How can your business benefit from a board of experienced business people?

“An investment in knowledge always pays the best interest.” Benjamin Franklin

Being in business, particularly a SME, can be a lonely place. When you get to a certain level of success and growth, it can be hard to find high level advice.

If yours is a family business, it may be that the people around you are just agreeing with everything you say. Or you could be so busy on operational, day to day matters, you may not be planning ahead to see the risks that are lurking around the corner.

Having a board provides you with senior people with expertise who have successfully been down the track you are planning. It allows you to have robust discussion around your decisions, and the ability to draw on specialist expertise you don’t have.

There are two types of governance structures – an advisory board and a more formal governance board.

Advisory boards
An advisory board is made up of well-respected individuals from the community whose primary purpose is to help your business succeed - not for their financial benefit, but for the mentoring, networking and social opportunities the experience provides. Their role is to assist you in leading your company. This may be by way of:

  • Business development opportunities - sharing their insight into the local marketplace, drawing on their networks and sector knowledge

  • Strategy development

  • Having an outside perspective, with a focus on the future – your board is removed from the day to day grind and can be keeping an eye out for opportunities and risks

  • Having a bigger network – your board isn’t just those on your board, it’s everyone they know. This is a valuable resource when you need a new employee, for example. Through their own professional networks, they may know of the perfect vendor or management professional to join your team

  • Discussing your company’s performance and outlook with an objective professional perspective.

It’s always a good idea to provide some compensation for your advisory board members; at a minimum this means paying for their meals during meetings, though you may consider a financial stipend, as well. Typically, this financial investment is well worth the benefits the advisory board provides.

Governance boards
A governance board is a formal board of directors who have major responsibilities and legal obligations. They have a vote on how a company is run. Directors are much more committed to the longevity and future of the company than an advisory board member, which makes them a very valuable asset.

It is best practice to include an ‘independent director’ on a board. An independent director has no share ownership or executive duties and brings an impartial, unbiased perspective.

A formal board may be required at capital raising time. Often a bank will advise you to form a board when they lend capital for expansion. The bank will want confidence that, through your board. you have the experience around you to convert expansion or other plans into successful reality.

You may also need to form a board of directors if you raise equity from an outside shareholder third party. It’s highly likely they will require a position on your board to watch over their investment.

You may also have reached a critical stage where your knowledge, passion and skills are stretched. For instance, your company may be:

  • Growing and you need to find new ways of running the business that rely less on your personal involvement

  • Facing opportunities that are outside your knowledge and experience

  • Needing to profile itself to investors, bankers and other important outsiders

  • Wanting to grow and prosper in the future without your input

  • Wanting a fresh perspective on issues free of any emotional bia

  • Being readied for sale.

Making an investment in the knowledge of experienced business people can be a powerful tool in steering your business to growth and success. A board may well provide you with that tool. To discuss implementing a board for your business, click here to contact a Moore Stephens Markhams office near you.

Dan Druzianic is a Moore Stephens Markhams director. He has over a decade’s hands-on experience as an independent director of businesses in health, education, transport and food in the export sector. He is also an advisory board member of a number of client companies.