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Who Needs a Board of Directors?

October 4, 2009

By E-Myth Business Blog

As a business owner, you’re always prioritizing efforts and making resource decisions. You may feel like you live in your own world… wearing all the hats of the business, or “doing it, doing it, doing it.”  

Starting a board of directors and maximizing its usefulness may not be high on your list, but as your business grows, having an active board can provide you with significant advantages. It’s also something you may not have a choice about; every corporation is required by law to have a board of directors. You should, of course, be working with your attorney on matters such as these. But whatever the legal requirements, satisfying the laws of incorporation is only the beginning for this vastly underutilized small business resource.

What Kind Of Board Is Right For Your Business?

There are two basic kinds of boards: advisory or fully mandated. An advisory board does just what it says: it’s a board that provides feedback and advice, but nothing is binding. The second type, a fully mandated board has real power and accepts fiduciary responsibility for the company.

The kind of board you choose depends on your needs. Go with the advisory board if you just want advice but don’t want decisions mandated by a majority. A fully mandated board is a good option if you’re ready to take a step back from ultimate decision making. Either way a board is a great way to bring in expert, trustworthy advisers to help you make the big decisions.

Why You Need A Board

With a board of directors, your business immediately gains legitimacy and a panel of expertise you may not otherwise have “in house”. Directors with specialized expertise such as law, finance and marketing become a valued resource providing guidance and much needed advice in critical centers of the business. Your board can help develop business plans, handle policy issues and also help focus overall business strategy. Directors monitor a company’s financial strength and the success of its product and services. Selecting board members from your business community can also bring greater awareness from the community at large.

Typically, a board will focus on protecting the company’s unique values and culture — a necessity in our fast changing business environment. They’ll also assist with recruitment, bringing in new people for both the management team and other director’s seats, especially ones who can help further the company’s business objectives and secure sources of capital. A board can also help with succession planning and your overall exit strategy.

The most effective boards are comprised of diverse, strong-willed people with their own viewpoints. You want board members who are fearless about offering advice, guidance, feedback or argument. An open forum for ideas and opinions is a board’s most valuable asset — don’t squander it by setting up a board with a bunch of drone-like “yes” people.

Now maybe you’re thinking that your business is just a small family affair and your partners are already working in the business with you. But we would say that your business is the perfect candidate for a board. In fact, nobody needs a board more than you! Why? A board will help you set aside your tactical perspective, get outside the organizational boundaries of your day-to-day perspective and force you to work on the business!

A board allows you the unique opportunity to look at the business objectively and from every angle. It forces you to work on strategy instead of tactics. It allows time to develop new ways to improve the entire business enterprise. Don’t underestimate the impact formalizing a board can have on a family or small partnership business.

The Final Analysis

As with all entrepreneurial decisions, it’s up to you whether to invest your energy and resources in a board of directors. There are many advantages to consider; the only real disadvantage is investing your time and resources in a structure which may not serve your current objectives. At the least, an advisory board can increase your community outreach, while a fully mandated board can give you just the expertise and legitimacy you need to grow to the next level of your business organism’s natural development.

SCORE Lancaster offers free Advisory Boards

SCORE Advisory Boards function like a  free Boards of Directors, staffed by SCORE mentors with relevant expertise and experience.  In most small businesses, owners facing major decisions usually face them alone.  SCORE mentors and Advisory Boards provide  sounding boards, critiques and analyses to help lead to good decisions.  For information about SCORE Lancaster, contact us at www.scorelancaster.org or call us at 717-397-3092.

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One Comment leave one →
  1. kempozone permalink
    October 12, 2009 2:04 pm

    Im sure many of you are like me and one of the first things you do in the morning is head here and check out the new post. Along with seeing the new posts, I’m also always checking out the blog roll rss feed and watching them grow, or shrink sometimes. In one of my past …but all in all excellent site. Keep it up!

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