It takes some courage for business owners to admit they are "skills poor". Yet that is exactly what Charlie’s Cookies directors Ken Mahlab and Jacky Magid did about five years ago, and it has helped fast-track the business.
Recognising they were deficient in areas such as marketing and accounting, the husband-and-wife team first engaged a business coach and then took steps towards appointing a paid advisory board to tap into the knowledge of business and industry experts.
"What became very apparent to us is that as our little company grew we didn’t have all the skills in-house," says Mahlab, Managing Director of the Melbourne-based producer of gourmet biscuits and treats.
The decision to create a permanent board rather than paying casual consultants has led to a string of benefits for Charlie’s Cookies, including improving its long-term business plan and growing its industry networks.
"And (the directors) don’t write a report like a consultant and then walk away," Mahlab adds.
For many time-poor and cash-strapped small businesses, the notion of setting up a paid advisory board may seem a step too far. However, Mahlab says it can deliver great value if done correctly.
How does it work?
Charlie’s Cookies has appointed respected food-services industry veteran John Day as chairman, along with an "entrepreneurial accountant" and a marketing expert.
While there are position descriptions for the various roles, no specific key performance indicators are set for the board team. Rather, there are guidelines about the quality of advice to be given over time and expectations that directors will open up their social and business networks to Charlie’s Cookies.
Mahlab says the recruitment of board members requires human resources rigour.
"It’s really important for a board to buy into the dream like the entrepreneurs that own the small company. They have to have an emotional attachment to the goal."
The appointment of Day, in particular, has given Charlie’s Cookies access to industry links and expertise, creating new business avenues, leading to better sales systems and ensuring superior product development.
Compensation for directors
Charlie’s Cookies chooses to pay its directors rather than offer them equity in the business for two reasons: first, Mahlab and Magid wanted to retain exclusive ownership of the enterprise, and, second, legal advisors suggested that the obligations and culpabilities of directors would change dramatically if they were shareholders.
"So they have no decision-making powers whatsoever," Mahlab says. "They don’t get to veto anything or overrule anything. They get to advise."
Mahlab says having a board reduces the "loneliness" of running a small business and gives him and his wife impartial advice when there are strategy impasses.
Keeping you on track
Most importantly, the board members keep them honest, "not in a legal sense, but if you have a plan they steer you back to it if you get distracted or they highlight that you are veering away from the plan", says Mahlab.
For SMEs considering appointing an advisory board, Mahlab has one final, but important, piece of advice – go for the best people available.
"There’s no point in having a bunch of average people on your board."
In other words…
- An advisory board could help fast-track your business.
- Directors may be more committed to the long-term success of the business compared with hiring a consultant.
- Payment of directors rather than equity may be preferable for some.
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