When entrepreneurs seek counsel on developing their business — whether the goal is to accelerate growth, add new capabilities, provide governance or improve profitability — I frequently offer the same advice: Consider the make-up of your board.
Business owners are responsibility rich and time poor, so it’s no surprise that creating, maintaining or engaging a board of directors may not be a high priority for private companies, particularly when it is not required. Nonetheless, sound advice from a strong board with intimate knowledge of your business can be invaluable to good business strategy and operations, and can cultivate competitive advantages. In fact, a recent private company board survey found nearly half of participants categorized their boards as “indispensable” or “very effective” at driving corporate strategy, according to Lodestone Global.
If your goal is to attract outside investment, or if you are considering a sale at some point in the future, the board of directors can be critical to the process and to reaching a successful outcome. As an investment banking advisor to private companies, I have witnessed firsthand how strong boards can be a great asset and source of strategic thinking for clients. For example, there was a family-owned financial services firm that sold at the top of the market in 2007 at a very favorable valuation. The interesting part is the family had no previous intentions of selling, instead grooming their son to run the fast-growing and profitable business. But, a veteran board member, recognizing the market environment and future economic risks, encouraged the family to test the market for a sale — a wise decision.
Board construction
In creating an effective board, first think about your ideal composition and what skills, experience and personalities would be most beneficial for your company.
The most constructive directors for entrepreneur-led companies tend to be those who have built and run companies of their own; sector-specific experience is especially valuable. Consider your management needs — are there gaps in experience or expertise where a board director could provide guidance and support your strategic goals? Another good…