NFIB

Does Your Business Need a Board of Directors?
09/ 30/ 2005
by Steve Strauss

Bob Vukovich has started two successful businesses and spends a lot of time working with entrepreneurs. He says, “The worst thing you can do as an entrepreneur is to think you know everything. When I need advice, which is very often of a general nature rather than technical, it’s very important to have a great board to turn to.”

Vukovich is not necessarily talking about a board of directors, but rather a board of advisors, something all entrepreneurs and small businesses should consider having. A board of advisors consists of an independent collection of businesspeople who, as the name implies, advise you and help direct your business.

If you’re incorporated, then your board of directors is the same as your board of advisors. But many small businesses are not incorporated and do not have a board of directors. They are the ones for whom a board of advisors is designed to help. These advisors can give the entrepreneur, ideas, perspective, contacts, feedback and advice.

Think about it. If you are a sole proprietor, and you come up with a new idea, implementing that idea on your own is risky. It may fly, and it may not. You may know how to pull it off, and you may not. If you had a board of advisors, you could run the idea past them first. They could help you know if it really is a great idea before you invest a lot of time and energy in it. They may even have ideas about how to improve it or may know people who can help you implement it better. That is the purpose of a board of advisors.

When looking for board members, you will want people who:

• Complement your experience. Most entrepreneurs are strong in a few areas and weak in others. You may be a good leader who is a marketing whiz, but needs help with finance and operations. Look for board members who complement your skill set.
  
• Have broad experience. Ideally, a good board member will be an experienced businessperson who understands and appreciates the entrepreneurial process. You should also look for board members who have contacts with investors, possible joint venture partners or potential customers.
  
• Can give you guidance. Avoid the rubber stamp board. Instead, look for board members who will be honest with you and who can play the devil’s advocate.
  
• Have a vision. Entrepreneurs often get lost in the day-to-day experience of running their businesses. You, therefore, want board members who have a different, bigger perspective.

Don’t make the mistake of padding your board with friends or family. Say, for example, you’re looking for investors and give one the name of one of your board members to call. He does and discovers that he is speaking with your brother. Needless to say, that doesn’t look good and impresses no one. By contrast, an independent, experienced board can help your business build credibility. A board full of professionals and businesspeople with experience not only shows that you can take feedback, but  also that you have contacts.

Should you pay your board members? Boards of advisors are usually compensated, either with money or equity. Of course, some people are willing to do it for free because they appreciate the chance to help a young company grow.

Creating a strong, experienced board of advisors can really make the difference in your small business.

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