5 Steps to Building an Advisory Board

ABA's Founder is quoted in a great article about advisory boards for GO Magazine.

We have taken excerpts of an article that was published in the August edition of GO Magazine titled "Get on Board" by Jennifer Pellet. The full article can also be accessed at http://www.airtranmagazine.com/features/2009/08/get-on-board

Looking for Insight to take your Business to the Next Level? Consider an Advisory Board

Early last year, Idea Entity Founder and CEO Venu Yerra created an advisory board, hoping to help his information technology solutions company grow. By year-end, revenue had more than doubled, jumping from $2.1 million in 2007 to $4.3 million in 2008. Today, the Bellevue, WA-based company is on track to post revenue of well over $6 million. Coincidence? Not according to Yerra, who says that every member of his board contributed to that revenue growth.

"Unless the owner is a successful serial entrepreneur, a growing business will outstrip the owner's experience and resources sooner or later," he says. "A good advisory board can help with both, often netting a company upwards of $100,000 in terms of revenues, cost savings or some combination of the two."

Members of Idea Entity's advisory board did even better by Yerra. Several are retired industry veterans who drew on personal and business relationships to open doors. One former research lab director set up meetings and helped to pitch Idea Entity's capabilities to federal research labs and regional manufacturing companies. Another-an instructor of a business school's entrepreneurial program-lent operational expertise that saved the company more than $200,000.

"It's been wonderful," Yerra says. "Each of the five members has had a significant impact on the company in many ways."

While many board members are willing to lend a hand free of charge, offering some form of payment helps ensure that they take the board's role seriously, says Bob Arciniaga, managing partner of Advisory Board Architects. He also adds that the expense is nominal given the level of expertise a company can harness.

That proved the case for Brenda Newberry, chairman and founder of the Newberry Group, a global technology services firm based in St. Charles, MO. Newberry hand-picked board members to plug gaps in her then-fledgling company's aggregate skill set. "I was really blessed in being able to find great people," says Newberry, who recruited board members from community contacts made through her involvement in local nonprofit organizations. Her early picks included an academic from a business school who brought "both credibility and operational advice" and an attorney. "A board member cannot give you legal advice, but they can assess the advice you're getting and also let you know where you may have legal holes," she says.

For some companies, a board can also play a critical role in smoothing a major transition, such as passing management of a family business down to the next generation or changing legal firms, says Jennifer Pendergast, a senior associate at The Family Business Consulting Group. "Sometimes the person who owns a company is too close to it to make an objective decision," she says. "The board can be the best of both worlds: You still have the decision-making power, but you also have a sounding board of experienced people who can offer strategic input and council."

Cory Bertisch, CEO of My Gym Children's Fitness Center, assembled an advisory board seven years ago at a critical juncture in his company's growth path. An operator and franchiser of children's fitness centers at the time, the LA-based, family-owned company was expanding swiftly and moving into new areas. Today, My Gym is a nationally recognized brand with more than 200 locations in 25 countries.

"Our choice was to either stay small and specialized or branch out into entertainment, merchandise and international expansion," says Bertisch, whose eight board members helped the company raise growth capital. "We were young-both as a company and in terms of lacking executive power. Having child therapists, physicians, a physical therapist, a dietician, as well as veteran entrepreneurs and business experts on our board gave us credibility-verification that we were a stable company and capable in business."

Bertisch is quick to add that realizing the value of your board requires time and effort. "You need to approach this the way you would any division of your company," he says. "Take the time to keep those people informed, motivated and actively engaged."

When managed well an advisory board can be invaluable.

"Business owners are often surprised and thrilled by how quickly a good board can make a difference," Pendergast says. "I've never had a situation where someone wasn't thrilled with the results."

5 Steps to Building an Advisory Board

1. FIND GOOD FITS
   Identify your company's goals and recruit accordingly. "Think about what you need- doors opened, financing, credibility-and then look at your extended network," suggests Cory Bertisch, CEO of My Gym Children's Fitness Center, who suggests telling everyone you know-personally and professionally-what expertise you're looking for and asking who they may know.
2. FOREGO FRIENDS
   Family members and friends will give you advice informally so there's no need-and plenty of risk-to making that relationship more official. "You can replace an advisory board member a lot easier than you can a family member or friendship," says Corey Hansen, a financial adviser at Smith Barney who specializes in small businesses.
3. SIZE IT DOWN
   Experts generally advise having between four and eight members. "Fewer than four and you won't have enough collaboration if one misses a meeting," says Bob Arciniaga, managing partner of Advisory Board Architects. "More than eight and it takes too much time to manage and makes it difficult for everyone to contribute effectively."
4. MAKE MEETINGS COUNT
   Plan to meet at least twice and up to four times a year, providing members with an agenda and relevant information at least two weeks prior to a meeting. (And if you need urgent advice between meetings, Hansen says it's okay to contact them.)
5. PAY FOR PLAY
   While paying advisory board members is optional, most advisors suggest some form of compensation-from a nominal fee to stock options, access to free products or services, or use of company-owned facilities. "It helps meeting attendance, shows that you're serious and demonstrates respect for their time," says Brenda Newberry, chairman and founder of the Newberry Group, a global technology services firm.