Nearly every formed Corporation or LLC, by law, is required to have a governance structure, usually called a Board of Directors.
Most companies, particularly small businesses, or small family businesses, take this requirement and rubber stamp it with a few family names.
Dad, of course, is the board chairman. Mom might be the secretary and uncle Jack might be a board member. The names are listed, the signatures are quickly obtained and the paperwork is submitted to the state. Once the corporate papers are finally registered, it is time for business with hardly a thought of a board meeting or board governance from that point forward.
LLC’s governance structure acts a little differently but the same principles apply—governance is almost always set at the feet of the main owner, which is why we get into business for ourselves anyway is it not?
An Outside Advisory Board for small privately held businesses or LLC’s is NOT meant to take your control away—nor will it, either legally or figuratively.
What it is meant to do is simply help you run your business.
I like the term “Outside” to describe enlisting professional people to help you manage your business without the family ties—in other words, Outside the family tree!
When people first consider or hear of this idea their first reaction, almost without fail, is reluctance or even fear. Immediate questions surface like the following:
– What power can they exact upon me?
– Can they take my business away from me?
– What if they tell me to do something I don’t want to do?
– What if they think I am doing a bad job running the business?
– What about the ugly stuff that we suck at as a business—what will they think about that?
– Will it cost me a ton of money?
– How will I deal with the embarrassment of our shortcomings?
Family businesses are normally formed because we have spent a lifetime together and built up, despite some of our small differences, enormous amounts of trust with each other!
The term “Outsider” immediately makes us feel the opposite.
To be clear, there are two types of Boards:
Advisory Board
Board of Directors
Advisory Boards are made up of professionals but have no legal jurisdiction over the company—this would be the most common type of Outside Board most small businesses would engage. This board, normally, would consist of a group of professionals that a small business can enage to ‘act’ like a Board of Directors but without the added teeth a real board can bare.
An actual Board of Directors, on the other hand, does have legal precedent and jurisdiction in a small business. However, from a legal perspective, and very important to remember, shareholders elect Board Members. In family businesses, the family almost always owns all the shares and therefore has the power to assign or terminate board positions.
In large, Hollywood-style, public companies, like Apple, shares are most often not controlled by the original owner like Steve Jobs. Founders can be booted from their company leadership (like Steve Jobs was in the early days of Apple) by the Board of Directors.
As I stated earlier, most Outside Boards for small businesses would be an Advisory-type-Board. There are instances for small businesses when it makes sense to form a real Outside Board of Directors.
It is important not to get the two confused—both from a legal perspective or power perspective.
All of that is to explain that an Outside Board cannot take your business away or exact any power over you, as owners, that might cause you harm or risk.
In short, they cannot tell you what to do!
The idea of formulating an Outside Board, in the case of small family businesses, is to find a group of people, many who have been in your shoes and are anxious to give back by helping others, is quite the opposite—they won’t tell you what to do but they will advise you on what you should do (based on their experience) and who among us would not want to get some advice from peers that have traveled the same road we now trod.
Equally risky, seems to be this notion of embarrassment. “I know I don’t run my business as well as I should and it is, frankly, embarrassing…people won’t understand my specific set of complex circumstances.”
Opening ourselves up to group of non-family members about the details of our business can be terrifying.
Bruised egos have kept many a man in shackles.
Stop and consider that nearly every business has warts and vulnerabilities—no matter how life appears from the outside-looking-in.
Most people are shocked to learn how much money other companies do NOT make. Running your own business is very difficult—we are all in the same boat!
The reality is that having an Outside Board will provide way more emotional support then embarrassment. Most of it is just having the courage to make the leap. One or two meetings in and you will be shocked that not only are you not embarrassed by an Outside Board’s perspective but quite the opposite—you are emotionally strengthened by these Outsiders that look at your work with knowing admiration.
Finally, there is this thing of expense, “How much is this gonna’ run me?!”
Frankly, it is often not that much (some of it depends on who you try and garner as board members).
I have seen board members volunteer for free. I have seen board members take small stipends, two, three, four hundred dollars a meeting. They usually take the money embarrassingly—but you will feel like you need to pay them something for their valuable time and even more valuable insight.
Boards often meet four times a year so you can see the cost is not earth-shattering.
We have only scratched the surface of what a Board can do for your business—it can literally transform what you are doing.
Download a free copy of why your small family absolutely needs and Outside Board of Directors and learn more about why this might be the best decision you have ever made to drive your business forward and have more success!