Money Matters: 'Board of advisors' should complement CEO

By Jeffrey S. Rosen

The Daily Record Newswire

Business owners are a special breed. They have the audacity to start and/or run a business, hire employees whose livelihoods depend on their success, and leverage financial resources to sell products and/or services.

Meanwhile, they have the "privilege" of reaping the profits (and losses) from their hard work, guiding their business through daily challenges, and navigating ever-changing rules, regulations and tax regimes. Despite the threat of recession, litigation and market forces, business owners are pervasive optimists without whom the vast majority of us would not make a living.

Given all the pressure on today's business owners, it begs the question: Who are your trusted advisors? This term has become cliché, as it can pertain to your attorney, doctor, accountant, spouse, friends, children, etc.

So let's ask the question a different way: Who is on your board of advisors? How often do you collectively meet? Does your board of advisors know one another? Is your board of advisors constantly looking out for you and your business?

The answer to these questions is important because it is lonely at the top. While most business owners have some level of business acumen, they cannot possibly have all the answers all of the time.

To be sure, your internal organization should have good managers whose counsel you trust. However, these individuals share similar points of view as you since they are dealing with many of the same issues through a limited frame of reference.

Public companies have very well established boards of directors and committees that play vital roles in helping businesses grow, not just support corporate governance objectives. They guide senior management on business strategy and operational directives as well as make important connections. More importantly, they hold public company management accountable for their actions.

Nonpublic companies, most of which are small and middle-market businesses, can follow this same approach to meet their business objectives.

Prior to creating a board of advisors, you need to do some planning. First, make a list of the various issues that you need to address in your business as well as issues that you have recently tackled. Be sure to include challenges that have been on your agenda for a long time but not addressed due to lack of capacity or time. For instance, many family businesses require succession planning but do not have formal plans in place.

Next, make a list of the individual backgrounds that may be helpful to your business. For example, a government contractor may desire an advisor with contacts within relevant government agencies or prime contractors, merger and acquisition experience, bank and/or private equity relationships, Defense Contract Audit Agency experience, program management expertise, etc.

The next step requires the creation of a matrix that includes a list of traits that you believe will help grow your business and the list of your current informal advisors. Rather than weight the various individuals relative to the respective traits, which is a more detailed form of this exercise, simply mark off the traits that apply to each noted individual.

In order for this tool to work, you need to be honest about each individual and not simply note a trait due to bias. If necessary, have a discussion with the individuals on your list to understand their experience and ascertain whether they have traits that are important to your business.

Your completed matrix should yield some interesting results. On the one hand, you may find that your team includes valuable expertise that is not being leveraged to the benefit to your business. Business owners may only be aware of their team's experience as it relates to their prior business needs, not their current or future business requirements.

On the other hand, you will most likely find experience gaps within your team. This leads to the final step in creating your board of advisors.

For those areas where you have experience voids on your team, determine whether such expertise is needed. If internal experience is warranted, plan accordingly with new hires and/or training programs. For external resources, ask your existing advisors for assistance with introductions to potential new advisors.

Owning and managing a business is challenging. While it is lonely at the top, you don't have to be alone, nor does the creation of your team have to be left to chance. An explicit, planned board of advisors can be a terrific tool to help you grow your business.

----------

Jeffrey S. Rosen, CPA, MBA, works at Owings Mills-based RS&F. He can be reached at jeffreyr@rsfchart.com.

Published: Thu, Jun 16, 2011

Comments

  1. No comments
Sign in to post a comment »