In smaller companies, the CEO is often the sole person responsible for running the business, attending to every activity and decision. This means they are also the sole person in charge of the company’s growth.
Even in mid-size and larger companies, CEOs and leaders can become so involved in the details that they don’t have enough time to focus on growing the company.
As a result, CEOs of all sized companies end up feeling isolated and as though they’re achieving success only by the seat of their pants, rather than in an intentional manner.
This is where a strong advisory board can make the biggest difference for a company – specifically, in helping it grow.
A CEO with a strong advisory board can escape isolation and also gain that expert, outside perspective that’s so valuable in validating direction and strategies. Advisory boards also force CEOs to ask the hard questions and to take time to think and reflect. Additionally, it’s their job to bring forth the most important issues for the CEO to consider and to facilitate a deeper dive into underlying challenges to find solutions.
Finally, advisory boards can fill critical knowledge and experience gaps. For example, a business owner may not have a financial background, but can bring on an advisory board member with that exact expertise.
Overall, an advisory board can be the secret weapon that ensures the CEO is prepared and disciplined and that the company grows.
Because not much hard data exists on the effect advisory boards have on company growth, in 2014 the Business Development Bank of Canada took on the task of studying the impact of having an advisory board on the growth of small to midsized enterprises. The study revealed that 27% of businesses that set up advisory boards were high growth (defined as having annual sales growth of 20% or more over the last three years) compared to only 11% of business which did not have an advisory board or board of directors. Additionally, fewer companies with advisory boards experienced flat or negative growth during the same period – 19%, versus 34% from companies without advisory boards. In particular, owners and leaders of SMEs (Small- to Medium-sized Enterprises) credited their advisory boards with bringing value related to the following elements known to have an impact company growth:
o Risk management
o Sales growth
o Employee relations
o Hiring the best talent
With the right advisors, you can gain the insight you need to take your company forward much more quickly and wisely. But, of course, ensuring you do have the right expertise on your advisory board is key.
Accomplishing this requires taking a hard look at your current company and plans, including any skill gaps that need to be filled and what’s happening in the external environment.
Even though your advisory board will ultimately help you steer your company in the right direction for growth, analyzing your current situation will give you a head start in determining the best composition of your board (at least to start). This is where an outside strategic growth consultant can help. Their objective perspective on where you and your company are today can give you more confidence that you’re building an advisory board that is truly capable of guiding your company’s growth by helping you identify your most pressing needs and gaps, as well as assisting you in how to find and secure the right individuals.
Is building an advisory board or getting more value from the one you have worth all the work? Here are a couple of real-world examples of how strong advisory boards helped business owners grow their companies:
Doug Mellinger credits his advisory board with saving him from himself. When his software company, PRT Group, Inc., had $4M in revenues Mellinger devised a plan to open 10 U.S. offices in one year. Because at the time the company lacked the financial resources and infrastructure to do it, the advisory board advised him not to move forward. He followed their advice and was grateful he did. His company grew to $24 million by 1999 according to an Inc. article.
Another article from Inc., shares the story of how NetMarquee’s advisory board continually proved its worth. According to co-founder, David Gumpert, early on he and his partner had their sights set on what they thought was a big opportunity. Specifically, to become a content provider for the new Microsoft Network. This was a move they believed would catapult them into big player status. However, Microsoft’s fee for becoming part of the network, along with the other expenses it would take to get up and running, presented a roadblock. The advisory board pointed out – rather bluntly – that the company simply did not have the money to move forward. Ultimately, the original vision for MSN failed and the content providers that had become initial partners suffered serious financial losses. NetMarquee avoided a fate that might have collapsed their fledgling company thanks to the guidance of their advisory board. Eventually, NetMarquee was acquired and, according to Gumpert, “Without the board of advisors regularly challenging us and our thinking, it’s doubtful we could have achieved the kind of growth necessary to make us an attractive acquisition candidate.”
Clearly, the impact of advisory boards on company growth can be substantial, but creating one and managing it effectively takes time and expertise. If you’re ready to take your company to the next level and want to explore putting a high-performing advisory board to work in support of your company’s growth, contact me at firstname.lastname@example.org. I’d be happy to talk to you about guiding you through the process to ensure the advisory board you put in place has maximum positive impact.