Carl Gould is a business transformation expert with 7 Stage Advisors. His methodologies are practiced in over 71 countries.
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In the early days, many entrepreneurs focus all their energy on getting their companies off the ground. They lean into the roles of lone wolf and sole decision-maker. That’s why they feel a great sense of accomplishment. After all, starting a profitable business is hard, and they did much of it on their own.
But even after a firm is up and running, founders remain in a risky position. That’s because the skills needed to launch a business differ from those required to grow one. And statistics back this up. According to the United States' Bureau of Labor Statistics, while about 80% of new companies will make it through the first two years, only half will survive past year five and only 25% last 15 years or more.
In my experience, one of the best ways to beat the odds is to form an advisory board. This board should include experts from a range of fields. By finding the right mix of professionals and formalizing their roles on a board, a founder can amplify the skill and experience of their company.
Who should be on the board?
Any board needs to have a diverse set of perspectives. A board should include a skilled business attorney, a tax adviser and an accountant. While the same person may handle two of these roles, it’s wise to consider keeping these roles separate. This way, each person remains focused on a specific part of the business. Their opinions will differ, offering a more well-rounded approach to business decisions.
The board will also need a person who understands key performance indicators and critical paths to success. This professional will provide context for goals, growth and success. They’ll compare the firm’s performance with others in the industry and be able to spot challenges and opportunities early on.
As a company grows, it may identify a need for additional board members. Retired CEOs, other business owners and industry specialists are all great additions. Adding these kinds of experts can be a great investment.
Finally, make sure you have a strategic advisor in place. This can be a mentor or a coach. This person serves as a sounding board for your ideas but also must have facilitation skills because they will be running board meetings.
Why should a facilitator run board meetings?
The facilitator creates agendas for each board meeting, with input from the owner and each board member. Sessions will include discussions about all facets of the business, allowing each board member to collaborate and contribute.
Having a facilitator run the sessions allows the business owner to step back and be a team player instead of a ruler. As facilitator, the advisor’s job is to encourage all board members to share ideas and honest opinions. Often the advisor will play “bad cop” so the owner isn’t forced to make unpopular comments, shelve ideas or shut down tangents.
The advisor should be able to see the whole picture, allow all voices to be heard and make educated decisions about the next steps. It’s a special set of skills but critical for continued business success.
How can boards help you to avoid critical business errors?
Remember that only 50% of businesses make it to year five. Companies that succeed rarely do it without help from a team of specialists. Without expert advisors, it’s easy to make minor errors early on that grow into insurmountable issues later on. Wondering which decisions to assign to board members? Here is a list of common issues they should address:
- Your company's unique selling point and its place in the competitive landscape
- Competitive research and updates
- Industry research and news
- Benchmarking sales, profits, expenses and growth
- Capital investments and payback timelines
- Growth and expansion opportunities and associated risks
- Pricing and product and service offerings
- Profit and loss statements, billing, inventory and shipping strategies
- Tax compliance, structures and possible savings
- Legal concerns, compliance and changes in laws and regulations
- Staffing, employee benefits, retention rates and hiring needs
Do you already have a team? Formalize the board structure.
Many firms already have the necessary talent on staff or on retainer. When this happens, it’s tempting for an owner to casually discuss issues with key team members and then make decisions on their own. But that can be a mistake. Formalizing roles on a board and using a facilitator allows the team to develop strategies together. It also reduces the chances of the founder developing an unprofitable case of tunnel vision.
So, embrace the value of an advisory board. Remember that the owner doesn’t know everything, nor should they. When a firm allows a team of experts to improve the business, they significantly improve their odds not only of surviving but also of growing and expanding past year five.
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