Businesswise | Why your small business needs an advisory board
As a principle, I don't like the idea of giving general business advice to entrepreneurs because I believe businesses are so vastly different that there is no one-size-fits-all solution to most challenges.
For me, offering blanket recommendations is akin to a doctor diagnosing an illness and prescribing medication before learning about and thoroughly examining the patient.
As a result, my rule of thumb is to learn as much as I can about the business, its history, business model, leadership and management, strategy and operations, infrastructure and utilisation of resources, financial position, market position and opportunities for growth, stage in business life cycle, risks, and so on, before doing an assessment and proffering advice.
However, there are a few notable exceptions to this rule as there are some strategies and best practices from which almost every business may benefit. One such strategic move is to assemble an advisory board, which may dramatically improve the leadership, development and growth of the business.
The majority of businesses registered in Jamaica are done as business name registrations and not as limited liability companies with a formal board of directors.
A large number of businesses rely exclusively on a single individual, usually the sole proprietor, for strategic management, governance and all aspects of leadership. That individual is typically the businesses' sole source of knowledge, expertise and experience to influence critical decision-making.
It is an extremely tall order for any one person to fulfil. It should, therefore, come as no surprise that when compared to a company with a well-functioning, qualified and effective board of directors, a small business with no board is likely at a significant disadvantage.
A board of directors typically adds substantial value to a company in term of its leadership, management, competitiveness, financial performance, longevity, sustainability and overall governance. Several great business minds working together towards a single objective of ensuring the success of a business is almost always better than one person working alone to achieve the same outcome.
One way a sole proprietorship, partnership can strengthen its leadership to drive better performance and improved financial results is to assemble an effective advisory board, which can guide management in much the same way a board of directors would, albeit without the statutory obligations and responsibilities of the latter.
In putting together an advisory board, entrepreneurs will want to identify prospects with a wide range of skills from which the business can benefit, in addition to leveraging professional experiences and status, qualifications, vast networks, among others.
Most small business advisory boards would benefit from members who have strong accounting and financial expertise, marketing, legal and risk management, strategy and innovation and human resources management and operation to name a few key areas.
It's important to identify even one advisory board member with experience in the industry in which the business operates.
In practical terms, it takes considerable groundwork and skill for entrepreneurs to pull together and a good advisory and ensure that it functions properly.
Typically, the prospective members are usually already a part of your network and are individuals with whom you have established a relationship and enjoy mutual trust and confidence. While they, therefore, may have a genuine interest in helping you grow and strengthen your business, you will need to demonstrate the reciprocal value they can expect for their service to the business.
However, no matter how strong the bonds of trust and camaraderie, it is important to formalise the commissioning of advisory board members by signing an agreement which outlines a clear terms of reference to include objectives, responsibilities, mode of operation, meeting frequency, confidentiality, compensation, and other such details.
This will concretise the commitment, give clarity of purpose, manage expectations, and help safeguard the best interest of all parties.