“Janine” owned a highly successful women’s athletic apparel business (Swette, Inc.). She faced an issue common to companies ramping up and expanding: the business outgrows the founders. Janine’s background was in sports apparel design. So she saw soon enough that she needed outside brainpower to give Swette the foundation and systems to thrive.
Where did she find it? Through her various advisory teams.
1. Professional advisory team.
From the outset, Janine secured a strong set of professional advisors she could reach out to when needed. These outside advisors were (and continue to be) available to her a consulting-type basis.
Her lawyer helped form the business entity, review contracts, and make sure her website was legally compliant. Her accountant guided her tax-related decisions, and introduced her to the bookkeeper who kept Swette’s financial records clean as a whistle. Janine’s insurance broker made sure that Janine and Swette were protected from various claims.
2. Peer advisory team.
Janine had no prior experience running a small business. Although the professional acumen helped her manage risk, Janine also wanted input that would encourage growth. As a result, she joined a mastermind group for business owners.
A mastermind group convenes to help each of the members of the group. Ideally, the members make a regular time commitment (somewhere between weekly and monthly). Group members also agree to be accountable to themselves and to the other mastermind members for the steps they promise to take to further their business from one meeting to another. Each group differs in how it draws the line between legitimate reasons for not meeting goals and “the dog ate my homework” excuses.
In Janine’s experience, home-grown mastermind groups had difficulty sustaining the passion with which they started. She preferred the facilitation and structure that organizations like The Alternative Board (www.thealternativeboard.com) and Vistage (www.vistage.com) provided. But as with all peer advisory teams, there is that elusive element of “chemistry”—which, like the Goldilocks fable, needs to be “just right.”
3. Board of Advisors team.
As Swette grew, Janine wanted personalized guidance and support from those who had “been there and done that” so she could discover best practices and avoid pitfalls when aiming for Swette’s strategic targets (namely, an increase from 7-figure to 8-figure annual sales). Janine formed a Board of Advisors.
An Advisory Board is just that: it’s a board that provides non-binding feedback and advice. Advisory Board members don’t have a legal responsibility to your company (unlike members of a Board of Directors). Nor do you have a legal obligation to take their advice. While you want people who support your company’s values, you don’t want either “rubber stamps” or chronic naysayers.
Janine defined the skills and connections she needed from her Advisory Board—like quality assurance with overseas manufacturers and retail negotiations. (NOTE: seats on your Advisory Board and Board of Directors should not be doled out like candy at Halloween to all your extended family members, unless they head Google, Spanx, or other key industries you need).
4. Board of Directors team.
From inception, Janine had a Board of Directors. Not that she gave it any conscious thought—by law, most companies have some form of “board,” that is, a committee having supervisory powers over the activities of the business. It may be a committee of one (you!), but it’s there, whether formalized or not.
Currently, Janine is exploring whether to sell the company or take on investors. When she’s ready to step back from ultimate decision making, having a solid Board of Directors in place will help prove there’s an executive team that can run Swette without her. The catch: the Board of Directors will run Swette without her. Board directors have an obligation to the company first, and the CEO second … unlike an Advisory Board, where the CEO/”advisee” comes first. Decisions will be mandated by a majority (usually). Directors contend with many of the strategic, fiscal, policy and management affairs of the company.
Because of the legal liabilities, Directors are often compensated for their service. Variables such as size of the Board (and the company) and meeting frequency dictate how much to pay Board members. Often, Directors receive a fee per meeting plus an annual retainer. Even relatively small companies which ask a fair amount of their board members can expect to pay upwards of $30,000 a year per member.
Janine didn’t take all of these steps simultaneously. For her, it was a natural progression from one step to the next as her business (and Janine’s own knowledge and sophistication) grew. What’s your plan for assembling the advisory team your company needs to thrive?