November 11, 2021 | 3-minute read (501 words)
Many small- and medium-sized business owners think that forming a board of directors is only necessary for giant corporations. But this isn’t always true. Even a one-person startup can benefit from installing a board of directors.
The board of directors should comprise a set of people with a broad range of experience, such as seasoned CEOs, investors and individuals with industry expertise. They should be well-versed in the operational challenges that startups confront.
The directors ensure that all corporate executives are accountable and focused on the firm's business strategy. They also have the authority to restructure management if the company is not functioning as it should.
A strong board of directors may provide a small firm with a network of specialists and other resources that can help it prosper, especially in the early stages. Typically, the board creates strategies to support the business’ growth.
While the most popular board type consists of paid outsiders who meet at least once a year to oversee the business’s success, it's critical that the board and the business owner complement each other, have similar values and work to create a consistent company culture.
Below are three reasons a well-chosen board of directors helps ensure a business’s success.
Assistance with corporate governance
For your business to thrive, you need more than a fantastic product or service. If you can't work well with others, you'll find yourself hurrying to complete all the operations necessary for the business to expand. Fortunately, a well-functioning board’s management professionals and strategic thinkers can teach you how to effectively manage personnel while also establishing a more solid organizational structure to improve efficiency. To practice good corporate governance, the board of directors must have an unbiased viewpoint that considers the interests of all shareholders and stakeholders.
The board's function will change as your company expands, but a robust and well-selected board will offer value at any point in your firm's development.
A robust board excels at strategic thinking. Once your small business is up and running, you'll want to make sure it stays on track by making strategic modifications as suggested by the board. Access to the guidance of specialists who have successfully dealt with similar challenges in their business careers can be invaluable.
Access to a broader business network
As an entrepreneur, you are expected to maintain strong connections with suppliers and customers as well as focus on prospective new clients and foster interest from potential investors. A board of directors with diverse experiences and business connections can effectively widen your own network of industry contacts, strengthening your competitive edge.
If a paid board of directors is too expensive for your small business right now, consider forming an advisory board instead. Members of an advisory board may include existing shareholders, trusted friends and even family members, all of whom have a genuine interest in seeing your company succeed. Advisory board members are generally unpaid and have no legal responsibilities to you or your shareholders.