This document discusses advisory boards and their role in driving business success. It provides a range of advisory options for business owners from independent advisors to paid consultants. It also outlines the differences between board advisors, peer advisors, and informal friends in terms of meetings, control, preparation required, duties, costs, and topics discussed. The document then summarizes surveys that show many family businesses have boards of directors but few have formal legal boards. It stresses that older, larger companies are more likely to have advisory boards and outlines factors to consider when starting a board.

1. Austin Family
Business Program
Don’t Grow It Alone –
How Advisory Boards
Drive Success
December 7, 2017

5. Business Family

17. Range of Advisor Options
Grow It
Alone
Independent
Board

18. Range of Advisor Options
Grow It
Alone
Independent
Board
Non-Profit
Resources
Trade
Associations
Sponsored
Resources
Paid
Consultants
Board Advisors
Paid Board
of Advisors
CEO
Peer
Advisory
Informal
Friends

19. Control: What’s the Difference?
Board Advisor Peer Advisors Informal
Friends
Statutory
Board
Board of
Advisors
True Board of
Directors
Meetings Attends Family
Council Meeting,
maybe board
Monthly Meet occasionally
over coffee or meal
Meet 1x per year Meet 2x-4x per year Meet 4x per year
Control Owner controls Owner attends Owner controls Owner likely controls Owner controls Owner likely controls
Prep No additional prep Some prep No prep No additional prep Additional prep Additional prep
Expertise Specific expertise Broad expertise General or specific
expertise
No expertise Specific or general
expertise
Specific or general
expertise
Duty Competence in area
of expertise
Duty of
confidentiality,
participation
None None Duties of care and
loyalty
Duties of care,
loyalty, good faith,
oversight
Cost Hourly fee Monthly fee Drink or Dinner No additional cost $1K-$25K per $50K+ per
Committees None None None None Ad Hoc Audit, Compensation,
Nominating/
Governance
Task Facilitate culture/
value discussions
Comment on culture/
values
Comment on culture/
values
May mention culture/
values
Must understand
culture/values
Sets “Tone at the
Top” for culture/
values
Management
Compensation
Only if compensation
specialist
Not likely discussed May discuss Sets compensation May comment on
compensation
Sets compensation
Topics Family function Any you want Any you want Finance/Strategy Any you want Finance/Strategy

20. 2015 Survey of 200 NW Companies
• Average 46 years in business
• 22%>60 years, 14%<20 years
• 31% 21-50 FTEs, 38%>50 FTEs
• 77% have estate plan
• 53% have succession plan
• 52% believe family member, 25% non, 23% undecided
• 64% have Board of Directors
• 50% 1-2 family members, 33% 3-4 family members
• Most businesses have non family members on board
• 27% have formal/legal board
• 37% have Advisory Board
• 33% have no board
Older/Larger Companies More Likely to have

21. 2016-2017 Private Family Business Survey

22. Do You Know Where You’re Going To?

23. There Are 7 Forces to Align

24. Business Accelerants™ Inverted Pyramid
Values/Culture
MissionWhy does this business exist? >3
Years
Vision
What, Where, When is the
business?
3
Strategies
How will we operate? >3
GoalsWhat do we want to be? 3
ObjectivesWhen will we get there? >1
ActionsWho will do What When? 1

25. GreenLawn Corporation Example
Strategies
SALES—focus on clustered, high-end homes, apt complexes & business parks. Expand to Mexico
OPERATING EXPENSES—negotiate multi-yr supply agreements, consolidate blogs., call center BinC
RETURN ON ASSETS—efficient on-board equip, fuel-efficient trucks, lease vs. own building
NEW ACCOUNTS—emotional ad campaign, separate sales teams for apt complex & biz park bundled service
WINDOW CLEANING—focus on ext, large apt complexes, off truck design, purchase quality equip
CUSTOMER CALLBACK—industry best customer satisfaction, exceptional amps on, best chemicals
ORDER DELIVERY—implement CRM/ERP, routing software, off vehicle employee tracing
EMPLOYEE SALES CAPABILITY—product training, Skills+ train the trainer, ride alongs tech/s1
RECORDABLE ACCIDENTS—SEA Change-Safety Everywhere & Always, health program, OSHA compliance
Green, Clean & Healthy Homes & BusinessesMission
By the end of 2018 grow GreenLawn into a $500 million North American service business
providing lawn care, tree/shrub care, carpet cleaning, indoor pest control, and window
cleaning to executive homeowners, apartment complexes, and commercial businesses.
Be recognized nationally for the most professional and courteous employees.
Vision
Values/Culture Sustainable, Clean, Healthy, Safe
Actions
SALES—Focus areas decided Q1, Mexico plan approved Q2 (John)
OPERATING EXPENSES—Call System implemented Q2, Consolidation decision Q3 (Tony)
RETURN ON ASSETS—Lease/own plan approved Q1, Truck decision Q2 (Andy)
NEW ACCOUNTS—Approve ad campaign Q1, approve bundled services pricing Q2 (John)
WINDOW CLEANING—Sales/marketing plan append Q2, Truck design proposals Q1, Truck capital append Q2
CUSTOMER CALLBACK—Satisfaction program append Q2, review results quarterly (John)
ORDER DELIVERY—Implement CRM/ERP Q1, vehicle/employee tracking Q2, routing Q4 (Ext IT)
EMPLOYEE SALES CAPABILITY—Training cgms approved Q1, 30% completion each quarter (Mary)
RECORDABLE ACCIDENTS—Launch SEA change Q2, OSHA inspection Q3, health cgms Q4 (Susan)
Improve annual SALES from $228MM to $275MM/2016, $350MM/2017, $500MM/2018
Reduce 2016 OPERATING EXPENSES from 18% of sales to 14% of sales
Increase RETURN ON ASSETS from 5% to 8%
Add 450K NEW apt ACCOUNTS in 2016; 300K in 1st half, 150K in 2nd half
Generate 100K initial product trials in 2016 for WINDOW CLEANING
Reduce CUSTOMER CALLBACKS/reword from 5% to 2% of total job orders
Improve DELIVERY OF ORDERS within 10 working days of first call from 92% to 95%
Increase # of EMPLOYEES CAPABLE of SALES from 1K to 1.8K
Decrease number of RECORDABLE ACCIDENTS from 5/district/year to less than 2/district/year
Objectives
Goals

26. Toppled

27. Business Accelerants™ Inverted Pyramid
Actions
Objectives
Goals
Strategies
Vision
Mission
Values/
Culture
Why does this business exist? >3
What, Where, When is the
business? 3
How will we operate? >3
What do we want to be? 3
When will we get there?
>1
Who will do What When?
1
Years

28. Exercise—Understand Values
Individual, Family, Business
http://www.threadsculture.com/threads-guide-to-creating-your-own-core-values-list-download.html

29. What Does the Board Do?
What?

30. What’s the Board Do?
What?

31. What?

33. Who Do You Need? Yes Men? NO
GE Housecleaning Will Alter Board’s Makeup
Company hasn’t decided which nine of 18
directors will lose their seats
A housecleaning at General Electric Co.’s board will remove many long-term
associates of former Chief Executive Jeff Immelt and aims to create a board that
is more closely aligned with CEO John Flannery’s strategy to streamline the
industrial giant.
Outdoor guide versus outside director
Think of it as outside guide
Who?

35. Who Ya Gonna Call?
• Look beyond current consultants and
advisors
Who?

36. Ulven Company Casting Call
Who?

37. Fit—Values and More
Who?

38. Where to Find the Right People
• NACD
• www.nacdonline.org
• The EXECRANKS
• www.execrank.com
• Employing Network
• www.employing.net
• Trusted peers
• Trusted advisors
• Existing board
• Former CEO in
your industry
• Executive search
Where?

39. When Should You Start a Board
• Owner/leader transition
• Disruption (think medical directive)
• Provides continuity
• Big expense
• Capital infusion needed
• Liquidity event needed
• Business model changing
• Sooner rather than later
When?

40. Highlights from NACD 2016 survey
• 54% on board of company smaller than
$250 million
• 7-8 board members typical
• Trends/Issues
• significant industry change, global economic
uncertainty, increased regulatory burden,
competition for talent, business model
disruptions, shifting workforce demographics,
technology disruptions
Why?

41. Best of Both Worlds
• Family business
• Public but family controlled/influenced
• Public business
• Better performance for the middle section
• Long term perspective plus governance
• Managed professionally
• Looks better to future investors
Why?

42. Benefits of a Board—More Money
Why?

43. Boards & Family Work Together Effectively
• Separate company/family NoW—Needs or Wants
• Help CEO look beyond tactical
• Accountability
• Tennis coach, mother
• Risk management
• Objectivity and independence
• Planning/advising CEO succession
• Talent management
• Business first, not family first
• Safe Harbor for employees to lodge complaints
• Advise on exit strategies
• What am I missing? Better solutions result
• DTNA “board meetings”
Why?

44. How to Run a Board
• Look out 3-6+ years
• 1-3 year terms
How?
161 hours

45. Director Compensation
$200 Million Revenue
Not profitable according to 10K filing
959 employees
COB/CEO/President owns >90% of stock
$15-$20 per share in 2017
How Much?

46. Forbes—How Much Should I Pay?
How Much?
https://www.forbes.com/sites/bernietenenbaum/2016/11/26/how-much-should-i-pay-the-directors-on-my-board/#e1f7050aa306

47. Director Compensation
https://www.execrank.com/board-of-directors-articles/how-much-should-you-pay-an-advisor-for-your-company
• Startup
• 2-6% equity set aside, split among advisors
• 1/2-1% per advisor
• Small Private Company
• Per meeting fee, annual retainer, equity
• $1,000-$10,000 per year
• Middle/Large Private Company
• $12,000-$26,000 per year
• Public Company
• $50,000-$150,000+ per year
How Much?

48. Should You Have a Board (of Advisors)?

49. Multiple Boards of Advisors/Directors
http://achatespower.com/our-team/technical-advisory-board/

50. Take Aways and To Do
• Boards are good
• Advisors are easier
• Get ducks in a row
• Culture/Values
• 7 Forces
•
• NoW
• Single Sheets

52. Thanks,
I wish you a Merry Christmas and faster profitable growth.
More money from your business, and more time for your life.
May you work more on your business and less in it.

53. One of the most important lessons I learned in business was that if all you're getting
from your team is a single point of view -- usually your point of view -- you've got to
worry. You can get your own point of view for free.
Lee Iacocca,
auto executive
It takes a village—It takes a team
Remember the story of
The Emperor’s New Clothes—
Find advisors you can trust
Read the lyrics of two songs—
You’ve Got a Friend by James Taylor
With a Little Help sung by the Beatles, written by Billy Shears

55. Are you mentally equipped to depend upon others?
Posted on September 7, 2017 by Dave Berkus
. . .
I found from experience – after investing in many other
entrepreneurial businesses over the years – that this stage
typically occurs first at about twenty employees or $3 million in
net revenues (or gross profit) for most any kind of company.
In future weeks, we will dissect this $3 million-dollar
phenomenon separately.
https://berkonomics.com/?p=3113

56. Further Reading
Governing the Family-Run Business
http://hbswk.hbs.edu/item/governing-the-family-run-business
Organizing the Family-Run Business Part Two: The intricacies of creating a board for the
family-run business.
http://hbswk.hbs.edu/item/organizing-the-family-run-business
The Three Components of Family Governance
http://hbswk.hbs.edu/item/the-three-components-of-family-governance
What Is a Board’s Role in a Family Business?
https://corpgov.law.harvard.edu/2014/07/30/what-is-a-boards-role-in-a-family-business/
WHY SHOULD YOU FORM A BOARD OF DIRECTORS?
https://www.familybusinessmagazine.com/why-should-you-form-board-directors
Don’t Run Alone
https://odb.org/2017/09/02/dont-run-alone/
Everyone needs a coach - Bill Gates & Eric Schmidt
https://www.youtube.com/watch?v=8R1pHd4niLI

57. Further Reading
The five attributes of enduring family businesses
https://www.mckinsey.com/business-functions/organization/our-insights/the-five-attributes-of-
enduring-family-businesses
Finding Great Directors For Your Board
https://www.forbes.com/sites/bernietenenbaum/2017/02/13/finding-great-directors-for-your-
board/#626d8dd43f87
Boards Drive Profit: The Diesco Story
https://www.forbes.com/sites/bernietenenbaum/2017/03/14/boards-drive-profit-the-diesco-
story/#8ceb6775e8ba
Who Do I Want On My Board Of Directors
https://www.forbes.com/sites/bernietenenbaum/2017/01/26/who-do-i-want-on-my-board-of-
directors/#36efaf697d65
Building a Successful Family Business Board: A Guide for Leaders, Directors, and
Families
(2011). Jennifer Pendergast, John Ward, and Stephanie Brun de Pontet, Palgrave Macmillan

58. Further Reading
Family Business Governance: Maximizing Family and Business Potential
(2010). John Ward & Craig Aronoff, Palgrave Macmillan
The Family Business Guide: Everything You Need to Know to Manage Your Business
from Legal Planning to Business Strategies
(2010). Frederick Lipman, Palgrave Macmillan