Can Your Business Use a Board of Directors?

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

Advertiser Disclosure ▾

This page contains affiliate links from which we receive a compensation. Like many publications Wise Bread is supported by affiliate commission from partner companies whose products appear on our site. This may influence which products we write about and the location and order in which products appear. We aren't able to cover every product in the marketplace.

Wise Bread Picks

• Travel Rewards Credit Cards
• Cash Back Credit Cards
• 0% Balance Transfer Credit Cards

Many small business owners don't want to have outsiders on their board "overseeing" them, and that's understandable.

If your small business is incorporated, you were required to form a Board of Directors when you formed your corporation, but chances are very good that the founders, management, and the Board are all the same people. If your small business is unincorporated, you haven't had to deal with the question of a Board of Directors at all. But a Board of Directors serves a very important purpose – to provide oversight, accountability, and expertise to management.

Of course, part of the reason that many of us start our own businesses is that we want to “be our own boss." But sometimes you will hear people say (usually to someone who never asks for advice and tries to do everything themselves), "Don't be the Lone Ranger."

Now, putting aside the fact that the Lone Ranger did not actually work alone (Remember Tonto?), most people understand this to mean, "get someone else to help you, don't go it alone."

Great Advice

Interestingly, this is one of the areas where I find that the small "for profit" businesses that I work with can really learn a lot from the non-profits. In the non-profit world, there is a legal requirement for a formal Board of Directors, which is usually composed of smart, caring, committed people who volunteer their time to:

• Understand and support the vision and mission of the organization;
• Provide guidance in their respective areas of expertise;
• Help expose the good work of the organization to the community;
• Be a sounding board for the people running the organization on a day-to-day basis.

Legally, a Board of Directors also exists to:

• Make major organizational decisions;
• Provide oversight (the executive director or CEO of the organization reports to the board);
• Ensure the continuity of the organization.

So, how do you get the outside help you need, without giving up your autonomy? There are three major ways that work well.

• Join a peer based advisory group. These groups can be pricey but they’re popular for a reason – they work.
• Hire a business coach and some good consultants.
• Form an advisory board.

Businesses are inevitably more successful when their owners bring in the right horsepower when it's needed. But let's face it … you don't always know what you don't know, and different people with different backgrounds will always bring more perspective to an opportunity or issue. The job of an advisory board in the "for profit" world of small business is to:

• Understand and support the vision and mission of your small business;
• Provide guidance in their respective areas of expertise;
• Be a sounding board for you and provide you with accountability.

Accountability and expertise are the most important.

Accountability

The truth is, most of us need a little help in this area. When you decide to "be your own boss," you're gaining a lot of freedom. You're also losing one of the things that made you a successful employee – external accountability.

Knowing that other people know what you're supposed to be doing, what your performance goals are, and that your performance is being monitored against some standard (even if it's just showing up every day), is a powerful motivator and it keeps us on track.

So the first function of an advisory board is to give us someone to make commitments to and share our goals with, and then continually report to them how we're doing against those goals. This keeps us on the road to success.

Don't feel bad that you really can't do this for yourself; most people can't. That's why programs such as Weight Watchers are so much more effective than losing weight alone.

Expertise

The second major function of an advisory board is to give your small business the benefit of specialized expertise that you don't have. They are there to help you make better decisions. The question you will be asking them most often is:

"What do you think?"

You would be surprised how much easier it is to run your business when you have other people – people whose paycheck doesn’t depend on your decision – to go to for help and advice. Wouldn't it be nice to have a group of people with your best interests in mind to call on?

It sure would.

That's the "why" of advisory boards. And anyone can have one!