One of the most common (and perplexing) mistakes that I see so many start-ups (and "mature" companies) make is in not having a Board of Directors.
And I hear so many reasons why this is "not possible", ranging from, "But who can I get that even understands my business?" ( a favorite of high-techies ), to, "What a waste of my time ... I have to show them numbers and tell them what I'm doing, and burn critical time ...".
Yep. You DO have to "tell them what you're doing". And, you DO have to "show them your numbers".
That's the deal here!
In all of my years of owning businesses (31-plus) and in all of my companies (nine and counting), the single most important step I have consistently taken is to always convene a Board of Directors or Advisors, and then give these men and women full authority to hammer me with questions while offering suggestions.
I'll bet you'd now like to know "why"? So ... here's why.
First off, a Board (and I'll just use this term, "Board" generically, although more and more companies SEEM to think that they are "beating the rap" with the insurance companies by declaring their "Boards of Directors" to instead be "Boards of Advisors". Guys, I'm here to tell ya, "This ain't flying." The insurance companies AND the lawyers are saying, "If it looks like a duck and if it walks like a duck" ... well, you know the rest) should and must be comprised of hard-nosed and experienced men and women who truly know how to help you reach your goals.
(And if you have no goals --- no Exit Strategy, no Strategic Plan, then don't even bother to convene a Board. Or, if you do, convene a "Board of Fools", because these are the only people who will still be with you after your first meeting anyway.)
Look for "opposites" when choosing your Board. If you have a sales oriented philosophy, then bring in "Precision Guys" ... engineers, accountants, and mathematicians. If you are a "Precision Guy", then bring in the marketers. Always "load up" with people who will push you out of your comfort zone. An "opposite" will do this for you ... both early and often!
Then, add people from the target industry you sell to. I needn't explain why. Next, make sure you have an entrepreneur or two. These are your "cockroaches" --- (a term of endearment to me --- remember, if there is ever a full-fledged nuclear war, only the cockroaches will survive. And, they will survive because they can mutate their genetic make-up, their "essence", faster and more completely than any other species on Earth) these guys will think outside the box and they will also give you some very unconventional solutions to both conventional and unconventional problems.
It's always nice to have an attorney on your Board. (I particularly like this because you can often get very expensive legal advice for FREE!)
Finally, make sure that you have someone who takes copious and detailed notes. (This need not be a Board Member, BTW. In fact, it is MUCH better if it is not --- you don't want valuable Board Members scribbling notes each night!) Why this? Two reasons: first, you will need to send them out to all Board Members (and please get these out within five working days of the meeting!) for their approval and scrutiny; and, second, because you will need them if there is ever any "change of control" in your business. This means a sale, an IPO, or a merger. (I once had a company "dock" me more than one-half million dollars on a sale price simply because I had no Board Minutes!)
(BTW, I'm often asked, "Should I pay my Board?". I always reply, "yes" --- but never with cash and always with stock options --- and small stock options at that!
But the best "payment" you can make is to also insure them ... and this, my friends, is getting real expensive! Thank you Enron. Thank you WorldCom.)
The last reason why I love Boards is this --- just like a Trade Show or some other immutable deadline, they will force you to have all of your numbers and reports up-to-date and accurate each and every quarter! (Which is what I recommend – quarterly Board Meetings.) This is a killer, and you will have to work hard during evenings and weekends --- but eventually, you will acquire the discipline needed to avoid "Board Preparation Scrambles".
But so what? For this, my friends, is just more growing for both you and your company!
About Ron Morris
Ron Morris puts over thirty years of entrepreneurial experience to work answering your business questions, solving your business problems, and bringing you all the latest information about everything that is happening on the entrepreneurial landscape. “I’ve built companies with ZERO money and I’ve been associated with companies who have borrowed money”, says Morris, “I’ve merged companies, I’ve sold companies, and I’ve even bankrupted a company. (My “greatest learning experience.”) So, when you tell me about your business problem, it’s a pretty sure thing that I’ve ‘seen it at least once before ... this ain’t textbook stuff ...this is ‘real bullets’, real world stuff.”