One trap entrepreneurs often fall into is that they get too close to their business to see it from any perspective other than their own. The associated risk is not responding fast enough to the changing marketplace.
The bankruptcies of Blockbuster and Borders are perfect examples. While the marketplace was changing how it wanted to acquire videos and books, Blockbuster and Borders were not keeping up with the changes.
In order to build a long term profitable business, the entrepreneur must artfully read the changing marketplace and develop strategies to give customers a product or service better or different than their competitors do. This is where an advisory board can provide a competitive advantage for your company. Outside advisors can provide sharp, incisive perspectives that often are missing from internal resources.
Unlike a board of directors, which has formal legal authority over a company and a fiduciary duty to its shareholders, an advisory board has no obligation to the owners or liability for the company’s actions.
Think of the advisory board simply as a brain trust with no strings attached.
When starting an advisory board, a few basic questions need to be addressed: whom to include; how many members; how much to pay members; where to hold the meetings; how often meetings should be held; what topics to discuss.
As a starting point, consider meeting three or four times a year, preferably at an off-site location. Pay is optional, but a generous gift card to a local restaurant is a good idea. Typically about four to five members would be an effective number for an advisory board.
Discussion topics should focus on company vision, strategy and execution. This involves identifying critical success factors that lead to long-term profits and growth; identifying those key processes relating to the critical success factors; setting performance targets; evaluating performance and then adjusting strategy, if necessary.
The big question remaining is: whom to include. Matching a prospective advisor’s skills and experience with company vision should be the basis for making a selection.
For example, if you own a successful restaurant and your vision is to franchise the concept, seek a restaurant executive who has been through this process.
Equally important is avoiding the wrong advisor. A general recommendation is to avoid asking your lawyer, accountant or banker as they are not typically strategic advisors. Further, it is recommended that you do not include friends and family or anyone with an emotional interest in the business.
One important condition to remember is to be prepared to act on advisors’ suggestions. Otherwise you are wasting their time and will likely lose credibility with them.
Andy Fried is a business consultant with the Kennesaw State University office of the Georgia SBDC Network. He may be contacted at firstname.lastname@example.org.