Create an Advisory Board

I hope you don't live in the Washington DC area and listen to sports talk radio.  All day, every day, the air waves buzz with RGIII rehab news.  Is he ahead of schedule?  Is he behind schedule?  Will he be ready for the first game of the season?  Is he dissing Coach Shanahan for leaving him in a playoff game to get injured?  RGIII's words are more closely parsed for hidden meaning than the pope's.  Of course, RGIII's words make more sense.

If you could create an advisory board for your business, whom would you select?  Wouldn't it be nice to get advice from your CPA and attorney for just the cost of maybe a meal instead of hundreds of dollars hour?  Let's add a banker and maybe our marketing person.  I'm sure they'd love to work in the evening for free as well.  Here is my experience with advisory boards for small businesses.  They don't work, and you may already see why.

What do your advisory board members get for their time?  Oh, you say, they get your continued patronage.  Well, bully for you.  If your business reputation draws free work from attorneys, you don't need an advisory board.  You should be on several.  Here's my experience serving on one client advisory board.  I have been on several over the years.

Joe owned a small manufacturing company that had been in business for fifteen years.  Over that time, he had some success, but he spent a lot of time drifting sideways.  He reached a few million dollars in revenue, but didn't earn any more profit at that level than at lower sales levels.  Joe needed to make some major decisions on direction, and he needed help.  So he recruited an advisory board.

Four people served on the original board, which met quarterly at Joe's office in a run down section of town.  Of course, I was the CPA on the board.  Another person was an employee at a commercial real estate developer.  The third was Joe's brother, who also did something in real estate development.  I don't remember the fourth person, as I don't think he ever showed up at a meeting.

You should be asking right now, "What??????? Two real estate guys and a CPA?  Doesn't Joe run a manufacturing business?"  There was some reason to have at least one real estate person involved.  Joe owned the building and rented out the majority of it to other businesses.  His first issue for the board was refinancing the real estate to raise some capital.  He wasn't totally crazy, but yes, the composition of the board was his first mistake.  He really needed some other areas of expertise, but we were the only fools available.

Here's lesson number one about advisory boards as if this isn't already obvious.  Most small business advisory boards are comprised largely of two types of members, fools (like me) and sycophants.  The fools bring you no value (guilty as charged), and the sycophants echo what you already intend to do.
Let's assume you are luckier than Joe with the composition of your board.  Here's lesson number two about advisory boards.  Members, who get nothing in exchange for their time, will drift away in about a year.  Your lawyer may attend a couple of meetings, but soon, you'll find that he just can't seem to make the meetings work in his schedule.  At first, he'll conference in.  Then, he'll stop participating at all.

Can you really blame him?  Put yourself in his place.  He gets to deal with twelve hours worth of schmucks every day.  Then he gets to spend an evening with you giving free advice.  Sounds attractive to me.  I would mistrust the competence of any lawyer willing to do this.

How can you make an advisory board work?  Put very simply, pay them.  You can't afford that, because you're just a struggling small business?  Then waste your time putting together a group of advisors, who would rather spend time with their spouse and kids.  They will eventually find creative ways to avoid you.  Sorry, your continued patronage just won't cut it for in-demand professionals.  Show me the money.

There is an advisory board concept that I like, peer to peer advisory groups.  You pay to play here, and it isn't all about you.  Not only do you get an advisory board, you are on the advisory boards of the other members.  This isn't coaching, where you are "taught" by someone, who has never run a business.  You help other business owners, and they help you.  Everybody benefits.

I like this concept so much, I've invested some of my hard earned nickels in a business that organizes these boards, Inner Circle.  I need some business advice too.  So I'm participating myself.

Thanks for reading!  Please catch up with me daily on Facebook by liking the "How to Screw Up Your Small Business" page.  3,400+ people can't be wrong.  Well, actually they can, but these people aren't.  This week, we are building a business model for a handyman business.

Until next time, let's do it to them, before they do it to us.