Having a Board of Advisors Can Help Your Business

Most family businesses have a complete set of professional advisors including an accountant, an attorney, a banker and an insurance agent. Some even have gone further to include a financial planner and a business manager. And, of course, family businesses have a board of directors, usually consisting of family members and controlled by the same individual who controls the company’s stock. Even when there isn’t a controlling shareholder, the board of directors typically is made up only of insiders.

Board of Advisors Offers Advice
But something that many family businesses aren’t using yet is the family business board of advisors. This advisory board is comprised of individuals who aren’t in the family or from the typical professional advisor’s group. This board lends advice and counsel in areas it is specifically asked to address, or to help the family business owner make decisions based on advice received from his or her professional advisors. This is particularly helpful when the advisors offer conflicting advice.

Some of the potential members of a family business board of advisors might include suppliers and customers, marketing professionals, and even other attorneys and accountants. The family business board of advisors should be compensated, meet regularly and discuss strategic business decisions on a global basis rather than day-to-day operational items.

Advisors Help Owners Make Better Decisions
One of the reasons more business owners haven’t implemented a family business board of advisors is that they typically trust the advice that they receive from their attorney and accountant. Sometimes, however, questions arise that are outside the realm of these advisors’ expertise. While an accountant may have an opinion about marketing issues, he or she typically does not have a great deal of marketing expertise. Similarly, although an attorney can deal with labor law, his or her advice on personnel issues such as whether to hire or fire a certain person is typically outside the realm of the attorney’s expertise.

A family business board of advisors can help in these areas, but often the family and its professional advisors resist bringing in other opinions because they don’t want to be second-guessed. And when the board of advisors puts professional advice to the test, it often requires more meetings, research, and other discussions that may involve more time and make professional advice more expensive. However, everyone should be more open to this sort of advisory board since it almost always results in better decision making by the business owner and can be done without embarrassing anyone on the professional team.

Roundtable Discussions Are a Good First Step
Some business owners have taken an intermediate step that is somewhat short of implementing the board of advisors, but is in the realm of seeking outside advice. This is to join a group where a business owner may seek advice from other business owners who have dealt with similar situations in roundtable discussions. While this falls somewhat short of the family business board of advisors, it certainly is a step in the right direction.

If you poll your contemporaries in other family businesses, you will likely find that few, if any, have used a board of advisors. However, most of your contemporaries will find the concept to be a good one. If you would like to consider implementing such a board, or if you see it as an opportunity to generate more business with strategic partners by putting them on your board, please call us to discuss the matter further.