Oct 152014
 

Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
Dr-Smith.com

A well constructed and professionally managed advisory board can bring amazing benefits to a company. A poorly designed and managed one is usually a colossal waste of resources. The difference often lies not so much in the idea of an advisory board, but in the execution of that idea by the senior management team, and particularly the CEO, of a company. In many cases, the productivity of a company’s advisory board is an indication of the effectiveness and sharpness of focus of the senior management team.

In my very first column I described how an advisory board can turbo-charge the business development process. A lot of you found that idea intriguing and have asked for more details. I thought I’d take this column to describe the very first advisory board that I built specifically as a business development engine.

In my last column I described how I leveraged the needs of a client base and funded the launch of a company using the customer’s money. This was the company that also taught me how an advisory board, if appropriately structured, populated and managed, can radically improve a company’s performance.

As it turned out, there was a second major benefit that came out of that experience. Beyond a validation of my suspicions 1) that a promising solution to a major problem will draw investment from those who will most benefit (the customers) and 2) that involving potential clients intimately in the process of developing solutions to their problems will ensure their support of the company which then offered those solutions, another important lesson was learned … this time quite by accident.

Once our business model was in place, we set about managing three flows. The first was the flow of product … film projects that we could participate in financing. The second was the flow of investment dollars which would ensure that we could meet our obligations under the financing agreements. The third was the flow of bank funds.

Informally at first, but then more formally later, we formed two working groups that eventually merged into one Advisory Board. The first group was representatives from the film industry and their bankers. Their task was to organize the flow of investment ready opportunities. The second group was senior representatives of the street houses and accounting firms. Their task was to organize the flow of investment dollars. Initially we spent time working to balance the flows but soon realized that, if we brought both groups together, we could more closely coordinate the process. Thus the advisory board as business development engine was born.

What was neat about this approach was that entire, multi-million dollar transactions were often proposed, negotiated and funded during single Advisory Board meetings. The process wasn’t entirely on automatic pilot but it sure was a lot easier to manage than shuttling back and forth between camps. My team provided the meeting coordination, processing and the post-closing management … we also acted as the coordinator of the overall process and made sure that each interest within the group was fairly served. In the end everybody had a big win and everybody had a respected role in the process.

On reflection, there were at least three major characteristics of this Advisory Board that were important to its success. The first was that the Board had a very well defined and obviously important function to serve. (And I am not referring to driving the run rate of a startup company.) When the members came to the meetings there was an anticipation of ‘doing business’ and ‘getting things done’. As a result meeting preparation was very through, materials were provided well in advance and meeting participation was very active. A second characteristic was that all Board members had specific economic interests that the Board would help advance. All of the players came to do business and trusted the others (including members of my team) to come to the table in the same spirit … a culture of cooperation towards a common set of goals that served the individual goals of each member dominated the proceedings. Finally, all discussions were conducted in a spirit of camaraderie and common purpose. Complex settlements would be explored and reached at the table and not left to extended phone discussions that typically involved lawyers and accountants. In other words, the decision makers made the decisions (and compromises) together.

From my team’s perspective, the Advisory Board made life much easier. The flow of product, investment funds and bank loans was all organized within one venue. The regular meetings of the Board provided a continuity of process that helped to organize a complex situation. Because the ‘market’ had become so well organized and the ‘players’ were all recognized ‘friends’, the process of arranging and closing financing became ‘rationalized’ … much of the uncertainty had been removed. My team got the credit for doing that and the company was seen as a necessary part of the process.

In the middle of the Big Apple we had organized a lower stress oasis.

© Dr. Earl R. Smith II

 

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