence.
"It’s been a wonderful experience," she said. "I get a lot of good ideas from the group. They’ve seen potential problems before they actually became problems or [have] seen things from another angle."
Godfrey has made it easy for the group to help her, said David Rollins, marketing manager for Plug Power Inc. of Latham, a member of the advisory group. "It has served a great purpose for her. Not wanting to waste the group’s time or embarrass herself has been the glue that holds it together," he said.
While it has been difficult to report her progress at times, Godfrey said the group has helped her to view herself more objectively.
"You have to be able to be a critic of your own business," she said.
Rich Bollam, a partner in Bollam Sheedy Torani & Co. LLP CPAs in Colonie, also has seen the value of outside advice. While his firm has not established a standing advisory board, it has on three occasions invited advice. Eight to 10 of the firm’s most valued clients came together for three hours to respond to a prepared agenda. No executives from the firm were present, said Bollam, just the clients and a tape recorder.
"The idea is to get some good clients in a room and get a high-quality information exchange," he said. With no company employees present, the conversation is candid and objective.
Though the investment is nominal, the feedback is very valuable, Bollam said. The firm has found out what it does well and what clients would like it to do in addition. It has gotten leads for potential new clients and direction for future marketing. The client advisory boards have also helped spread the word about the quality services the firm does offer.
Bollam Sheedy’s client advisory boards have met about once every two years, he said. The firm has arranged one meeting for a client’s firm as well, and would like to offer this type of service more.
"To me, with very little effort and a little organization, you can get a lot of low-cost information from folks around town," Bollam said. "Anybody should do it," he said. "It’s almost like, `Should I plan?’ Everybody should plan."
Still another take on the use of outside boards is that of Taconic Farms Inc., breeders of laboratory rats and mice in Germantown. Though the company has recently grown past the small-business category, it has remained a family-run business for the past 49 years. From its earliest, even as a very small company, an outside board of directors was in place. Now, with three brothers collectively running the business and their mother chairing the board, that board continues to provide accountability and expertise.
It has been important not to have those who run the company on the board, said Joseph Phelan, co-owner of Taconic Farms with his brothers Sam and Richard.
The Taconic Farms board consists of six members, some of whom have served for many years. They bring business, legal and financial expertise, as well as technical expertise in veterinary pathology and nutrition, to the company’s decisions, Phelan said. The board meets twice a year, and individual members are called upon between meetings as needed.
Getting the three brothers to agree can be difficult at times, said Phelan, and then there’s the board to answer to. Phelan said his mother, now in her 80s, is just now figuring out that her sons have a pretty good idea of how to run a business.
That family dynamic that Taconic has somehow been able to keep positive is often the weak link, said Stanley Simkins, president of Menands-based Management Advisory Group and director of the Siena College Family Business Institute. Small or family-run businesses often make the mistake of putting inside people on the board. The board then fails to give objective advice.
"The idea behind a board of directors or advisory board is to get accountable, objective expertise, structure and discipline," Simkins said. "But if the implementation is to bring in your buddies, what have you gained?"
Though advisory boards and boards of directors can be a valuable thing to a small business, it matters how they are established and run. In Simkins’ view, it is a rare small company that has done it well.
Simkins’ word to the wise is, "Proceed with caution."
Written by John Kreitler
Virtually every business can benefit from the wisdom, perspective, and contacts of an experienced group of outside advisors. Larger, public corporations fill this need by having a diversified Board of Directors. Smaller businesses can gain the same advantage by creating Advisory Boards to augment their formal Board of Directors. An Advisory Board can provide many of the advantages of a good Board of Directors, but without some of the risks to the individuals asked to serve.Advisory Board members can bring independent perspectives, experience, special skills, and connections to a company.
This can increase a company’s leverage and credibility in its industry and in the financial markets, and enhance its ability to plan, implement and evaluate its strategic direction and operating effectiveness. Advisory Boards can bring to a company the diverse talents of people who might not want to serve on a Board of Directors. A key distinction between a Board of Directors and an Advisory Board is that the Board of Directors is responsible for directing the affairs of the business, while an Advisory Board only makes non-binding recommendations. A Board of Directors is held to a higher standard of ‘fiduciary’ responsibility than a Board of Advisors. The Advisory Board members have neither the legal obligation nor authority to run the business. This makes it easier and less costly to recruit valuable and experienced people who are focused on helping the business succeed.
Here’s how he suggests that a small business use an Advisory Board to give them a competitive advantage:
- Strategic Planning – An Advisory Board can help facilitate a strategic planning process, serve as a sounding board or discussion stimulator, and add to the range and quality of the ideas considered and recommendations reached.
Advice/Policy Forum — Because of the experience of members of the Advisory Boards, they can improve a company’s decision-making on operational matters such as difficult customer or distributor decisions, product development, marketing and pricing questions, and personnel and compensation issues. - Evaluation – An Advisory Board can be an excellent, objective, and non-threatening evaluator of management performance, business process implementation, and/or product and marketing strategy.
- Influence – The reputation and contacts of individual Advisory Board members can add significantly to the credibility, reach and clout of the business with sources of financing, potential strategic partners, and
prospective customers/distributors. - Leverage – Knowledgeable and experienced Advisory Board members can extend the range of management skills in areas key to next-stage growth, and fill gaps in industry savvy, especially for companies who cannot yet afford to
hire all the talent they need for future growth. - Transitions – Members of an Advisory Board could be selected to help during periods of transition (ownership and/or management). They can be an important resource for planning, communications, reducing and resolving
conflicts, and providing a sense of continuity.
How does a small business create an Advisory Board?
- They start by determining the Advisory Board’s mission and the role it will play. Next, the company needs to determine the best structure to implement the mission. This includes deciding on the size of the board, the types of members, frequency of meetings, method of appointing and removing members,and member compensation. "It is advisable to document the Advisory Board’s mission and structure and to have these documents approved by resolution of the company’s Board of Directors.
- Then there is the matter of compensation for members. I suggest that there be a per-meeting stipend, with reimbursement of reasonable travel and living expenses. Advisory Board members can also be offered stock options (non-qualified only) or minimal fringe benefits as a form of payment.
- Next are some policy decisions. "Most companies wisely insist that each Advisory Board member enter into a non-disclosure agreement to protect the company’s confidential information. Some also have a formal conflict of interest policy to prevent members from having competitive interests or participating in competitive enterprises. The
company should also consider whether it wishes to indemnify Advisory Board members from suits related to their service in the same manner as directors and officers are indemnified. - In the next step, companies need to determine the initial composition of the Advisory Board. Pick involved, knowledgeable, experienced and committed people. Don’t use Advisory Boards as a place for "honorary" appointments. When looking at the make-up of the Advisory Board, companies should look at qualifications and special skills, commitment to the business, and industry and financial connections. In some transition situations, members also might be chosen to represent different constituencies of the business.
I suggests getting recommendations for potential members from management contacts, the company’s professional advisors and bankers, industry sources, and even from professional recruitment firms. - Finally, the company must establish and foster a good working relationship between the members of the Advisory Board and the management. They should provide members with well thought-out meeting agendas and deliver well-orchestrated meetings.
A key to this is to provide sufficient and timely information to Advisory Board members. Companies should keep meeting minutes and document specific recommendations. Management should honestly seek the Advisory Board’s counsel on matters within its chartered role, and be willing to communicate management’s views with respect to the advice and recommendations obtained from the Advisory Board.
A Board of Advisors can be a powerful asset in a changing business environment, provided there is a clear mission, the Advisory Board has the right composition of member to meet its goals and are supported properly by the company. They allow smaller companies to compete with larger institutions by bringing in talent that might not otherwise be available to such companies.