The pursuit of growth is a fundamental characteristic of all strong business, and good governance is an essential foundation of that growth. It has been found that SME’s with good governance enjoy better growth by maintaining strategic focus and building more effective leadership.
The Business Development Bank of Canada found in 2014 that on average, businesses enjoy increased sales of 66.8% in the first three years after setting up an Advisory Board.
The inclusion of an Advisory Board as a governance structure provides additional expertise, objective advice and support. Perhaps because it holds no formal power or control over the organisation, it is becoming increasingly popular as a method to develop more effective leadership.
One of the results of setting up an Advisory Board is to help build the strategically defensible positions needed for longer term success.
Business Growth Stages
Leading a business is a lonely occupation. The buck stops with you and it is inevitable that at some stage you will hit a ‘growth ceiling’ where your motivation, talent, and hard work just don’t seem to be enough. This is where growth slows or stops, and it all feels that much harder than it used to.
All businesses grow through different stages of maturity. Reaching the next stage of business growth or maturity is a step-like progression. Each stage throws up new and different challenges which require additional expertise, knowledge and commitment.
These growth stages are most evident in the $5m to $100m revenue range.
In relative terms the first $5mis the easiest. Pure energy will often get you there. From $5m to $20m is the next hurdle, and it is often the hardest step to take. It frequently needs a different mind-set, and a more complex organisation.
The journey from $20m and beyond generally throws up another different set of challenges. The larger your business grows, the more issues you have to deal with, and there are limits to what any one person can do on their own, no matter how skilled.
Successful entrepreneurs realise that additional expertise and objectivity to provide the right advice is needed to navigate through these challenges.
How do you, as a business owner, get access to the advice and support you need as you build your revenue towards nine figures? What do you do when you want to discuss your plans with a trusted peer?
The role of business owner or CEO is lonely, you have to be the positive influence at all times to lead your team. There are some things that concern you that you simply can’t share with your inside team. You just can’t do it all yourself. If you’re serious about growing your business you should be considering engaging additional expertise at a Board level.
“Don’t Handicap Your Business by Trying to Do It All on Your Own”
To ensure good governance protocols, larger companies have a formal Board structure. This holds management to account and provides mentoring and critical advice to the CEO and Leadership Team. An important element of these Boards is the use of independent Non-Executive Directors.
The owners and leaders of SMEs however, often lack this support. They lack the opportunity to reach out to the wisdom of experienced Directors, and often lack accountability for their performance and decision-making.
For an increasing number of private enterprises, the answer is to set up an Advisory Board. This provides good governance for SME’s.
Advisory Boards
An Advisory Board helps you make the right decisions at the right time. It assists the owner, CEO and Leadership team through objectivity and insight. It develops skills and judgement, and ensures effective leadership to the broader management team.
Many business owners are aware of mentoring and project-based consulting services as means of garnering this assistance, they are usually less aware of the advantages of an Advisory Board. That’s because advisory boards have only recently become more widely available to small business owners, and are still seen as a relatively new concept.
“Imagine having a circle of trusted experts you can call on when you have a question or need advice for your business. That’s what a Board can do for you.”
An advisory board is composed of a group of a group of highly qualified business professionals who meet regularly to assist a business owner in making executive decisions. They are selected to offer additional insights and expertise on diverse matters such as marketing, sales, financing, etc. They can guide founders through some of the hurdles and growing pains of getting a business through the pains of growth or finding a new trajectory.
The advantage of an Advisory Board over mentoring or consulting services is that it imposes an additional discipline of good governance and its Board Members become more familiar with the business over a longer period of time.
Unlike a corporate Board of Directors, an Advisory Board is informal and unofficial, and can be structured in any way that suits your company. They do not exert any formal authority of control over the business.
While the advisors exist to guide the business owner, they generally don’t have authority on final decisions. Executives from your staff can be beneficial in your Advisory Board, but other successful entrepreneurs from varying industries can provide a wider range of perspective.
Why do you need an Advisory Board?
There are many reasons to establish an Advisory Board. Most commonly it is to help grapple with the challenges of achieving high rates of growth above market rates, or to respond to changing business circumstances. Advisory Boards are also established to help emerging enterprises become established or pursue commercialisation. In other instances, they are formed to aid with succession planning or preparation for business sale.
All of these are examples of where good governance assists SME’s with their growth ambitions.
Another advantage of an Advisory Board is that it’s membership can be altered to suit different circumstances at different times, or even be disbanded once the particular issue has passed (e.g. succession or exit).
Leadership Leverage
Establishing your company’s Advisory Board will provide you and your Leadership team exponential leverage by:
- Providing a sounding board where Directors can explore challenging issues and opportunities with independent, experienced advisers
- Ensuring your business has a well thought through strategy and execution methodology that is appropriately resourced
- Providing a governance structure and ‘accountability’ for you and the Leadership team
- Providing access to qualified networks and resources
- Bringing new thinking to the organisation
- Assisting with mentoring and the personal development of the Leadership Team.
Are You Ready?
Do any of these ring true for you?
- You have ambitions beyond where your business is now
- Your business is running smoothly, but you’re not sure where to go from here
- You know where to go, but you don’t know how to get there
- You feel like you’re missing opportunities
- Your business has stopped growing, it feels like it’s hit a growth ceiling
- You’ve made costly mistakes
- You feel like you’re operating in a bubble, that you’re all alone
- You’re thinking inside the box and feel the need for new, different ideas
- You have great ideas, but you have trouble sticking with them
- You are accountable to others – be it investors, family members or the like
Transition Capital is aligned with the Australian Advisory Board Institute and can assist with setting up your Advisory Board. David Shelton is an approved Chair and conducts initial no-fee and no-obligation briefings for business owners and CEO’s to further explore the suitability of establishing an Advisory Board.