Building Your Board of Directors: A Guide for Growing Small-Medium Businesses
More and more I'm being asked about Business Growth Coaching and role of Advisory or Governance Boards. Here, I'll explain more about these business guidance options to help scale business growth!
As your small to medium-sized business (SMB) grows, establishing a board of directors can be a pivotal step in ensuring sustained success and governance. A board of directors can provide strategic guidance, enhance credibility, and support key decision-making processes.
Here’s a comprehensive guide on why you need a board of directors, the differences between business growth coaching, advisory and governance boards, and critical questions for CEOs or owners to consider.
Scaling a business is a complex process that can be greatly facilitated through stages with the help of a business growth coach, an advisory board, and a governance board.
1. Business Growth Coach
A business growth coach provides personalized guidance and support to help you navigate the challenges of scaling your business.
Business growth coaches can be instrumental in helping by providing a range of services and support tailored to the unique needs of your business.
Here are several of the most common ways in which business growth coaches assist SMB CEOs and Founders:
Strategic Planning & Execution
Business growth coaches help businesses establish a strategic plan for long-term revenue growth with clear, achievable goals, while ensuring revenue is efficiently converted into profit through execution practices.
Operational Efficiency
Identifying optimization processes to address inefficiencies and streamlining operations are central to best manage resources allocation, deploy time, money, and personnel. By sharing broader knowledge and insights for new technologies and tools, such as AI, coaches can help integrate new technologies that can improve efficiency.
Profit
By providing tools and insights into the cash conversion cycle, cash flow, and pricing strategy, coaches help maximize cash as a critical business asset. Business growth coaches can also help identify areas to reduce costs, develop critical metrics and KPIs.
Marketing and Sales
Business growth coaches can increase understanding of the market through identification exercises to specify core target market customers and the customer experience. Coaches can help connect the business offerings to the brand by way of the brand promise and brand story.
Leadership and Team Development
Business growth coaches will enhance the leadership effectiveness of the CEO, business owners, founders, and managers through capacity-building activities and developing team dynamics. Many coaches, with appropriate expertise can assist in hiring, training, and retaining top leadership talent through programs such as Topgrading.
Accountability and Support
Business growth coaches will help establish highly effective meetings, planning sessions, and updates to track progress, address challenges, and stay focused on goals. Many provide executive coaching, facilitating an external, unbiased perspective from an experienced, certified professional on the most critical business issues that hold back business growth.
Networking and Connections
Business growth coaches can leverage their extended networks, and professional relationships to provide valuable connections, partnerships, and collaborations, both within and across sectors, providing exposure to newer practices and innovative thinking.
Personal Development
Successful businesses only grow at the speed of leaders' ability to keep learning! Business growth coaches help CEOs and Founders achieve a better work-life balance with less stress by focusing on the right things, providing strategies to prevent burnout, while building their confidence and resilience through powerful practices.
CEOs and Founders of any size business can greatly benefit from partnering with a business growth coach, in conjunction with an advisory board or in place of it.
Advisory Board vs. Governance Board
Understanding the distinction between an advisory board and a governance board is crucial on the journey of growing your business:
Advisory Board: provides non-binding strategic advice and mentorship. Flexible and informal, focused on specific expertise or market insights. Consists of experts in various fields relevant to the business’s needs.
Governance Board: oversees the company’s direction, policies, and adherence to governance standards. Legally responsible for the company’s actions, involved in major decisions like financial oversight and executive appointments. Often includes internal members (e.g. CEO) and independent directors with fiduciary responsibilities.
Questions to consider when considering the formation of an advisory board:
· What are the primary objectives I hope to achieve with a board?
· What skills and experiences are lacking in my current leadership team?
· How much control am I willing to cede to a board?
· What size should the board be to effectively manage responsibilities without becoming unwieldy?
· What criteria will I use to select board members?
2. Advisory Board
An advisory board is a group of external experts who provide strategic advice and support to help you grow your business yet have no formal decision-making authority. Many benefits of having an advisory board include:
Diverse Perspectives: Access to a wide range of viewpoints, which can lead to more balanced and comprehensive decision-making.
Enhanced Credibility: Association with respected and influential advisors can enhance the organization’s reputation and credibility.
Objective Feedback: Receive unbiased and independent feedback on strategies and performance, which can be more candid and constructive than internal reviews.
Although advisory boards can be highly effective, as your business grows, a more formal governance is eventually required.
According to BDC.ca, when businesses either transform into public companies or when they take on investors—such as venture capital funds or private equity firms—who want board representation to represent their interests, this is when businesses shift from using advisory boards to a statutory board of directors.
3. Governance Board
A governance board (or board of directors) provides oversight and ensures the business is managed in the best interest of its stakeholders through formal legal authority in accordance with business laws and regulations.
Why You Need a Governance Board of Directors
Strategic Guidance: Board members bring diverse experiences and insights, helping shape long-term strategies and identify growth opportunities.
Accountability: A board holds the CEO and executive team accountable, ensuring decisions align with the company's mission and objectives.
Network and Resources: Board members can offer valuable industry connections, resources, and potential partnerships.
Enhanced Credibility: Having a board can improve your company's reputation with investors, customers, and other stakeholders.
Also according to BDC.ca, members of governance boards will generally have slightly different profiles than advisory board members. Generally, t favors someone with "C"-level management experience. That means a Chief Executive Officer, Chief Information Officer, Chief Financial Officer or someone with equivalent experience.
Building Your Board - Questions to Consider:
Define the Board’s Purpose: can you clearly articulate the board’s role, responsibilities, and how it will contribute to the business’s goals?
Identify Needed Skills and Expertise: what are the strategic gaps that potential board members can fill?
Develop a Recruitment Strategy: What steps will provide the expertise and skills you are needing?
Network: who in your professional network can you identify as potential candidates?
Search Firms: can as executive search firms specializing in board placements help?
Industry Associations: what industry groups and associations can recommendation candidates?
Vet Candidates Thoroughly: what processes do you have to assess candidates’ backgrounds, experiences, and potential conflicts of interest? What is their commitment and fit with your company culture?
Establish Clear Expectations: Have you defined the terms of service, expected time commitments, and compensation (if any), along with roles and responsibilities?
Onboard Effectively: What does your comprehensive orientation, including company background, current challenges, and strategic plans look like?
Foster an Engaged Board: how do you schedule regular meetings, encourage open communication, and seek members' input on critical issues? What ongoing training and development opportunities do you offer to keep the board informed and effective.
Leverage the expertise of a business growth coach, advisory board, and governance board, at each stage of your growth, CEOs and Founders can create a robust framework for scaling businesses. Each option plays a unique role in providing guidance, oversight, and strategic direction, helping you navigate the complexities of growth to achieve long-term success.
Is your medium-sized business (SMB) ready for the next step?
Contact Jerome to discuss what might be right for your business.
Jerome Dickey, MA, PCC, CPHR, Q.Med
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