Leveraging Podcasting Into Your SMB Marketing

June 9, 2019

SMB’s marketing efforts always need an additional edge.  The rapidly growing world of Podcasting is an effective media to add leads, grow sales, expand market foot print and drive profits.

One reason is that within the next 24 months, Podcasting will surpass over-the-air radio as a provider of information to Americans.  While this ascendency is occurring, Podcasting offers the SMB an opportunity to augment their marketing efforts at surprising little cost and effort.

Offering bargains in ad and production costs, Podcasting will enable smart SMBs to expand their branding efforts and generate significant word-of-mouth.

However, there is another kind of cost to these efforts.  It requires SMB leaders to have a leap of faith and expose themselves to learning and being part of a whole new world.  The reward for this effort can be significant.

Why?  Podcasting is proving to be the best channel for creating and expanding a brand in today’s multi-media, myriad message environment.  Given how many competitive messages hit everyone, every moment, Podcasting is a bright beacon when it comes to attracting, educating, selling, and retaining customers at very reasonable costs.

Not Easy But Rewarding

Earlier in this decade, businesses learned the importance of branding.  Today as they fight to establish their brands, management and owners are learning Podcasting is within the financial reach and abilities of any business.
Creating a Podcast and expanding your brand are not easy tasks but one can help the other and it is a smart business leader who takes on the challenge.  Both require never ceasing attention and creativity but together add up to significant added profits.

The key to why Podcasting can be an effective tool lies in the fact Podcast content offers you amazing ways to draw audiences and motivate buying.

To maximize the effectiveness of your content:

  • Give the speakers enough time to clearly articulate the value proposition of the product/service.
  • Talk about specific uses with guests asking their real world experiences.
  • Offer a reward for audience responses on how they used the product.
  • Promote special sales found only through the Podcast.
  • Ask audience members to be guests on future shows discussing their experiences.
  • Promote to audiences guests appearing on future shows.

Making the decision to explore and ultimately use Podcasts is not simple.  There are many so-called experts in the field.  But the secret is to develop a program reflecting your company values and ethos.

Podcasts Dos and Don’ts 

Veteran podcasters often argue over this list, but generally agree on the following:

  • Have a host with a warm welcoming voice.
  • Where possible have the company leader be a part of the program.
  • Identify guests frequently along with a contact information (URL, physical location, telephone number, etc.).
  • Allow the guest to talk, the more he/she talks the better the program.
  • Promote the programs and have an easily downloadable embedded program on your website.

The first task for you as an SMB leader is to research Podcasting and see how it can benefit your company.  The chances are it will.  Then the next step is up to you.

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What is the Value of Your Business?

May 1, 2019

Value is in the eyes of the beholder or buyer.

Today, there are more small businesses for sale than at any time this century.

While sellers have one idea of a business’s value, buyers have another.

Therefore, in this competitive marketplace, before initiating a sales process it is important to know its value.

While a seller may think the value of a business is related to its assets, sales and profits, professional deal-makers often have a different idea of where the value of your business truly resides.

Here are a few critical things to know about how a buyer sees a business’ value and ways to maximize its’ value before a sale, merger, etc.

Highlight unexplored opportunities

Identifying all of the opportunities that the seller could take advantage of in growing future profits.  A buyer is going to focus on what they can do with the business after they put their time, money and other resources into it; not what has been done.

Consider what additional resources could have propelled the business to extra profits.  Be ready with a plan that identifies opportunities along with the estimated time and cost to pursue.  Buyers are often attracted to owners and business leaders who can envision taking the firm to the next level.

Focus on your business’ future, not the past

The buyer is seeking his/her future with the business as a base.  In the presentation to potential buyers include a description of intangible assets, such as customer list (consider number, life time value, longevity), contracts (terms and especially if multi-year), reputation (in marketplace and ratings), supplier relationships (terms and rapport), and distribution channels. Also identify opportunities to improve the value of these intangible assets.

One intangible asset that buyers value is the company’s ability to operate without the seller. If he or she wants to leave the business after the sale, are there employees that can take over the company? If yes, that’s a huge intangible asset.

Other intangible assets include the company’s unique channels of distribution. Has it diversified the customer base to make it more resilient to market forces and the competition?

Is the company’s good reputation tied to the seller personally or to the organization? If it is tied to the seller personally, it’s time to begin transferring that reputation to others inside the company so that buyers find value there.

Recast the financial documents to maximize profits

While most business owners make every legal decision they can to minimize the value that is presented in their P&L, most buying company CEOs need to maximize profit to keep their job.

These differing approaches can be reconciled by recasting the financial past. The “add backs” that many financial professionals talk about are less than half of the answer; buyers will also perform an M&A recast to rewrite the target company’s financial history as if they had always been part of the acquirer’s firm.

Turn to the experts for valuation guidance

The need to have value determined by an M&A professional or an MR&A firm is critical. This should not be left an accountant or a broker. The buyer will be buying his or her future, not the company’s past; they are not going to calculate value based on some multiple of the seller’s past results.

Many sellers believe that multiples and formulas are the way to determine the value of their firm. But buyers use multiples for negotiating purposes, to set low expectations in the seller’s mind.

Ultimately, buyers will calculate value based on a forward projection of the future of the business under their ownership. They will then use a discounted cash flow approach to determine the maximum value of that future.

Hiring Critical in 2019

April 9, 2019

Hiring is still the name of the game for small business leaders.

By a two-to-one margin, small business leaders say they plan to hire more staff the rest of year versus laying off employees.

This statistic, echoed in our own Information Strategies, Inc. (ISI) surveys, comes from a new Clutch report.  In its survey, more than half (51%) of small businesses say they plan to hire, and only about a quarter (23%) plan to lay off employees this year.

Most tellingly, job growth in small businesses is expected to focus on the types of positions that support customer growth.

As soundings from many sources indicate, there is a need for salespeople who are going to create the initial demand as well as customer service people who insure fulfillment of that demand.

In demand are staffers who understand how to execute marketing campaigns with the right strategy; particularly sought after are digital strategists and marketing automation experts.

IT professionals are always in high demand and increasingly so with digitization.

As of March 2019, there were approximately 1+ million more job openings than unemployed people in the U.S.  Small businesses must consider how they can entice talented candidates in an economy that offers job seekers options.

With employee demand that high, recommendations from existing employees often work out as they already know your business’ culture, what is needed in the position and vouch for the new applicant.  Don’t ignore this vital internal resource channel and reward the successful referral in some way.

 

Small businesses may lack the HR expertise and higher compensation packages of larger companies, so they should think creatively about their recruitment processes and benefits packages.  Consider joining a PEO that offers flex-packages with a variety of benefits.  While there is a management fee, the PEO’s volume purchasing power often compensates. 

For more information on PEOs, please see my May 6, 2018 blog, PEOs Can Be Advantageous.

On the flip side, if your small business needs to let one or more employees go, take care in doing so professionally.  Prepare a consistent message that is honest and give the employee(s) as much heads up as possible.  It is also important to be aware of how your business’ remaining employees learn about the departure(s) to avoid misunderstandings.  Doing it right will make it easier when your company is ready to hire.

Businesses save money, streamline operations by automating

March 5, 2019

Small businesses are not being left behind in the trend towards industrial automation.

Rather, they are being cautious in their approach to moving more and more of their operations onto automated processes.

It is popular to think since the 1950s that industrial automation was more for big businesses running huge operations, which involve massive production lines.  But the historic barriers to entry, huge costs and time constraints associated with setup are disappearing.

One reason, thanks to advances in how robots learn, many systems are designed to be set up by non-experts.  Robots have become readily installed onto productions lines without dramatically slowing down or re configuring operations.

Without the need of hiring specialists, but rather using consultants and a rapidly growing field service sector targeting small and mid-sized business (SMB), customers are cropping up literally overnight. Moreover, many suppliers offer help getting their robots online, easing the transition to automation.

Here are reasons why your small- or medium-size business might consider automation.

AFFORDABLE

The most popular collaborative robot on the market is UR5 by Universal Robots; it costs about $35,000, it is suitable for a variety of tasks like components manufacturing, pick-and-place, as well as bench-work in labs and light fabrication shops.

Another company, Soft Robotics, using materials science in favor of complex engineering, makes soft grippers that conform to objects and are suitable to handle a wider range of tasks than their hard-skinned counterparts.

SAFE

While collaborative robots are billed as safe, and by and large that is true; it is a matter of how it’s used.  There is currently a groundswell effort to help establish stricter compliance protocols to ensure safety; perhaps 2019 is the year that robot safety becomes a top priority.

The safety record since robots have come out of cages to start working alongside humans has been strong.  A combination of force sensors, which cause robots to stop when they bump into things, advanced machine vision, and other sensing innovations have resulted in platforms that are reasonably safe if deployed responsibly.

FLEXIBLE DEPLOYMENT

If your company warehouses and ships components, manufactures small devices, performs scientific testing, fabricates metal or is involved something else… there is most likely a robot for that.  In fact, it is possible all of those operations could be served by the same robot.

The trend in industrial automation is task-agnostic platforms that can be customized and configured for an infinite number of deployment types.  Companies like Fetch Robotics, which makes autonomous mobile robots for materials handling and picking & placing, can move materials in a warehouse just as easily as they can stock inventory in a logistics operation.  When designing a lightweight pneumatic collaborative robot, Festo intentionally modeled it after a human arm, a nod to the range of tasks it was designed to perform.

The widest integration of collaborative robots has happened in industries like components handling, but SMBs in all industries are finding innovative ways to automate with collaborative robots.

What tasks can be automated?

Repeatable tasks in predictable environments.  That could mean picking diverse products off a line and placing them in a bin.  It could also mean operating existing machinery, such as CNC machines or welders.  At the other end of the spectrum, it could mean holding a beaker and pipetting chemicals.

Sectors

Automation with a diversity of applications is so versatile, SMBs are benefiting from automation in a variety of sectors; they include but are not limited to agriculture, apparel, boutique manufacturing, construction, fabrication, healthcare, laboratory, publishing, real estate, technology, among others.

With the pressure to increase salaries and finding qualified employees, perhaps it is time to consider how your SMB can benefit from automation.

Small and medium-sized businesses are finding ways to save money and streamline operations by automating.

February 3, 2019

Small businesses are not being left behind in the trend towards industrial automation.

Rather, they are being cautious in their approach to moving more and more of their operations onto automated processes.

It is popular to think since the 1950s that industrial automation was more for big businesses running huge operations, which involve massive production lines.  But the historic barriers to entry, huge costs and time constraints associated with setup are disappearing.

One reason, thanks to advances in how robots learn, many systems are designed to be set up by non-experts.  Robots have become readily deployable into lines without dramatically slowing down or reconfiguring operations.

Without the need of hiring specialists, but rather using consultants and a rapidly growing field service sector targeting small and mid-sized business (SMB), customers are cropping up literally overnight. Moreover, many suppliers offer help getting their robots online, easing the transition to automation.

Here are reasons why your small- or medium-size business might consider automation.

AFFORDABLE

The most popular collaborative robot on the market is UR5 by Universal Robots; it costs about $35,000, it is suitable for a variety of tasks like components manufacturing, pick-and-place, as well as bench-work in labs and light fabrication shops.

Another company, Soft Robotics, using materials science in favor of complex engineering, makes soft grippers that conform to objects and are suitable to handle a wider range of tasks than their hard-skinned counterparts.

SAFE

While collaborative robots are billed as safe, and by and large that is true; it is a matter of how it’s used.  There is currently a groundswell effort to help establish stricter compliance protocols to ensure safety; perhaps 2019 is the year that robot safety becomes a top priority.

The safety record since robots have come out of cages to start working alongside humans has been strong.  A combination of force sensors, which cause robots to stop when they bump into things, advanced machine vision, and other sensing innovations have resulted in platforms that are reasonably safe if deployed responsibly.

FLEXIBLE DEPLOYMENT

If your company warehouses and ships components, manufactures small devices, performs scientific testing, fabricates metal or is involved something else… there is most likely a robot for that.  In fact, it is possible all of those operations could be served by the same robot.

The trend in industrial automation is task-agnostic platforms that can be customized and configured for an infinite number of deployment types.  Companies like Fetch Robotics, which makes autonomous mobile robots for materials handling and picking & placing, can move materials in a warehouse just as easily as they can stock inventory in a logistics operation.  When designing a lightweight pneumatic collaborative robot, Festo intentionally modeled it after a human arm, a nod to the range of tasks it was designed to perform.

The widest integration of collaborative robots has happened in industries like components handling, but SMBs in all industries are finding innovative ways to automate with collaborative robots.

What tasks can be automated?

Repeatable tasks in predictable environments.  That could mean picking diverse products off a line and placing them in a bin.  It could also mean operating existing machinery, such as CNC machines or welders.  At the other end of the spectrum, it could mean holding a beaker and pipetting chemicals.

Sectors

Automation with a diversity of applications is so versatile, SMBs are benefiting from automation in a variety of sectors; they include but are not limited to agriculture, apparel, boutique manufacturing, construction, fabrication, healthcare, laboratory, publishing, real estate, technology, among others.

With the pressure to increase salaries and finding qualified employees, perhaps it is time to consider how your SMB can benefit from automation.

How Startups and SMBs Can Make the Most of the Freelance Economy

January 10, 2019

Six of ten start-ups in the past five years have used or are using on-demand or gig employees.

One in three workforce members are freelancing regularly by choice today.

The freelance economy has played and is playing a big role in the continuing growth of start-ups, small- and medium-size businesses, and even larger corporations; and that role keeps getting bigger.

Today 53 million Americans or 34% of the entire workforce is freelancing, and that number is expected to grow to half of US workers by 2020.

Freelancers are available and generally more affordable workforce than full-time employees for start-ups and SMBs to tap into.

Of course, the freelancing economy is not without disadvantages. One is that freelancers do not guarantee accountability, unlike with a regular workforce whom you can closely observe as they work.

On the flip side, in addition to freelancers costing less than maintaining a long-term workforce, they also help businesses expand their networks and form mutually beneficial business relationships.

All it takes is a system that facilitates good work, better communication, and integrated workflows between businesses and the freelancing community. These are the foundations that will help build long-term relationships and sustained success.

Here are some tools and platforms that will allow you to maximize the benefits of the gig economy.

Enhance Workflow Through Accountability, Performance & Tracking

Accountability has always been a concern when it comes to remote workers.  If you can’t always observe and monitor their work, how can you track their progress or evaluate their performance?

Relying on outside workers may also affect the productivity of your in-house team. By adding freelancers to the mix, it can be tricky to establish a seamless workflow that will keep everyone on the same page.

Businesses need to deploy a project management platform to manage your entire team, onsite and offsite.

There are plenty of platforms that can make sure everyone is doing their job, no matter where they are in the world. Some to consider:

  • Trello: a simple project management tool that allows you to assign tasks to specific team members; this cloud-based solution also enables you to specify deadlines for each task, and all of these are managed through a drag-and-drop card interface.
  • WorkflowMax: a time tracking tool which provides a time tracking and timesheet tool that can be used by project managers, full-time staff and freelancers in facilitating a smooth workflow will help to better enforce your use of a project management platform.
  • Xero: a financial tool that tracks the amount of time a freelancer puts in a specific work project will guarantee businesses get what they pay for and the worker wastes no time computing when it’s time to invoice and does so accurately.

Continue Expanding Your Network

As a growing business, you need to consider options beyond freelancing networks like Upwork that will help you connect with a bigger community of reliable freelance professionals. Start-up and VC communities as well as an accelerator or incubator are a good way to find good connections when it comes to talent and available work. Plus, beyond finding individual freelancers, a good network will enable your business to partner with other enterprises in fulfilling your goals.

Address Structural Difficulties

Sometimes, a professional may be hesitant to form freelancing commitments with businesses, particularly due to structural difficulties, such as managing taxes, spending overhead, and registration for documentation purposes.

As a business, providing your support for your freelance workers is important if you want to make the most out of the gig economy. Your business might consider helping them manage overhead costs, providing assistance in filing for regulatory or accounting purposes, and providing access to business resources, as necessary.

Remember that, just like your in-house team, forming long-term relationships with your remote staff is enormously beneficial. If one particular freelancer is highly valuable for your business processes, you should consider hiring them as a permanent remote staff as opposed to outsourcing them for projects from time to time.

With project management platforms that can help relay consistent workload, it will be just as good as having a permanent onsite employee.

Bridge Cultural and Time Differences

So you found the best freelancers for a long-term project, but they can’t deliver on a regular basis due to a difference in time zones.

Since the gig economy encompasses the global market of professionals, the cultural differences barrier is commonplace. The mismatching time zones are among the most common. This, however, can easily be overcome with the right use of project management platforms and tools.

The language barrier should be out of the question, especially since there are plenty of English-speaking professionals in most freelancing and social networks. But when it comes to other cultural issues, cost disagreements and payment, the differences may have significant implications.

Again, leveraging a workflow and time management tool can help provide accurate invoices, thus resolving the problem of both underpayment and overpayment.

Conclusion

In summary, the gig economy continues to empower startups, SMBs, as well as larger businesses with a global pool of talent that is accessible and cost-effective. For the most part, freelancers offer a better deal, especially for project-based agreements. But to bring about sustained success, businesses must look at the bigger picture and adopt strategies that will foster productivity and help keep reliable freelancers for the long-term.

Cyber Security Begins With Small Business Culture

December 4, 2018

Many small business leaders think they aren’t big enough to be a target.  This is a myth hackers want them to believe.  Because fully one of three hacker attacks in this year’s first six months involved a small company.

Based on those statistics, a small business can expect a cyber-attack in the next three years, say cyber security professionals.

These same professionals say attacks are increasing for small businesses because they are often easier targets for sabotage.  The main reason, they say, is because small business leaders do not have the time or funds to fully devote to preventing or thwarting cyberattacks.

While the simplest way for hackers to gain entry is through your company employees there are ways of cutting down the threat through creating a company-wide awareness of the danger.  Even if the funds for greater cyber security are not available, by putting in some or all of the following recommendations can help your company be safer from cyber-attacks.

Security starts with the culture. Effective cyber security requires acknowledgment, assessment, and total participation.  Many users do not implement these basic protections because they assume additional security controls will complicate usability and interfere with efficiency.  To truly secure their assets, businesses must work towards proactive risk management rather than reactive compliance.

Take the words out of passwords.  Remember this simple adage: the best possible password is one that you don’t know.  According to Open VPN, 25% of employees reuse the same password for everything.  One person’s weak password has the potential to compromise not only an entire organization’s data, but also the data of those serviced by that company. Using password management software such as 1Password or LastPass disperses responsibility and risk in a visible, automated manner.

Test your business’ readiness by phishing yourself.  After you simulate a phishing attack at your organization, you will be better prepared for a real attack.  Available are free programs such as Microsoft’s Attack Simulator and KnowBe4 that gauge your organization’s awareness of and response to hacking attempts. This will not only train your users, but also give you the visibility into how well they’re trained.  As a general rule, tell your users to read the fine print: hover over links to fully read domains exchanged through email.  Spelling errors and suspicious redirects are highly legible, even when embedded into a lengthy link. (Pro tip: Open any foreign link in an incognito browser.)

Since emails are a popular attack vector, it’s critical that security and forensic teams have complete awareness of email activity within the organization.  Step one is connecting O365 or G Suite to your SIEM (security information and event management), which will, for example, correlate login events to look into potentially compromised accounts.

Use Multi-Factor Authentication. The more barriers are put in place, the more difficult it will be for hackers to infiltrate your data infrastructure.  According to the Verizon 2017 Data Breach Investigation Report, 81% of breaches are the result of stolen, default, or weak credentials.  MFA significantly reduces the chance that credentials can be compromised.  Have your employees present two or more pieces of evidence to verify their identity for a login or other transaction.

Use MFA such as Google Authenticator that does not connect to a phone number, because phone numbers are no longer secure and most are publicly available

Better yet, use physical MFA layer to your defense, especially key executives and employees, with encryption keys such as Yubico Security Keys that plug into USB ports.

Lead the leaders. Security is a top-down solution and should be considered as an integral part of business.  Business owners and leaders should be the most secure so that the culture permeates down.  Aside from altruistic business concerns and the cost of a security breach, owners and leaders should be doubling down on security efforts out of self-interest: today, hackers are targeting the top.

Pleasant 2018 Tax Filing Surprise Possible

November 9, 2018

A nice surprise is in store for many small businesses at the end of this year’s tax preparation cycle.

Uncle Sam’s tax bite will be less for many companies according to experts because of the reforms implemented by President Trump’s new tax bill will lessen the tax bite Uncle Sam gets from ongoing companies.

But changes made by The New Tax Cuts and Jobs Act of 2017 means it is important to talk to your Tax Advisor now. There is still time to implement changes to your business based on the new tax bill.

While savings can differ from company-to-company most experts think small businesses really benefit from the tax bill.

To help small business taxpayers maximize savings legally with the changes that impact 2018 returns, here are some year-end tax planning questions you should consider.

Business Tax Changes:

Does your business income qualify for the 20% pass-through deduction? If not, should you switch to a C corporation to take advantage of the 21% corporate tax rate?
If your business does not qualify for the 20% pass-through deduction because it is one of the Specified Services Trades or Businesses, consider taking steps to reduce your income below the thresholds ($157,500 for a single taxpayer, $315,000 for a married taxpayer) to avoid this limitation.
If you are planning on starting a new company, are you planning to sell the company in 5-10 years? If so, consider forming as a C corporation to take advantage of the Section 1202 tax-free gain rules.
If you live in a high-tax state, consider your alternatives to paying tax as a business instead of personally to receive the deduction for state taxes or make state-tax-credit-effective contributions in your business to avoid the limitation on individual state-tax-credit contribution deductions.

Maximize Real Estate Investment Deductions:

Do you need to invest in real estate to take advantage of the bonus depreciation to offset other taxable income?
If you are a commercial real estate investor, consider if you need to replace your roof or any HVAC units as these are now deductible.

As a real estate investor, are you maximizing the new 20% pass-through deduction?

Maximize Retail Deductions:

If you own a retail establishment, consider whether to change your accounting method to maximize new inventory deductions.

Maximize Business Automobile Deductions:

Can you establish a home office to increase your automobile deductions?

Do you need a new car? If so, do you want to consider an SUV or truck over 6,000 pounds to take advantage of the 100% write-off of the business use portion?

Finally, Make Critical Personal Decisions:

Are you contemplating a divorce? If so, the divorce must be finalized by 12/31/18 if you still want to deduct your alimony going forward.

Do have children and want to share money with them? There are changes in the way you can legally shift some of your 2018 income to your children.

Keep in mind, the IRS still haven’t ironed out or published all of the new changes. What it has done is give professionals road signs to help them guide clients.

Talk to them now, not when it is too late.

* Note: The New Tax Bill Is Positive For SMBs was the topic of my February

How to follow up with networking contacts

October 7, 2018

Follow-up is the key to making the most of the time, money and effort you invest in going to events. The people you meet at such events can mean extra profits to your business.

Often time, after an event you have a big stack of business cards. Looking at that pile, you think about following up with all of those contacts but are a bit overwhelmed?

Do not worry, your experience does not have to feel that way. In fact, reconnecting with your new contacts can be fun and meaningful.  Here are a few ways to keep those new connections close:

Business card CRM: if you do not have a CRM system, Excel spreadsheets and Sharpies work well.  Immediately after a conversation with a new contact, write the important details about them on their business card.  Since it probably already has their business title, include something that is more personal — like your conversation about a mutual sports team or your connection to their hometown.  That way, when you reconnect, you can keep the connection human. Not only is that more fun than leading with business talk, but it also helps the person remember who you are.  Keep track of each connection you make with your contacts.

Reconnect with cards or notes: although it may seems so last century, getting a handwritten letter is a nice, unexpected surprise.  It shows you thought enough of them to write a card or note, then address and mail it.  That is more effort than an electronic message to let someone know you are thinking about them.  That is why this personalized follow-up method will make you memorable.

Invite: generally, people hate to be sold, but they love to be invited, as long as the invitations are relevant and anticipated.  By offering an invitation to an event, you are providing value and opening the door to future conversations.  If you are the type of person who goes to events frequently, this strategy will require very little effort while providing great results.

Be a Matchmaker: connecting two people via email is a simple yet powerful strategy.  After all, it provides value to two people while simultaneously boosting your worth to both.  In other words, you are not just out to help yourself, you are creating opportunity for others.  But if you should need help in the future, each person may be more likely to help you.

Comment on Content: if you create content (videos, photos, blogs, tweets, books, thought pieces, etc.), you know that it feels great when people provide a thoughtful response to your work.  It is rare, and really means a lot.  That is why you should take the time to peruse the work of any meaningful new contacts.  Then, send them an email with some positive feedback.  For a guaranteed way to continue the conversation, make sure to end the note with a question.  Also consider posting a favorable comment about their work online.

We all like to be remembered so any touch can lead to something more. Be the one to follow-up.

Boards: Why, When, What and How to Build the Best Advisory Group for Your Business

September 2, 2018

WHY? The reasons for having a board are varied and include:

Strategy – independent views / voices can challenge and improve strategic decision making with other perspectives, plus help guide your business

Expertise – bring in others who know the industry, or a provide skill that is missing or needs oversight

Succession Plan – you may want to move on to another business or retire; thinking about in advance who is going to take over is important

Innovation – outsiders can foster modernization, improvement

Governance – a formal board process will ensure a company is properly managed

Credibility – quality names will add to the integrity to your company

WHEN should my business get a board?

Establishing a board isn’t necessary for all entrepreneurial ventures; venture-backed companies routinely start out with a board from day 1, and privately held companies, those that bootstrap their way to success, may be small enough to navigate day-to-day operational issues without one.

There are a few scenarios where creating a board not only makes sense but can be a critical part of growing the business to the next level.

Contemplating big moves – businesses that have significant growth opportunities or face significant threats or decisions can find a board very helpful.

CEO or owner decides to step down – a board can be instrumental in finding a new CEO, supporting his or her transition, and holding the person accountable to the owner’s objectives.

Next generation succession – a board can help with the leader’s plan to bring his/her children into the business, a handover that he/she may find difficult can be eased with a board composed of parents, adult children, and advisers who discuss business issues and make decisions together.

For many entrepreneurs who have become successful doing things their own way, the formality of board meetings, can be off-putting. But that doesn’t have to be the case. 

WHAT type of board is the best one for your business?

First, figure out what kind of board you want. There are a range of board types to consider, each appropriate for different situations. 

A board of insiders – composed of shareholders and company executives who come together to make decisions on key issues related to the business. This type of board can be appropriate for closely held businesses that are not necessarily facing major issues, but want to lay the foundation for the future by taking some of the first steps toward more formal governance.

A board of insiders can also be an effective way to involve the next generation of family owners in the process of making major decisions.

These types of boards are relatively easy to assemble, requiring little if any legal setup, and can be an effective forum in organizations that lack sufficient debate and interaction at the senior leadership level.  

An advisory board – generally composed of a combination of insiders and outsiders, but they don’t hold their positions on the board in an official capacity. Owners get the benefit of outside thinking and expertise, but in a less formal context.

Advisory boards work well for owners who are not ready to give up any control, but want advice and support on a range of issues. This can apply to businesses that have a relatively small ownership group that are facing major long-term strategic issues in which a consistent, outside perspective can be helpful.

A well-run advisory board is often more helpful than a formal board; it’s easier to recruit great people, everyone is independent and you can structure meetings in whatever format makes most sense.

A fiduciary board with a minority of independents – has a formal role in the organization; the members have decision-making authority laid out in the corporate bylaws and are also subject to the liability associated with board membership. Keeping the number of outsiders, those unaffiliated with the company or the ownership group, in the minority keeps the decision-making firmly in the hands of insiders. This can be more comfortable for owners who want to maintain their authority while moving to more independent oversight.

Ownership groups that are considering major changes in their ownership structure, either by raising capital or selling a part of the business, may elect to form this kind of board to demonstrate a level of governance and oversight that will be important for outside investors. 

A fiduciary board with a majority of independents – is what you see in most public companies and many large privately held companies. With a majority of outsiders, the board generally functions more objectively and independently than if it were dominated by insiders. While still acting on behalf of the owners, the board is more likely to drive the strategic agenda and have more authority.

These boards also typically can and need to attract members with a higher level of expertise and experience. Most privately held businesses that pursue this route have an ownership group that, for a variety of reasons, has decided to turn the majority of the key decisions over to a board. Perhaps the founders have sold their stakes in the company, ownership has passed on to a next generation of owners who don’t know much about the business, or the owners are preparing to go public or pursue some other liquidity event.  

HOW to proceed?

Once you’ve made the decision to form a board, how do you actually move forward?

  1. For a first-time board, you should aim for 5-9 members, to ensure a range of opinions but not so many that everyone will be fighting for airtime. Consider looking for people within your network to serve on your board before going to a search firm or recruiting more broadly.
  2. With regard to pay, you should expect to pay board members enough to make them feel appreciated, but not so much that they feel like they are doing it for the money. One useful rule of thumb some companies use is they compensate the board at a daily rate equal to the CEO’s effective daily rate.
  3. Finally, no friends, customers, suppliers, or other connected individuals who are obviously underqualified or has a conflict of interest; they can compromise the effectiveness of the board. Everyone you choose for your board should be there because he or she has something to contribute and is willing to deliberate the issues carefully before, during, and after the meetings.

Once the board is up and running, here are a few guidelines to get the board off on the right foot.

  1. Make sure the board functions well as a team. It is as important to get a group who works well together as it is to get people with the right experience or expertise. Effective discussion and decision making requires good chemistry, so interview for personal fit and character as well as what is on the résumé.
  2. Give the new board members some breathing room to be effective. Initially, it can be tempting for you as the leader/owner to set the agenda, dominate the discussions, and focus only on what you are interested in. You need to make sure you are listening, especially early on. After all, you formed a board, presumably, to get support and guidance from others.

Consider going as far as giving the chairmanship or other important responsibilities to other members of the board to distribute the balance of authority.

  1. Define the board’s authority clearly. Be clear about what decisions they can make and which ones they cannot. This will help focus the discussions on what they can affect and reduce confusion between the roles of the board, owners, and CEO.
  2. Finally, set the tone that every board member works on behalf of all It can be tempting for board members to align with one or a group of shareholders, especially if they were introduced to the board by said shareholders. For the board to stay focused on what is best for the company and thus the entire shareholder group, they should avoid pushing a particular shareholder’s agenda.

To address your fear of somehow losing control by bringing in a board, it’s important to make clear that the board reports to you (and your partners, if you have any) as the owners, not the other way around. This is generally documented in the corporate bylaws. You, as owner(s), will retain the ability to make the key decisions, including selecting board members, while delegating only the decisions you choose to the board.

Many owners look back at the founding of their board as a critical moment in the long-term success of their business and in their own success as owners stepping away from the business.

Understanding that boards can be designed to fit the unique needs of every business can ensure that you get the expertise and support you need without the unnecessary bureaucracy or any unintended loss of control.

If you consider why, the range of options for what type and how to build a board, you’ll be far better positioned to know when you’re ready for one.