Opinions expressed by Entrepreneur contributors are their own.
Small business owners these days have a lot on their minds — and too much on their plates. Sky-high borrowing costs, corrosive inflation, a slowing economy and tighter credit conditions are keeping them on edge.
Along with your entrepreneurial cohort, you’re probably working overtime, redoubling efforts to drive revenue and shifting into overdrive mode. Here’s one more thing for your to-do list: Form an advisory board.
If you’re a builder, a restaurateur, an online retailer or run any other type of small business, you need an advisory board. Relationships with trusted advisers will help you weather a downturn or an economic shock — something that’s happened with more frequency over the past few years. Uncertainty, above all else, is the watchword for this year.
Related: 10 Reasons Why Leading Entrepreneurs Join a Peer Advisory Board
Who’s on your board?
Advisory boards are usually composed of local individuals from different industries who have your — and your business’s — best interests at heart. They’ll help you solve problems, develop strategies and even analyze regulatory changes. Why on earth would they give their time to you? For one, they may directly or indirectly benefit from the growth of your business. They’ll likely learn from you as well.
Typically, board members are financial professionals including bankers, accountants and advisers, as well as attorneys and human resources experts. They might even be competitors if it’s in everyone’s interest to share industry insights. It’s a good idea to have someone affiliated with a Small Business Development Center, a local chamber of commerce or the SCORE network of retired entrepreneurs.
Think of this loose coalition as your personal “Shark Tank” mentors — but even better. Whereas Mark Cuban and the other venture capitalists on the popular TV show take a stake in small companies from contestants in exchange for their advice, you give up no equity.
Your advisory board is also your sounding board. It’s like a group of five to 10 friends you can call on the phone for expert advice in their niche that you could never hope to master yourself. Beyond advice, you get to build a community around you that grows along with your company.
Related: ‘I’ve Had A Few Letdowns’: Barbara Corcoran Spills Behind-the-Scenes ‘Shark Tank’ Secrets
How to go about it
Once you’ve decided to form one, it’s time to select the players. The interview process is key. Some questions include: Are you able to meet face to face at least once every three months? Are you willing to accept impromptu calls if a situation arises? This is about laying the groundwork for your business’s needs, beyond any paid services they might provide your company.
First and foremost, you’ll want advisers who will be straight with you — brutally honest, even. They should aim to break you out of your silo to see the bigger picture — a lurking risk, a potentially missed opportunity. Family and friends often make poor advisers because their judgment is clouded by their loyalty to the business owner, not the business. There will be times when difficult advice will be hard to hear, so a neutral, trusted voice best fits the bill.
Your board members can play the role of risk managers, talent scouts and trend followers. You’re too busy to keep up with industry, local, state and federal regulations for everything from tax-code changes to labor rights to product regulations. That’s why the group of experts in their field will complement your own knowledge and skills.
Today’s new normal of high interest rates might be new to business owners under age 40. Funding has gotten complex. Whereas a loan might suffice when rates were near record lows, exchanging equity for cash might make more sense today. You can be sure that a financial professional, who’s working with other companies in your industry, can give you the pros and cons of each option.
What’s more, advisers can help you plan ahead so you’re not caught out, for example, when a cash crunch hits. Like in other aspects of life, it’s about maintaining ongoing relationships that keep you in check.
Related: Stop Throwing Away Money: 5 Tax Incentives Your Business Is Missing Out On
Too busy? Think again
A small business owner may say they are too busy to add five to 10 people to their business circle. It’s key to remember that every entrepreneur works both on the business and in the business. Many focus on the latter. But as a company grows, a founder must delegate to others and use the extra time to think about the vision and overarching strategy.
After all, as a business grows, it has new needs. There will be different tax ramifications for a larger or more varied company. Excess profits, which are a good thing to have, present a quandary: What to do with the extra cash — pay off debt, make investments in equipment or invest the money? Putting your head together with a financial professional, attorney and accountant goes a long way.
You might think it’s hard to complain about a small business doing well. But during a growth phase, everything changes. There might be a need for more real estate, equipment, software and employees. And the resulting requirement for additional funding. The last thing you want to do is to leave money on the table.
Your small business advisory board will help you grow through those challenges. As you benefit, so will the members of your team.