Set up an Advisory Board!
Most companies in the Portable Storage Industry are privately owned and operated. This means that the owner(s) and their family(s) are the only people with full insight in the business.
Most likely there are times when you wish you had an opportunity to discuss your business with someone who could give an unbiased and objective view of your business. To have meaning full conversations this person needs to have some insight in your company, insight in the local economy and industry knowledge. However, it is unlikely that you’ll find all the knowledge in one person and therefore you need a group of people to talk to. ￼An experienced Advisory Board can help your business grow and prosper because these individuals are there to guide you so that you can reach your goals. Other people who have insight in your business, your CPA, Attorney and Banker may seem like good choices. But they can never see your business from the same prospective as the Advisory Board Members because they are ultimately vendors and don’t share your objectives.
An advisory board is an informally organized group of suitable individuals who provide business owners with support, advice and opinions. Contrary to a formal board of directors in which the directors have legally defined responsibilities and fiduciary duties to the shareholders, advisory boards have no formal power or legally binding authority. In other words, you are still in control, you listen to the Advisory Board but you make decisions as you see fit.
Why would I want an Advisory Board?
The Advisory Board is a sounding board to the owner(s) and offers the following:
- An unbiased outside perspective on the economy, markets and trends.
- A need for structured internal accountability and discipline.
- Credibility with lenders, vendors and customers.
- A sounding board for major decisions and investments.
- Supplemental expertise to current management.
- Networking and exposure to other business environments and industries.
- Crisis and transition leadership in the event of unplanned management changes.
Who do I select for my Advisory Board?
The advisory board is supplements to the skills you and the management of your company have. Therefore, start by looking at the competence you’d like to add to your company such as marketing, legal, logistics, finance, supply, operations, information technology etc. Look for candidates that understands business and not necessarily from the portable storage industry. A variety of industry knowledge on the Advisory Board is preferable to having an Advisory Board with members from one or a few industries. If you feel that you’d like to have someone from the portable storage industry on your Advisory Board, pick someone from a region where you don’t compete. Don’t invite anyone who can’t give an unbiased view such as family members, retained advisors or members of your management team. If you are planning to make major changes sometime in the future such as selling the business, handing it to another generation, opening up new branches, taking in partners etc. look for candidates that have expertise in these types of situations.
How many members should I select for my Advisory Board?
Most companies in our industry are relatively small; having an Advisory Board with two to five members excluding the company owner is probably a good number. The size of the Advisory Board should be decided on the types of capacities that are needed. For example if you want legal, financial, scientist and engineering input and it requires four people to provide that then four is a good number.
What should I expect of the Advisory Board?
First of all, you should require commitment, being a Board Member means being involved, present at meetings and engaged in the tasks at hand. In your selection process it is important to make this clear to the candidates. Secondly, don’t expect the Advisory Board to have all the answers. Many topics that arise are new to the Advisory Board members as well as the owner. In these situations it is the aggregate experience of the Advisory Board members that is valuable. Finally, expect to be candid with the Advisory Board members and respect their views and opinions even if they are not what you want to hear. It is more valuable to have an Advisory Board what questions the owner and the management rather than vice versa.
How do I invite the candidates?
Define the skill sets you are looking for and make a list of potential candidates. Approach them one on one, preferably in person. You can very well start with just two or three people and hold an informal meeting where your thoughts and objectives are formalized. Your initial candidates may know other suitable candidates that you don’t know or haven’t thought of. Don’t rush to fill your board with members, it is an evolutionary process. You may find that some candidates don’t meet your expectations, you may find that some don’t have the interest they first showed and you may meet new people who you think are suitable. Most often people are enthusiastic and feel honored when being invited, however it is a time commitment so it is important to find members that have continued interest in serving on the board.
How do I get started?
If you are thinking about an Advisory Board you probably have an idea of what you want to achieve. Most often it is because you need someone to talk to whom you can be open with and from whom you expect candid opinions. Therefore, begin with bringing up the issues that currently concerns you the most. For the Board Members to be able talk to you about your, they need information, therefore make presentations of the data that you look at to gauge the status of your business. For example; an organizational chart, financial statements, utilization data, advertising agreements, customers, vendors, and market conditions etc. In the beginning you have to educate the Board Members about your company and its unique situation. Once they understand that situation they can give you feedback, thoughts and suggestions.
The Board Meetings
Hold your Advisory Board Meetings three to six times per year. In the beginning it is important to be at the premises of your business but as Board Members becomes more familiar with the company some meetings can be held via phone or off-site.
At the initial meetings give the members time to get to know each other. Ask the Board Members to prepare a presentation of themselves, their background and how they think they can contribute to the Board. It is important that everyone is informed of each Board Member’s background, expertise and capacities.
Establish an agenda that is partially reoccurring and provide reports that are consistent and can be measured from time to time. Make sure your Board Members are well informed of the upcoming agenda. It will give them a chance to come prepared and give more of a contribution. Keep in mind that you live day to day with your business while the Board Member is there for a few hours a few times per year. He needs to be informed of the current situation and reminded of how it compares to the situation at the last board meeting. Ask the Board members to give their view of current events as a way to get the meeting started. There is a lot of correlation between most businesses and to hear what other companies and industries are experiencing can help you better understand the challenges your company is faced with. Make sure there is a social aspect to the meetings as well, have a coffee break, go out to lunch or dinner. Very often the meeting continues in an informal way at the social events and many decisions, suggestions and ideas are better dealt with in a less formal environment.
Compensate your Advisory Board members appropriately
You have an Advisory Board to get professional feedback, support and to help you make better decisions for your company. Their efforts over time are expected to improve your business from a number of different aspects. Compensation to the Advisory Board members should address three things, the time they spend, the expenses they have and the benefit they provide. There are many variations of compensation structure, here are a few examples; A fee for each meeting ranging from $500-$2,500. A monthly retainer ranging from $1,000-$3,000. A combination of the two as well as compensation based on the company’s performance.
There are different thoughts about a performance compensated Advisory Board. Advisory Board members have no fiduciary responsibilities. Because the Advisory Board Member doesn’t face a downside situation, compensating for upside or part of profits may encourage the Advisory Board to make recommendations that are too risky for the owners. On the other hand, not having an element of performance compensation may mean that the Advisory Board members are less engaged.
To establish the compensation, you may have a discussion with the Advisory Board members and jointly agree to the structure or you as the owner can make a decision yourself. In preparation, talk to your paid advisors, the CPA and the Attorney or other company owners. Most likely you’ll be able to find a compensation package that is suitable for your company, industry and region.
Challenges with an Advisory Board
Commitment to the task is essential and you’ll find that the commitment will vary. You may be faced with a Board Member who wants the company run his way or who points out weaknesses to reflect his personal expertise in a way that is not beneficial to the company. On the contrary you may encounter Board Members that don’t show enthusiasm or engagement at all. Another challenge can be Advisory Board Members that don’t get along; it can be personality, style or history that makes the chemistry between them unacceptable.
Despite a thorough selection process, these negative sides may not present themselves for some time and if this is the case you need to deal with them swiftly. Confirm with the other Advisory Board Members, as a group or individually, if they see the same problems as you do. If so, you have to make a decision as to how to fix the problem. Usually pointing out the problem to the Board Member in question is the best start. If the problem doesn’t correct itself after a while then you need find a replacement.
To keep the Advisory Board effective the owner should communicate regularly and share the same information with all Board Members. If information is withheld, for whatever reason, the Advisory Board Members will lose trust in the Company and quickly lose interest in their task.
The compensation to Advisory Board Members is always a challenge. You have selected a group of advisors and they expect to be compensated as professionals. Make sure you are prepared to pay for the advise you seek and if not, be candid and eliminate the Advisory Board.
How to make the Advisory Board a success for the owners
- Take advantage of the Advisory Board, as the owner you spend time and money to set up the Advisory Board, use the members expertise, knowledge and experience not only at the Board meetings. Contact them as you see fit.
- Respect the Advisory Board Member’s expertise and experience even when it is in disagreement with your own thoughts and preferences. You engage these professionals to give you a second opinion; a view contrary to your own may avoid a costly mistake.
- Communication with the Advisory Board Members, stay in touch outside of the meeting schedule, provide detailed material prior to the Advisory Board Meetings and provide frequent information about your company and the industry.
- Hold regular meetings and set the dates far in advance so that all Advisory Board members have a chance to arrange their schedules. However, don’t hesitate to arrange extra meetings if issues arise unexpectedly.
- Have an objective for each meeting; present an agenda and pertinent information in advance so that the Board Members have a chance to prepare themselves.
- Be patient, the benefits from having an Advisory Board are not instant. It takes time for the owner(s) to implement change and see the rewards from having an Advisory Board.
- Assess the benefits of the Advisory Board on an annual basis. Does it meet your expectations? Do you have the right mix of experts? Are the Board Members committed to the task?
Most privately held companies don’t have an Advisory Board, most likely your local competitor doesn’t and therefore by developing one you’ll have a competitive advantage. There is tremendous value in having objective expert advice from committed individuals who share in the success of your business. Start thinking about an advisory board today!