Tag Archive for "Board of Advisors"
You’ve identified a prospective advisor. Perhaps you have even met a few times. The individual expresses an interest in considering the option but mentions that before she can do so she needs more information. As you are likely a privately-held company the information can only come from an internal source.
How to Proceed
- Get a signed confidentiality agreement from the prospective advisor.
- Remind the prospective advisor you are sharing information not available in the public domain.
- Get a list of what specific information the prospective advisor is seeking.
- Provide the requested information as soon as possible.
- Offer an explanation of either when you will have the information or why it’s not available, if you don’t have a particular piece of information.
Types of Information to Provide
- Historical financial statements for the last three years.
- Current Strategic Plan including financial projections.
- Operating Budget for last three years.
- Capital Budget for last three years.
- Organization Chart.
- Current Marketing or Promotional Plan
- Recent Competitor Analysis.
- Recent Marketplace profile/review.
- Top Ten Customers.
- List of people advisor might want to speak with as part of his/her due diligence.
Again, if you don’t have all of the information explain why. It could be one of the reasons you are forming the advisory board! If you don’t make it a big mystery it won’t become a deal breaker if you decide to invite the prospective advisor to join.
What other information would you provide to someone you’re considering for your advisory board?
Want to establish an advisory board? Then purchase the Advisory Board Kit: A Comprehensive Guide to Establishing an Advisory Board. You can have your advisory board up and running in 90-120 days if you follow the steps laid out in the Advisory Board Kit.
It is important to set expectations and delineate who does what on the advisory board. I’ve found it’s important to think about this before you begin to speak with prospective advisors as the good ones will want to know up front what they’re getting themselves into.
As a consultant on the formation and facilitation of advisory boards I recommend setting expectations by using a Statement of Roles & Responsibilities. The statement:
- Defines roles and who is responsible for specific tasks,
- Reminds people that all information is confidential, and
- Sets the stage to allow for graceful resignations or terminations.
To ensure people take it seriously I also recommend the CEO and the advisors sign the document. While it’s not legally binding, requiring signatures raises the level of importance in people’s minds.
The components of a good Statement of Roles & Responsibilities will include the following sections:
- Overall guidelines to be followed and ground rules.
- Advisor responsibilities.
- Company/CEO responsibilities.
- Resignation & termination.
- Signatures.
Some people may prefer to create a letter. I still recommend the components cover the sections I list above.
As the years progress and your advisory board gets more established it is important to review and revise the statement. It wouldn’t be a bad idea to make it an annual task done at the same time you are preparing to evaluate the effectiveness of the advisory board overall and the individual advisors.
You will find a sample Statement of Roles & Responsibilities in the Advisory Board Kit: A Comprehensive Guide to Establishing an Advisory Board.
As professional service providers we all strive to develop a “trusted advisor” relationship with our clients. A term coined by the guru to professional service firms, David H Maister in the book titled The Trusted Advisor.
I have found as a contract CFO, advisor, and consultant that when this relationship is working at its best I get asked about everything and anything. If I can’t do whatever needs to be done I am expected to know who else might be qualified. Many times the answer is as simple as my client needs to speak with someone with the appropriate background and not hire a consultant. If this happens often enough on a variety of topics it usually suggests a carefully selected board of advisors would be beneficial.
So what are the signs your client might benefit from an advisory board? Consider these ten indicators:
- Your client calls you about anything and everything.
- Your client continues to make the same sort of mistakes because no one in management knows enough about the topic in question.
- Human resource related mistakes are happening more frequently and have potential legal ramifications i.e. bad hires, high turnover, sexual harassment issues and the like.
- The CEO or business owner is making decisions without much consideration and is often so ill-informed that corrections need to be made.
- The company is expanding either through a new product, building a larger plant or new distribution territories.
- The company continually misses key deadlines and is losing credibility in the market place…often an indication of limited or no accountability.
- The company is receiving increased complaints about the quality of their product or service.
- The company has been hit with a law suit that was preventable had external advice, besides legal, been sought.
- A key member of the senior management team has just announced their retirement or has been diagnosed with a serious medical issue.
- The CEO or business owner has announced they want to prepare to sell the business because none of their children are interested in taking over.
I am sure if you could add to the list. Let me know what you come up with.
In the meantime, as a way to continue to be that trusted advisor resource to your client, consider purchasing on their behalf a copy of the Advisory Board Kit: A Comprehensive Guide to Establishing an Advisory Board.
