The Importance of an Advisory Board for a Small Family Business
By: Suzanne Amstutz – Ohio Power Tool Inc.
One of the issues that small businesses face, and especially a family business, is that the founders start their business taking on all the roles in the company. They are the marketing person, accountant, salesperson, human resources department, computer technician and customer service rep. While most business entrepreneurs are highly motivated and capable, they cannot be “experts” in all things. We were in business for 18 years before we decided that we needed to make the time to seek out an Advisory Board, and to take the big step in actually revealing our financial statements and hear some constructive criticism.
During those initial 18 years of business, most decisions were made with just some roundtable discussions between me and my husband. We would talk to our accountant and banker occasionally, but to be honest, we were “winging” it as we went along. Trade associations were a resource, but we really needed some practical, personal advice on a multitude of issues. When we finally invited a few professionals to be a part of our Advisory Board, things started to change for our company. We met quarterly for half a day, and we paid our board members a fee for their time.
The immediate result was that we were held accountable to our Advisory Board on the decisions and plans of action discussed at our meetings. We knew that they would expect updates and results at the next meeting, which pushed us to action. We found the time to implement changes with beneficial results. As we were growing we relied on our advisor’s expertise to guide us through the challenges and encourage us. They told us what we were doing right, and showed us where our weaknesses were. It was a relief to have an objective look from people who were genuinely interested in seeing us succeed.
The selection of the board members is critical. You want the meetings to be productive and there has to be mutual respect with everyone understanding their role. We selected our board members by conducting interviews based on referrals. We have also invited people to participate based on existing business relationships. We determined what areas we need help with, and tried to find people who had experience in that area. Typically they agree to a finite term, a year or so, and then we negotiate again after that. Sometimes you may find that someone is not working out and the relationship dissolves. Of course they sign a confidentiality agreement, and agree to the timeframe and fee.*
Now that our son is involved in the business, the Advisory Board is essential to allowing all voices to be heard objectively. Where the family dynamic might have previously caused a standstill or a head-butting, we now have professional opinions that validate an idea no matter who is presenting it. Or sometimes they lead us into a completely different direction that we wouldn’t have otherwise considered. I would absolutely recommend an Advisory Board for family businesses.
Ed note: Suzanne generously sits on the Conway Center Advisory Board and agreed to share her insight and experience with Ohio Power Tool’s own family business Adivsory Board for our blog.
*The Conway Center has resources to help you start your Advisory Board, including a list of potential advisors. Leave a comment or contact Jill Hofmans, Assistant Director – email@example.com