There Are Advantages to Creating a Board of Directors

Here's how to assemble a board that can work wonders for your business.
April 1, 2009

By Greg Kitson, Contributing Writer

When you think of a board of directors, you probably think of a big-time, publicly traded company full of Wall Street bigwigs. However, a board of directors is a proven concept that actually works for companies of any size, providing business owners unbiased insight and suggestions that can have a positive impact on the bottom line.

What makes a board of directors so powerful and helpful is that the members all have something you don't: namely, an unemotional, objective perspective of your business with an arm's length view. These board members can help create and maintain your company's business plan, providing professional guidance, direction and insight through good times and bad.

Unfortunately, many companies in the decorated apparel industry succeed in spite of themselves, and they're quick to dismiss the need for such a board. That's not always the case, however. In fact, some of the industry's biggest, most successful players have a board of directors — and they don't have these boards because they're successful; rather, they have them because that's what it takes to be successful.

Leading the Board
Every business has a principal — a person charged with running the company and acting as the point person, or captain of the ship. In a sole proprietorship, this principal is usually the owner, but regardless of the company's organization or structure, there's always a single person who ultimately provides the vision and driving force for a company.

If you're the principal of your decorated apparel business, you will serve as the chairman of your board of directors. Your first step in leading your board is to provide some clear guidelines about your company's current status, where you want it to go and how you think it should get there. Without such a vision, a board of directors won't be able to provide much help. In other words, they can't help you get where you're going if you're still not sure where, in fact, you are going.

The board's job is to give you input on how to achieve your goals, and to be brutally honest about your plans. For instance, they should tell you, "Yes, this is right on target," or "No, you're being much too aggressive," or "Dream on, that's not going to happen."

Board Members
In a major, publicly traded corporation, a board of directors would have representatives from several key business functions, including finance, legal, accounting, and so on — anyone who can serve as a representative of the entities that affect the business and its health. Similarly, your business should have these types of representatives on its board for you to consult with regularly — even if you don't actually hold face-to-face board meetings where you're all in one room at one time.

Envision a boardroom with a huge table and numerous chairs surrounding it. Each one of the following groups represents a chair at that table; again, you may never (and probably won't) all be in the same room at the same time, but the point is the same: They're your voices of reason, guidance and direction representing your key constituencies.

A financial representative. For a decorated apparel company, a primary financial representative is usually a banker. This person has obviously had an enormously important role in your company's future, given that he essentially controls the flow of cash pumping through your shop's veins. So, your banker will play a critical role on your board. You should meet with him several times a year, whether it's for lunch or a visit to your facility to see your machinery. That way, when you need capital to grow your business, he will have a better understanding of your equipment needs, and he can provide sound business advice.

A legal representative. Your board also should have a member representing your legal concerns, whether it's your attorney or a paralegal or clerk in the attorney's office who writes up all legal documents. Again, it's important to keep an open line of communication with this person throughout the year. As a business owner, your company is most likely a closely held, capital-intensive entity, and it's critical that you have a solid relationship with an attorney who can protect that entity — who can protect your assets, in other words. If you're just starting out, this may be less important, but certainly as you grow and become more successful, a legal representative will play an increasingly critical role on your board of directors.

As you grow, your attorney will play a key role in how your company is structured, how certain key transactions and investments or divestments are documented, and so forth. Further, he will play a part in your succession planning — the method by which you intend to eventually transfer ownership of the business from you to any other individual or individuals.

An accounting representative. This member shouldn't be the person who balances your checkbook, as she's too close to the business. You want someone at arm's length to provide a detached view — someone who can provide good, unbiased information. Working in concert with your legal and financial members, this representative will provide advice about acquiring new equipment, local abatements for equipment purchases, changes in tax laws, and so forth. Again, talk with this person at least three or four times a year so that she has a deep understanding of your business and its needs.

A customer representative. Even the world's smallest business should have a "customer council" — a group of clients you can talk to for candid advice and suggestions. Take them out to lunch, invite them into the shop to see your new embroidery machine, and ask them frank questions about their needs. Ask them what would make them happier: faster, better, cheaper, more variety? In other words, ask them how you can strengthen your relationship with them.

A vendor representative. This person (or persons) represents the supply side of the equation — the entities that provide you with the goods that allow you to create goods. Ask these vendors about the other side of the same questions you asked your customer representatives: What more can they do for you? Can they provide better pricing, samples, next-column pricing, and so forth. Again, the underlying question you're asking is, how can you strengthen your relationship with them? By asking such candid questions in a direct but positive manner, you're likely to see some extremely positive results.

Employee representatives. Challenge your employees to take ownership of your business. Ask them what you can do as a company to make their jobs easier, whether it's redesigning paperwork or rerouting workflow. Ask them to voice their opinions candidly, and you may find that they're only looking for small, simple changes to make their lives easier.

One example of the kind of simple, cost-effective change that can be gleaned from such interaction: Our shop upgraded our UPS shipping software to allow shipping information entry from anywhere in the building. Before upgrading, our employees had to walk to a single shipping computer at the loading dock in the back of the shop. Now, instead of carrying packages 250 feet 10 times a day, they can use any nearby computer and place the box on a cart with its labels and packing slips ready to go.

A family or peer representative. Unlike a large corporation, a smaller business should have a family member or friend with whom the principal can discuss the impact of key business decisions. If you're planning on adding direct-to-garment printing technology, for instance, your family should be aware that you'll be working six nights a week for the next few months until the new process is running smoothly. There is nothing like a close friend to tell you that you're being unrealistic about your chances. If the friends you tailgate with include successful business owners or executives in unrelated fields, they can bring a tremendous amount of value to you. You simply never know what you don't know!

An insurance representative. It's a good idea to have a board member who represents your insurance concerns. Your business is almost certainly the most valuable asset you own, so it's critical that it's reasonably and adequately insured. Your insurance company likely has "industrial hygienists," who can help make your facility more ergonomic and safer by looking at small but important things like whether you're using too many extension cords or improperly disposing of oily rags. They also can provide computer experts who make sure your data is backed up properly.

Specialty representatives. Your board also can include a transportation representative, such as a UPS person who can perform a workflow audit, and an emergency services representative who can discuss fire hazards, for instance. Another example of a specialty representative is a decorated apparel consultant who can offer sage advice on specialty inks, labor relations, industry specific financial benchmarks, garment construction, and so on.

The most important representative. Often, a business owner's spouse or significant other is an unwilling, uninformed participant in your business. However, your loved one should be aware of what's happening in your shop, even if he or she isn't directly involved in daily operations. This person knows how the business affects your life and your family, so he or she can help you make decisions that are good not just for the company but for you and your loved ones.

Meeting with the Board
In all likelihood, you'll never actually meet with your board all at once, in a single room, like the big corporations do — but that doesn't make the board any less important. These individuals represent important business concerns, no matter how you meet with them.

That said, recognize that they are professionals and their time is valuable, so it's not as if you're going to be calling them up every day and getting free advice. You'll pay for their time as any of their customers would, whether or not they're on a board of directors.

To be clear on this, you will more than likely be paying your accountant, lawyer and an industry consultant by the hour or project while the insurance broker, banker and vendors get their compensation though the on-going business relationship. The point is you want to maintain the perspective of each of these professionals you interact with. They bring value to the relationship so don't expect something for nothing.

Any money spent for their time, however, will be well worth it. As an entrepreneur, you're wired to believe you can handle everything by yourself. The truth is that you're not going to be great at everything; you need the business insight, guidance and direction of key business representatives. By building a solid board of directors, you're surrounding yourself with topic experts who can supplement your strengths — and help your business perform even better.

Greg Kitson is founder and president of Mind's Eye Graphics in Decatur, Ind. For more information or to comment on this article, e-mail Greg at greg@ mindseyeg.com or visit mindseyeg.com.

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