Not even the President of the United States is expected to know everything. That's why he surrounds himself with advisors--experts in particular areas who provide knowledge and information to help him make decisions. Savvy small-business owners can act "presidential" in their own right by using a similar strategy for running their businesses.
Maxine Turner credits her advisors with saving her company. Turner is the president of Cuisine Unlimited, an upscale deli and catering service in Salt Lake City. Seven years ago, she decided to embark on a major expansion effort and, in the process, made a series of mistakes that nearly drove her out of business. An attorney's suggestion that she declare bankruptcy only made her more determined to turn things around.
"I wanted to hear how to make it work, not how to get out of it," Turner says. "I realized what I really needed was to get a handle on my company, and who better to tell me how to do that than other business owners?"
She assembled a team of small-business owners from a variety of industries who agreed to meet with her once a month to offer advice and direction. It was a difficult and often painful process, but Cuisine Unlimited went from posting a $30,000 loss in 1991 to generating more than $1.3 million in annual sales at a net profit of nearly $150,000 today.
Turner called her team an "advisory board" because, she says, "I didn't want them to have any corporate liability. They weren't on the company's board of directors, and they didn't have any financial or legal responsibility to the business."
David Guidry, president of Guico Machine Works Inc. in Harvey, Louisiana, refers to his advisory board as his "think tank." Guidry formed his board when he realized his growing company needed a level of expertise for which he couldn't afford to pay. Over the years, his advisory board has helped him accomplish a great deal--and stopped him from making some serious mistakes.
"When I decided to buy a company that was about twice the size of my business, I called my board together," Guidry recalls. "We would meet, they would give me advice, and I would work on the deal and then report to them on how the negotiations were going and get more advice." Eventually, with the guidance of his board, Guidry backed away from the deal. "I didn't achieve what I originally set out to do, but I made the right decision, and I was so pleased with the effort my board made to help me reach that decision."
Guidry and Turner agree that any small business can benefit from an advisory board. In fact, Turner believes her crisis would never have happened had her board been in place before she began her expansion.
If you're not already in business, Turner suggests making an advisory board part of your initial business plan. It will not only get your business started off on the right foot, but may impress potential lenders and investors.
Because an advisory board isn't an official or legal entity, you have a great deal of latitude in how you set it up. Advisory boards can be structured both to help with the direct operation of your company and to keep you informed on various business, legal and financial trends that may affect you. But the first step is the most difficult. "You have to admit what you don't know and admit what other people know," Guidry says.
Here's what Turner and Guidry learned from their experiences:
- Put together a board that meets your needs. Generally, you'll want a legal advisor, an accountant, a marketing expert, a human resources expert and perhaps a financial advisor. You may also want successful entrepreneurs from other industries who understand the basics of business and will view your operation with a fresh eye. "You want people who started small and grew," Guidry says.
"I wanted small-business owners who were very successful," Turner says. "I didn't want corporate people because we speak a different language."
- Ask the most successful people you can find, even if you don't know them well. "You'll be amazed at how easy it is to get people you don't know well to help you," Guidry says. Most people will be flattered that you asked. "The human spirit to help is very strong. I've never had anyone refuse."
Guidry refers to two members of his board as his "silver-haired advisors." These two men are older (one is in his late 60s, the other his early 70s), very successful business leaders who are extremely visible in their community. Guidry made it a point to meet them and ask for their help. "They're icons in our area," he says. "They've done a tremendous amount of things, they know everybody and I can't think of any business problem they haven't seen."
- Be clear about what you're trying to do. Let your prospective advisors know what your goals are and that you don't expect them to take on an active management role or to assume any liability for your company or for the advice they offer. Guidry usually specifies the areas in which he's seeking help. He also makes it clear that he wants advice, not instructions. "I had one guy tell me, `I'm not going to give you advice if you're not going to take it.' You can't have that kind of person on your board," Guidry says. "You need people who can challenge you and help you, but who respect you and your decisions at the same time."
- Don't worry about compensation. Advisory board members are rarely compensated with more than an occasional meal. Because catering is her business, serving a meal was natural for Turner. "We weren't in a position to pay anyone," she says, "so I fed them a great dinner and said, `I promise you that, somewhere along the way, if I make it, I will return this kindness by helping other people. That's the best I can offer at this point.' And it was enough for them."
Keep in mind that your advisory board members will likely benefit in a variety of tangible and intangible ways. Being on your board will expose them to ideas and perspectives they may have otherwise missed. It will also expand their own networks, which can offer a wide range of advantages. And whenever he has the opportunity, Guidry enthusiastically recommends his board members to others who might become their clients.
- Consider the group dynamics when holding meetings. Turner and Guidry each take a different approach to meetings. Turner's entire board met as a group once a month for a year after it was formed. "There was a lot of healthy discussion," she recalls. Once the company had been successfully turned around, a few of the members dropped off, and the meetings became less structured.
Guidry rarely gets his entire board together at the same time. He meets with the various members separately, at least once a month. "There are people on my board who don't know each other," Guidry says. "If I got them all together at the same time, they would end up debating each other. I don't want them to waste time arguing their points. I just want their input so I can make the decisions."
- Ask for honesty, and don't be offended when you get it. Turner's first advisory board meeting produced the biggest jolt she'd ever had in her life. "I told them I wanted them to be frank," she says, "and to not worry about hurting my feelings. I needed to know how to operate this company smarter." Her advisors took her at her word, and pointed out a wide range of mistakes she was making, along with suggestions for correcting the problems.
- Learn from failure as well as from success. Encourage board members to tell you about their mistakes so you can avoid making the same ones. "You can learn a lot by finding out what other people did wrong," Guidry says.
- Respect your board's contributions. "Don't abuse or waste their time," Guidry says.
But remember you don't have to do everything your advisors suggest. "I evaluated everything," Turner says. "I asked myself, Does this work for me? Am I comfortable with that? Then I made a decision."
- Provide feedback. "One thing they insisted on was that I do my homework," Turner says. "At each meeting, I gave a report on what had happened since the last meeting."
Guidry concurs. "Good or bad," he says, "let the board know what you did and what the results were."
- Be willing to serve on other boards. Guidry will help just about anyone who asks him, as long as that person is seriously committed to his or her own business. Turner says she is currently active on several advisory boards. "I'm very grateful to the group of people who came together to help me," she says. "So I made sure, along the way, that I helped others."
Jacquelyn Lynn described the ups and downs of buying a turnkey business in the September issue of Business Start-Ups.
Cuisine Unlimited, 4041 S. Seventh E., Salt Lake City, UT 84107, (801) 268-2332
Guico Machine Works Inc., 1170 Destrehan Ave., Harvey, LA 70058, (504) 340-7111