Do you need a board of directors?

If you are not a corporation and required to have some sort of board, you may be wondering why anyone would even ask this question. After all, a board of directors represents the shareholders, and if you are a sole proprietor, you are the shareholder. If you are in a partnership, you and the other partners are the shareholders. It makes sense that you don’t need anyone else to look after shareholder (your) interests.

Or does it?

A board is . . .
A board is the governing body of a corporation. It is responsible to the owners of the corporation. It hires and fires the CEO and sometimes other officers. It sets policy and direction. Board members are supposed to be selected on the basis of their skills, experience, knowledge, or some other strength. No single board member is expected to be an expert in everything, but their strengths should complement each other. The board should be a moderating influence when necessary, and it should lead the corporation in new directions when necessary.

At this point, business owners are saying, “But that is my job!” They are right, and strictly speaking there is no need for a board to represent the owners and to direct management when the owners and management are the same. However, it might be good for business owners to learn the lesson that writers learn when they are first learning their craft. It is not a good idea to try to edit your own work. It is always a good idea to find a source of independent feedback so that you do not end up breathing your own exhaust. This is a term that refers to getting caught up in your own world view so that you lose sight of other ideas or approaches. The sad truth is that we are often not very honest critics. We either give ourselves a pass on opportunities for improvement, or we downplay our strengths. One approach that many businesses use to find an independent voice is to hire consultants. The consultant approach may be good for specific problems. However for ongoing advice, it makes sense to find a more permanent solution. That is where the a board comes into the picture.

While the role of the board may formally be all about policy and direction, effective boards are also advisory bodies. Wise CEOs take advantage of the accumulated expertise of their companies’ boards. Large partnerships are able to do the same thing because the partners often bring multiple skills and experiences to the firm. Not-for-profit organizations do the same thing. Sole proprietors and small partnerships however, do not typically have boards. Skill, knowledge, and expertise are limited to the owner or the partner or employees hired for certain tasks. What if something is missing? It is beginning to sound like a good idea to have a board or a team of advisors.

A board is not . . .
Having a board is not the same as hiring professionals to perform specific functions for your business. Your board will not take the place of your attorney or your CPA. Your board’s risk management advice will not be a substitute for a good relationship with a trusted insurance agent. However, your board may be able to help you in ways that these professionals cannot.

How to create a board
Your objective is to find a source of guidance, and you hope to be able to create a team of people willing to help you lead your business.

This is something more than just a group from the civic club or business networking group, but it does not have to be much more. Your objective is to find a group of people with skills or knowledge that are willing to help contribute to your success. It is easier to do this than you might think. The most anticipated hurdle to overcome is your own thinking that there is not anyone out there that would want to do this, or if there are people that want to do this, then they will charge dearly for their time. Good news. While there are people who make their living as consultants that will charge you dearly, there are just as many people that will help you without sending you a bill. The key is in understanding why they might want to help you build your business.
 
People will agree to help you for several reasons. The first is simple self interest. Your success will contribute to the economic growth of the entire local business community. If they help you, and your business grows, then their business will probably grow also. In addition, when you are ask other people for help because of their skills or expertise, they realize that you are likely to reciprocate. Another reason is altruism. Many people, particularly those who have been successful in life, enjoy helping other people become successful. One potent example of this is SCORE which has 12,400 volunteers with experience in over 600 business skills.. This is a group that shares its accumulated experience with small businesses. They do it simply because they can and because people need the help.
 
If you are trying to grow your business, seriously consider forming a board.

Who is on your team?

In the last week or so, I’ve been thinking about teamwork. The Word Cup is big news. Basketball teams are fighting over new talent in the NBA draft. Lance Armstrong is assembling a team for the Tour de France. Teamwork is in the news.

A well run business is like team. Businesses have owners and managers and workers. In big businesses the various players are pretty well defined. Small businesses tend to be more like pickup games though. Owners and employees do whatever job needs doing. It’s not all that different from showing up at the ball field where one day the team needs a left fielder and another day the team needs a short stop or a catcher. Specific skills may not be as important as simply being there to do the work. That works fine until the team realizes that it is good enough to play in a tournament. That’s when the team captain goes out and tries to recruit ringers. Unfortunately the new players rarely lead the team to victory. No matter what their skill or talent, it is not a substitute for practicing and playing with the team.

Think about how this applies to business. Many small businesses rely on employees to do whatever needs doing. It is simply too expensive to hire a lot of people, and until the business gets to be a certain size there is not be enough work for full-time employees. The owner usually manages the business, does the bookkeeping and payroll, hires and fires employees, manages compensation, keeps up with rules and regulations, and pays taxes. Since none of those things have to do with making or selling products and turning a profit, the business owner does all those things in his or her spare time. When tournament time comes, and the small business owner is struggling with financial statements and taxes or trying to understand insurance or deferred compensation, he or she goes out to find an expert. Unfortunately, just as with the softball or basketball team, the new player often does not know enough about the business to make a difference.

The way to victory is sign the players to your team before the tournament. You can do this even if you do not have any money by choosing the right people when you seek advice. When your books got too involved, did you ship them off to the least expensive book keeper you could find? Do you shop for a new accountant every year? Is your insurance agent simply someone you send money to every year? Is your attorney’s business card buried in a stack of cards in your desk? If the answer to any of these questions is, “yes,” then I have a new idea for you.

Find a single professional that will assemble a team for you. Many professionals recognizing the value of a team approach have developed relationships with other professionals. For example, many CPA’s routinely refer clients to the same team of advisors for legal matters, insurance, investment advice, and even hiring assistance. If you already have an accountant, attorney, book keeper, insurance agent, or investment advisor, ask that person for recommendations. Find out if they routinely refer to each other or if they ever work as a team. If you don’t already work with any of these professionals, then be sure to ask about professional relationships with other service providers when you are hiring them.

After you have identified a team of professionals that will work together for you, take the time to meet with them to discuss your business and your needs. You might try to meet with them together. If your CPA acts as a business advisor, then he or she may be able to help you do this. Consider a business lunch. The amount of time you spend with each professional will vary. The amount of time that you spend may vary. You may find it desirable to pay for a consultation. The short list below describes some of the things you might want to discuss.

• Attorney: You will want to discuss the form of your business and related liabilities and regulations that may affect your business.
• Accountant: The topics here include tax planning and structuring your accounting system so that it will provide you useful information. Other topics include cash management and accounting controls. Depending on the form of your businesses, you may also want your accountant to help you figure out how to distribute income.
• Bookkeeper: You may not have a separate bookkeeper if your books are simple or if you do not have a large volume of transactions. However if your books are complex or you have a lot of entries, or if you have payroll, then hiring a bookkeeper will be more efficient than doing it yourself and less expensive than having your accountant do the work personally. Ideally your accountant will handle the bookkeeping for you by assigning it to a bookkeeper or junior.
• Insurance Agent: The obvious items to discuss with your insurance agent include anything having to do with property or liability insurance for your business. If you or your employees drive for business, then you also need to discuss auto liability coverage. If you are a sole proprietor in a partnership or in some other business where you can be held personally liable, you should also review your personal coverage. If you provide health insurance to your employees, you may have a different agent for the health insurance.
• Investment Advisor: The discussion will include retirement planning and related issues. Your CPA will advise you on the tax consequences of various retirement plans and deferred arrangements. Your investment advisor will actually help you set them up for yourself or your employees.

 The objective is to create a team of professionals that know you and work together. Ideally one individual such as your CPA or planner can coordinate the work that they do. If that is not possible, then you can do it yourself. They key is to assemble your players and have them become part of your team early. If you wait until the tournament or the finals, it will be too late.

Hiring older workers

What did you think when you read the title of this post? Does it seem like a good idea? Is it a bad idea? How do you know? Ignore all of the obvious stereotypes of older and younger workers and take a look at this quote from an interview by Beth Kowitt, on June 11, 2010 in the Fortune Magazine section of the money.cnn.com website.

70% of all money in banks is held by people over 50. That's an example of an industry that's finally coming to realize that a 60-year-old client might actually appreciate dealing with a 60-year-old banker. Other sectors likely to welcome a more mature approach: adventure travel, luxury cars, lifelong learning, or retail.

The same article discusses strategies that retirees returning to the workforce should use and suggests:

sell yourself as a mature person. Stress your capacity to make smart decisions, your good judgment in managing people, your contributions in brainstorming and business development, and your lifetime connections. This is your advantage.

What do you think? Does that sound like the kind of worker that you want working for you? The proliferation of books such as Encore: Finding Work that Matters in the Second Half of Life by Marc Freedman and Don't Retire, REWIRE! by Jeri Sedlar and Rick Miners suggests that more older workers are either choosing to begin second careers instead of retiring, or they are reentering the workforce after retiring. This trend could mean a supply of experienced and knowledgeable workers for your business. Are you in a business sector that might benefit from more mature and experienced workers? Would your customers be more comfortable with older workers?

Finding qualified employees is always a challenge. Recognizing and understanding the trends related to more experienced workers can help you.

Tips on self-employment and working from home

If you have been following employment trends over the last few years, then you are probably aware of two important trends.

1. People in their 50's, 60's, and even 70’s aren't retiring. They are reinventing. They are taking their skills and changing careers. A few recent books such as Encore: Finding Work that Matters in the Second Half of Life by Marc Freedman make this point. There are also a variety of resources such as BoomersNextStep.com that provide services directly to the “Boomer” generation.
2. More people are working from home. This may be because companies are developing flexible work arrangements. It may be because of increased use of contractors.

One thing that links these trends is that many of the “encore careers” that boomers are pursuing involve working at home. Whether this is because a successful career has become the springboard for a second career as a consultant or because the boomer has the experience, knowledge, and skill to negotiate a non-traditional working arrangement, many older workers are not going into an office every day.

This new way of work brings some challenges though, and as Bill Vick from BoomersNextStep.com writes in Self-Employment and Working From Home Legal Facts:

Working from home can be a lot of fun and quite lucrative but there are a lot of things that you need to know from a legal standpoint that will help keep you out of trouble. Things such as managing finances, paying appropriate taxes, and following laws that the IRS has created are all important things that you’ve got to learn.

These are just a few of the question you should ask.

• Am I an employee or a contractor?
• If I am self-employed, how to I handle my bookkeeping and taxes?
• What other laws or rules affect me?

Check out this excellent article from BoomersNextStep.com to get started on the answers to these questions and others. Self-Employment and Working From Home Legal Facts