Using Advisory Boards in Small Business
BIRMINGHAM BUSINESS LAW BLOG
A blog published by Red Mountain Law Group providing
legal updates and tips to businesses and individuals.
Posted on November 13, 2012
In the last two articles, I referenced Advisory Boards and their usefulness in accomplishing goals for small business. Indeed, Advisory Boards are useful tools in small business. If you look at the role of the board as two fold – first, legal monitoring and second, setting the strategic direction – then bifurcating these roles can help the small business most effectively accomplish these two tasks. Without troublesome fiduciary duties, an advisory board can focus exclusively on helping with the strategic direction of the business.
Legally speaking, forming an Advisory Board is simple. Nothing needs to be filed, amended, or modified. The legal relationship is that of a company and consultant. However, in order to get value out of the relationship, care needs to be taken. To help give us a better overview, I did a question and answer with Stan Graves, Brent Peinhardt, and Howard Nelson of Vantage Point Advisors, which puts together professional Advisory Boards. While consulting a professional firm is not necessary, a level of diligence, professionalism, and accountability is necessary in order to have a successful Advisory Board.
Why are advisory boards so important to doing business?
Growing and sustaining a successful business requires making the right decisions at critical points along the way. Make the right decisions and enjoy continued profitable growth. Make the wrong ones and you may be out of business.
When businesses fail, it is usually for one of three reasons; a flawed business model and strategy, inadequate financial resources, or strategic missteps by owners/leaders. When businesses succeed, they do so for one of three reasons; good luck (timing), a good business model and plan, or they have effective leadership who seek and listen to good advice.
Advisory boards provide the good advice that effective business leaders need.
What is the primary function of an advisory board?
While some business challenges are unique, most are not – meaning most other businesses deal with similar issues. Some common issues shared among most businesses include: Human Capital, Financial Capital, Technology, Sales and Service, Competitive Advantage, and Business Model development. The realization being that most problems any organization will see have been seen and resolved many times before by others.
You want experienced people with good information, vision, and insight to help you make those decisions.
What will a strong advisory board bring to my business?
Advisory Boards are an incredible source of valuable business information, and provide many benefits for businesses and their executive leadership including:
- Bringing an “outside perspective” to the table
- Offering an unbiased look at the business
- Providing open and honest advice
- Opening up networking opportunities
- Leveraging specific business needs with board members expertise
- Sharing the knowledge of others
- Delivering the invaluable “reality check”
- Producing greater accountability
What is the best strategy for building an advisory board?
At Vantage Point Advisors, we use a proven strategy to build advisory boards:
- Understand at a high level, your strategy and goals as well as the need or desire for advisory board members.
- Identify candidates for an advisory board role.
- Contact prospective candidates and determine both their fit and interest in your company.
- Continue the process until you are satisfied with the candidates and select advisory board members.
- Participate in an initial board orientation meeting with the client and senior staff at their location to properly prepare.
Additional information can be found at http://www.vantagepointboardadvisors.com/.
Mike Goodrich
Goodrich Law Firm, LLC