Entrepreneurs often joke about social lives being a matter of historical record. Running a company demands more than sales; there are many other roles to fill. Expansion, growth, and overcoming obstacles takes planning, strategy and most of all: time. For many entrepreneurs, time is the most precious commodity of all.
Entrepreneurs launch businesses using familiar skills. For the rest, the general response is to outsource to a competent professional. For a lot of small business owners, extra help just isn’t in the budget. There is a lot of merit to identifying strengths and knowing where to find help. For help without the added expense, the solution may be a board of advisors.
Mention a board to a room of entrepreneurs and the sound of mental brakes screeching to a halt is nearly audible. For some, maintaining control over decisions and resources is enough to balk at the thought of implementing a board. For others, forming and running a board can seem confusing or challenging. A board of advisors gives advice, leaving legal control in the hands of the owner(s). Forming and running a board is simple, and there may be more advantages to forming a board than meets the eye.
Forming a Board of Advisors
There is more effort to forming a board of advisors than strong-arming your friends into joining. An effective board of advisors will be 3-5 strong, made up of carefully-selected professionals, and will operate with purpose.
- Plan First, Recruit Second. Prior to starting a recruitment drive, define the reasons for forming a board of advisors. Company growth, expansion into new markets, business strategy and more are all real-world challenges entrepreneurs face. Knowing the goals for forming a board will help in finding the right professionals for the role.
- The Right Stuff. The right board of advisors will be a collection of professionals with a myriad of experience. Packing a board with “yes-men”, or those inclined to agree with decisions adds little to the decision-making process. Discord can be a good thing, as discussing different viewpoints may introduce new concepts and solutions for the company.
- Two’s Company, 3 to 5 is a Board. An advisory board of 3 to 5 members helps create simple voting majorities. Adding more members will likely mire discussions. A small group will be more efficient during meetings and is easier to coordinate.
- Approaching potential members with defined goals and expectations benefits both parties. Establishing clear expectations will help potential members determine whether to commit and how to best contribute to that role. Approach an existing professional network first. Try to find members with experience achieving the goals you wish to accomplish. Try to recruit members from the same industry.
- The situation will dictate whether pay is in the budget. Oftentimes, pay can be a token amount meant more to express gratitude than to count for actual compensation. There are other incentives, such as travel and entertainment, beyond direct pay to entice potential members.
Piecing a board together is best done at a relaxed pace. As with hiring new staff, added to any team slowly is generally the best method. Non-disclosure agreements can help both parties feel more comfortable. Predefined term-limits creates measures for removing under-performing or hostile board members.
Running an Advisory Board
The entrepreneur is also board president. Business owners are responsible for scheduling and running board meetings. Most experts recommend quarterly meetings with informal updates in-between. While less-formal than meetings for a directorate, more will be accomplished with the aid of structure.
- Create a Schedule. Boards are there to tackle several big-issues per meeting. Meeting with a board too often leaves little time for accomplishing goals. 2-4 meetings per-year is sufficient for most boards to accomplish goals. Determine a meeting schedule and stick to it.
- Structure, Sorta. A board of advisors is a fairly-informal entity. Lengthy rulebooks for running advisory-board meetings are thankfully unnecessary. Still, some formality to the process is encouraged. Roll call, date and time, and a simple agenda are enough to record the meeting and outlined objectives.
- A lot can happen between meetings. Communicate with members a few weeks before scheduled gatherings to share the upcoming meeting agenda. Time to prepare for a meeting means more time to discuss important issues during a meeting. Informal communication between meetings may also be helpful in keeping momentum.
- Encourage Discussion. Great concepts can still be improved upon. If a board member has something to say, allow them to be heard. 5 heads are better than one. The perfect concept is fleetingly rare, encourage members to give opinions – assenting or dissenting.
- Prepare to Act. Once a board of advisors votes a recommendation it’s up to the owner to act on it. Board members are recruited for advice. If that advice goes unheeded, expect the board to notice. Giving up a sense of control can be challenging, yet may be the key to expanding to the next level of growth.
- If You’ve Got it, Flaunt it. A board of advisors adds credibility. Add member photos and bios to the company website and other marketing materials. Send the message that the organization is professionally run and intelligently managed.
The board is there by request. They likely see the potential in the company and want to see it succeed. Board members have agreed to meet and discuss ways to grow YOUR business. Help them help you by taking the reins. Structure and execute meetings to maximize value for each member.
Getting the Most from a Board of Advisors
There is more to gain from a board of advisors than advice, a sounding board, and a network of professional support. Creating a board of advisors opens the door for added financial benefits seldom taken advantage of.
There are many tax advantages to operating with a board of advisors. Many are well-known, including write-offs for meals, entertainment, and travel expenses. For many board members and entrepreneurs, this is benefit enough. For those looking to gain the most from a board financially, read on.
A lesser-known tax incentive allows many entrepreneurs to bill the company for meeting space. The company deducts that cost as a meeting expense, qualifying it as a tax write-off. Considering the market-rate for renting space in much of the U.S., this can be of significant value to the entrepreneur and the business. Restrictions apply; consult a financial advisor for more information on this and other tax incentives for business owners.
For more information on forming a board of advisors, or information about other tax advantages for entrepreneurs, contact ProsperiFi today. For more intelligent financial insights visit www.ProsperiFi.com or call (847)292-4475.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.