Growing a business? Advisory boards are key.

In this challenging economy, many businesses are working to keep their customers rather than planning for growth. Don't get trapped into managing your business day-to-day--position your business for growth by creating an advisory board.

Building a vibrant business through the use of an advisory board offers a huge competitive advantage. An advisory board will challenge you to think strategically about growth, provide a framework for making good decisions and will hold you accountable for following through on plans.

Here are some steps to creating an advisory board.

HOW DO I CREATE AN ADVISORY BOARD?

Think of an advisory board as a personal mentoring group. Don't operate in a vacuum, like many business owners do. Populate your board with people in various fields who have demonstrated success; mine for experts in banking, accounting, marketing, insurance, management and law; and look for leading-edge thinkers with practical experience within--and outside of--your industry.

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Identifying potential board members may not be as difficult as you think. Leaders and innovators are featured in the news, and professionals with breakthrough ideas often speak at conferences. Such individuals are usually high-profile and high-energy. If you think that a certain person would be ideal for your board, ask a colleague for an introduction or write a letter and ask for a meeting.

HOW MANY PEOPLE SHOULD I HAVE ON MY BOARD?

The number of board members will vary depending upon the size and complexity of your business. A small business might have a board of three or four people; a midsize business may do well with five to seven; and a large business can have 10 or more board members.

One key to board composition and size is diversity. Look for members who are compatible, but think in different ways. For instance, one board member thinks analytically and is strong on the numbers side, while another member is a strategic thinker with heavy marketing experience.

HOW DO I COMPENSATE MY BOARD?

Advisory board compensation varies widely. I see many small and midsize firms paying board members $300 to $500 per meeting, though some advisory boards are not compensated. In large companies, board member compensation can climb into the thousands of dollars per meeting, plus stock options and other perks. Board members often benefit by networking with each other, which can be a powerful incentive if your budget is tight.

Don't let a lack of funds stop you from creating an advisory board, however, With persistence and creativity, you can create a board of high-quality professionals. Once you create a quality group, it will not be difficult to attract additional members.

HOW OFTEN SHOULD I MEET WITH MY BOARD?

Quarterly meetings work well for most companies and provide you with enough time between meetings to implement the board's ideas. However, some boards meet monthly or annually--your needs will dictate the frequency. For example, some business owners bring in the board when they are facing a crisis or vexing problem to obtain an objective outside viewpoint.

However, it is also important to discuss with your board unique opportunities, such as acquiring a new service or product. Your board can help explore issues and their possible consequences prior to taking action. This type of discussion can help you strengthen your position in a contract negotiation or take an opportunity further than you anticipated.

BE ACCOUNTABLE TO THE BOARD

Board members will stay on the job as long as they feel that meetings have meaningful outcomes. Create an environment that allows board members to speak freely. The agenda should deal with your most important issues. Get opposite points of view and consider all options. Report on your progress at each meeting. Get an attorney to draft an advisory board charter outlining the board's duties and responsibilities.

It is not the role of board members to make management decisions or act as managers. While board members cannot take the place of management, they are looking for an opportunity to make a real contribution to your business' success.

Prepare your business for growth now, because better times are ahead for those who manage thoughtfully.

BY STEVE RAPATTONI, CPA 

Steve Rapattoni, CPA is a partner with Stonefield Josephson, a California-based public accounting and business advisory firm. You can reach him at [phone] or [e-mail].