Most people associate boards of directors with large, publicly owned corporations. However, a private company of any size and structure might also benefit from having a board.
Note that a board of directors isn’t the same as an advisory board.
It’s crucial to understand the differences and determine which is best for your business. Whether it’s a good idea to establish a board depends not just on how many employees you have or your annual revenue. You need to consider many factors when deciding whether to form one is right for you.
You’re planning significant growth in size or focus
Say you own a small roadside motel. Thanks to a sizable loan or a considerable influx of capital, you’re able to buy up some shuttered properties and open a chain of motels across the state. That requires a much more complex operation, and you could benefit from a board comprised of people who can provide valuable advice.
Maybe your little roadside motel has become famous. Instead of opening more of them, you decide to start selling a line of toiletries, mugs, t-shirts, robes and other souvenirs with your logo. That change in focus may warrant assembling a board as well.
If you don’t have the experience to execute your strategic objectives on your own, then there are a few attributes you should look for in others. You might want to bring in people who know the product or service and the market or someone who has the financial expertise to help you successfully expand or evolve your business.
You need outside advisors to resolve internal conflicts
If you’re dealing with a management team or investors who have conflicting views about where the business should go, it can be helpful to bring in a board comprised of outsiders who can resolve these issues.
This can be particularly helpful if you’re in a family business where people don’t see eye-to-eye. As long as everyone agrees to abide by the board’s recommendation, it can provide cover by freeing you from being the ultimate decision-maker.
As you consider what type of board you want to have, how large it will be, what authority it will have and numerous other details, it’s critical that you have experienced legal guidance. This can help you avoid issues that could result in court battles in the future.