If You Don't Know the Way, Ask for Directions
Jennifer Lawton, Owner, Just Books, Inc.
Many people think that you have to be a big company or a real company or a successful company to have a board of advisors or directors. The reality is that even a small company's boards can help it become real and successful. Although my business was of modest size, I can't say enough about the value of an advisory board or a board of directors.
When I started my company, Net Daemons Associates (NDA), in 1991, I knew nothing about running a business. I knew a lot about technology, supporting computer networks and using the Internet, but not much at all about sales, writing proposals, marketing material, invoicing or collections—the basics of business. Seven years later, following a successful exit from the business through acquisition, I know enough about the business world to be a valuable director and advisory board member for other emerging growth companies.
A key piece of information that I took away from my CEO experience was that I could not be the only person who was running into the issues that surfaced. In the early days, I was sure that my experiences were unique to my business, so it was lonely at the top. What did I do to change this?
Voices of Experience
First and foremost, I joined Young Entrepreneurs' Organization (YEO). A part of YEO is Forum, a group of 10 peers—that is, CEOs—who meet monthly to discuss prescient business issues. In actuality, a YEO forum is one of the best advisory boards that I ever accessed for my business.
For months I carted around an article by Norm Brodsky on advisory boards, and finally I decided to recruit one for my company, following his plan to the letter. It was a long process, with a lot of formality, but well worth it. First my partners--Rudy Ventresca and Chris Caldwell--and I identified candidates, called them and invited them to apply for membership on our board. We followed up with letters, personal interviews and, finally, offers to join the board for a specified term. That ensured an escape hatch if the relationship didn't work out. By the end of the process, we were all very well aligned on joint expectations and were able to hit the road running at our first meeting.
Since I didn't know a lot about business, I seeded my board with members who had sales, marketing, finance, legal, operations, engineering and technology backgrounds. NDA's first advisory board was composed of our mentors, people we already knew and trusted and who we felt were at a level of knowledge above our own at the time. Everyone on the board was known to one of us, the co-founders, who made up the management team. One advisor was a senior sales executive in high tech, another a marketing executive. We also recruited a banker, a lawyer, a senior engineering manager and a venture capitalist.
The board of directors was compensated with stock options, a good dinner and a day of meetings. Every six to eight weeks we met to review financials, operations plans, issues that had arisen and how we were going to get from point A to point B, on time and on target. The learning experience was set up to go two ways—and the end experience was a huge boost.
Growing Involvement and Responsibility
As the company grew, the membership changed, and eventually the advisory board became our board of directors. Every company needs directors—by definition, a corporation must have a board. At the very least, the board handles the legal and accounting issues that are required for overall governance. When I moved to a board of directors from an advisory board, the issues that we dealt with were increasingly focused around performance: keeping to an approved budget, and strategic and operational plans.
As we grew and continued to evolve and "move up in the world," we discussed more often how to get bigger faster, what our exit strategy was and how to execute that strategy. In the end, our board was heavily involved, not just in voting to approve our acquisition but also in what the structure, valuation and due diligence process would be.
An important benefit of the board was "keeping me honest." I didn't necessarily have the ability to keep myself on schedule and on track to update our strategic and operations plans, look forward to where we were going and ensure that we had proper financial management in place—but the board did. Because of the board, we managers kept very current with our planning and reporting and as a result were held accountable by someone other than ourselves.
Giving Back the Payback
As I grew and learned from others while I was growing my company, I realized it was important to turn around and offer my experience to newer entrepreneurs. As a result, I sat on several advisory boards and was a member of YEO's International Board.
Time and time again it became very clear to me that the payback -- in what I learned about myself, through advising, and what I learned from the company as I advised others -- was infinitely greater than I expected. The experience of sitting on someone else's board was invaluable to me as I continued growing my company. The stock options that I received for doing so are wonderful to have, but the experience I gained was priceless.