Entrepreneur magazine, October 1996
In a typical corporate situation, the shareholders elect a board of directors who hire the officers who actually run the company. But if you're the sole shareholder and you're running your own company, do you need a board of directors?
Perhaps not in the traditional sense, but you could benefit from setting up an advisory board, says Lois Mitten, founder and CEO of Children's Discovery Center, a chain of child-care centers in Toledo, Ohio. "My advisory board has been crucial to my success," Mitten says. "They have steered me away from some bad business decisions. They have also prodded me in times when I have not wanted to grow."
Mitten formed her board shortly after she opened her first center. She was taking a small-business financial management course, and the professor advocated creating an advisory board. "He said many businesses fail because they don't have an advisory board, but putting together a strong advisory board and using it well can mean the difference between success and failure," she recalls. "I decided to take his advice."
Today, that professor serves on her advisory board, along with an accountant, an attorney, a banker, an insurance agent and an early childhood education professional. "We get together at least once a year, sometimes more frequently, and look at various business decisions," Mitten says.
Some members of Mitten's board donate their time; others, such as the accountant and attorney, are paid at their standard rate; and still others, such as the banker and insurance agent, consider their participation and advice as part of their overall service package.
To set up your own advisory board, look for individuals whose business acumen you admire. Include members with a variety of areas of expertise, both in general business and specific to your industry. Establish a term of office and make your expectations clear--when and for how much time do you want them available, and what are you offering in return? A position on your board shouldn't necessarily mean a lifetime commitment; stagger two- and three-year terms to keep the board fresh.
Get the most out of your advisory board meetings by preparing for them well in advance. Choose a site that is comfortable and free of distractions. Solicit input for the agenda, and distribute important information ahead of time. Run the session as you would any professional meeting, and follow it with an action plan.
Finally, keep your board members informed of your company's activities between meetings. The fact that they've agreed to be on your board means they care about your company, and keeping up-to-date will help them be of greater value to you.