Our friends at Revitalization Partners help companies make better decisions about business operations. This blog from their newsletter focuses on small private companies and why they need a board of directors. At Juniper Capital, we are committed to sharing business advice that helps you achieve success. We specialize in real estate investments with private money loans in Washington, Oregon, and Idaho. Share your thoughts on this blog, so we can continue to provide you with quality information for operating your business in the Pacific Northwest:
You may think that a board of directors is only necessary in a large company with significant shareholders. Nothing could be further from the truth. A great many small companies can benefit from a board of directors. And, if you structure your company as a “C” or “S” corporation, you are required, by law, to have a board of directors. Many small companies address this requirement by having a two person board, which satisfies the legal requirements but eliminates many of the advantages of a truly functional board.
Not all small businesses have all of the skills needed to operate effectively, especially if they experience rapid growth or a sudden business problem. A board of directors can help by adding complementary skills and expertise that the business might not have in-house. A board can also help ensure that you have the right processes in place, keep you focused on your strategy, and help raise capital. Networked boards can also help bring in new talent, both at the board and operating levels.
Most business owners believe, “I know my business better than anyone.” This may be true, however since most small corporations are owned and managed by the same people or person, independent board members can be invaluable. They “see the forest” while a business owner/operator is surrounded by trees. Independent outsiders can contribute new perspective, experience, support, bring different skill sets, and serve as a sounding board.
Sometimes business owners are reluctant to open decision-making to outsiders who are not stakeholders in the business. One solution is to make board members stakeholders by rewarding their service with small amounts of equity in the company. Another is to require shareholder approval of certain decisions made by the board.
In many family-owned businesses, different family members have differing degrees of ownership and differing roles in the operation of the company. Questions of management qualifications, business performance, transparency, accountability and transfer of ownership can acquire an emotional charge that interferes with the success of the business. In these situations, independent board members can add to a mutual confidence between stakeholders and management, while bringing different perspective to issues.
Directors, by law, have a fiduciary responsibility to the corporation. They must act with loyalty to the company and in a manner calculated to serve the best interests of the corporation. In doing so, they may consider the interests of the company’s employees, suppliers, creditors, customers, economic conditions and the long and short-term interest of the company and its shareholders.
We’ve had clients tell us, “I wish I had done this years ago. I have a great board and they are really helping me grow the business.” Yes, it requires some initial work, thoughtful planning and the selection of experienced, trustworthy people. But they are out there and willing to help. We highly recommend it.
Revitalization Partners is a Pacific Northwest business advisory and restructuring management firm with a track record of achieving the best possible outcomes for clients. They specialize in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Contact Revitalization Partners if you want the best resolution in the fastest time with the highest possible return.
Revitalization Partners… when a company is worth saving.