Navigating business complexities can be overwhelming, especially when its opportunities and challenges are outside of a business owner’s area of expertise. To effectively manage these situations, many management teams seek the support of outside counsel through an advisory board. By forming and consulting with an advisory board, a company benefits from the knowledge and experience of its members without being bound to their advice. As such, advisory boards are particularly viable options for companies facing new complexities, such as the exit of an owner and the subsequent leadership transition.
An advisory board is unique in that its role is to act in a supervisory nature, particularly during the exit planning process. By doing so, its members ensure that the process remains untainted by bias or politics. Additionally, since no fiduciary responsibility exists, the members’ advice and guidance to the company remains detached, allowing for the business to benefit from their recommendations without being obligated to accept them. Because of this, advisory board members maintain the freedom to not only endorse and oversee company processes, but to challenge company management if need be.
According to Craig Holland’s The Art of Business Succession, in addition to providing guidance during the implementation of an exit plan, an advisory board can help monitor and improve business management by:
- Reviewing a business’s financial statements, audits, mission and strategy;
- Monitoring business performance and goals;
- Making recommendations regarding major capital expenditures;
- Assessing organizational structure and policies; and
- Approving mergers, acquisitions and major debt transactions.
Establishing an advisory board has proven to be beneficial for many companies going through a leadership transition process. By having their steps be fully vetted by outside advisors, the business’s decisions appear objective, measured and credible.
If you have questions about how to successfully overcome obstacles in exit planning, or for questions regarding other value acceleration and exit planning issues, contact Gina Miller by calling 770.396.2200.