Businesses can have countless organizational structures, but one of the most daunting for many former owners is the launch of an advisory board following the sale of the business. Reporting to an advisory board can be quite intimidating if you’ve never had to report to anyone other than yourself. As a result, some business owners refuse to move forward with recapitalization or sale opportunities to financial buyers, which may be a big and rather costly mistake. Therefore, we would like to provide owners with some advice on how best to work with an advisory board after selling your business in order to avoid leaving money on the table.
- Be open and honest with your potential board members. This may sound cliché, but it is excellent advice. An advisory board is tasked with monitoring and ensuring the success of an investment, which is you and your business. As such, you both have the same objectives; increase revenue, drive profitability, ensure long-term success. Quite frankly, a financial buyer probably wouldn’t have invested in your business if they didn’t think you and the business were worth their time and money.
- Provide input into the development of an advisory board. You are going to be working with the board on developing and implementing strategic plans so it is important that you make sure the board members are capable of providing you with the support you need. For example, you and your team may be great with operations, but lacking in sales and marketing. If everyone on the board has a background in operations, then you won’t be addressing the primary opportunities for supporting growth. Therefore, your new board needs to know where you need help.
- Avoid hockey stick projections when selling your business. An investor will question your projections if they appear too good to be true and sets a bad precedent for your relationship with your future advisory board. Will you be the kind of manager that tells the board what they want to hear, or what they should hear? With that in mind, we recommend using a SMART (specific, measureable, achievable, realistic, and timely) Goal model when building your projections. The board will appreciate the honesty, and work with you on a strategy to exceed the goals you outlined during the sale process.
- Tell the advisory board how they are performing. At first glance, this may sound crazy. After all, who are you to tell the board if they are doing a good job? This attitude is what leads to mediocre results. More than likely, the board plans to work with you for quite some time and views you as a subject matter expert, so it is important to let them know what they can be doing differently to help the business achieve better results. That said, this dialogue needs to be constructive and strategic. It can’t be used as a way of passing blame for not achieving the results you outlined during the sale of your business.
- Failure is inevitable so ask for help when you need it. The advisory board is not out to get you, but there to support you and their investment. If you keep things to yourself that could adversely affect the business because you don’t want to seem like you don’t know what you are doing, then the board will find out and eventually start wondering if you know what you are doing. Maintaining an open dialogue with the board, even when board meetings aren’t taking place, is of critical importance to everyone’s success.
- Stay passionate about the work you are doing. If you aren’t passionate about the success of the business, then your executive team won’t be passionate either and it will show up in the results. Don’t misunderstand, everyone has a bad day at the office. However, an advisory board needs a CEO that wants to show up for work and lead the company, otherwise, the whole thing comes crashing down.
- Take board meetings serious and ensure that they matter. All too often board meetings take place with the members checking off boxes on the things they are supposed to discuss. This is not a good board meeting. Everyone attending the board meeting should come prepared to discuss the company’s performance, explore new opportunities for profitable growth, and review and refine existing strategic growth plans. If this is not taking place, then you should reassess the individuals on the board and structure of the meeting.
Ultimately, a decision on who to sell your company to is yours, and yours alone. That said, we strongly advise against locking in on a certain type of buyer because you have concerns about working with and reporting to an advisory board since it potentially diminishes the value of your business by reducing competition among buyers. If you would like to confidentially speak with a member of our team about selling your business, send us an email at firstname.lastname@example.org.