In this episode of the Small Business Banter podcast I'm joined by Louise Broekman, CEO and founder of Advisory Board Center. We cover the importance of strategic decision-making in business, but specifically the role of advisory boards in exit planning.
Key messages for #businessowners #founders #familybusinesses from Louise include the importance for shifting from on-the-run decision-making to a more thoughtful and how Advisory Boards;
- provide a space for businesses to think and problem-solve over a 90-day period
- help business owners make confident decisions that focus on long-term investment and growth
- provide benefits including external perspective
- support strategic decision-making
- help navigate the complexities of exit planning
"To grow means that the business needs to be different, which means that the way that we make decisions on day-to-day things needs to be different" - Louise Broekman
Louise has a compelling 20+ year journey as a business owner, entrepreneur and advisor.
Timestamped summary of this episode:
00:01:18 - Background of the Advisory Board Center,
Louise explains that the Advisory Board Center is a professional body for the advisory board sector, focused on best practices and ethics. They offer membership and certification for advisory board professionals, and operate in over 25 countries.
00:03:35 - What is an advisory board,
Louise distinguishes advisory boards from governance boards, explaining that advisory boards are focused on problem solving and thinking, rather than decision making. They provide business owners with a second set of ears and different perspectives to help them make confident decisions.
00:08:41 - Types of businesses using advisory boards,
Louise discusses the wide range of businesses that use advisory boards, including startups, mid-sized businesses, family businesses, partnerships, and those looking to exit or scale. She emphasizes that the market is growing and that businesses are starting to adopt advisory boards at an earlier stage.
00:15:07 - The Importance of Making Decisions,
Making decisions on the run can be addictive and fulfilling, but to grow a business, different decisions need to be made. An advisory board can provide the space and time to think through decisions and explore different options, transforming it from a working capital discussion to an investment conversation.
00:16:45 - The Addictive Nature of Busyness,
The busyness of running a business can feel satisfying, but it's important to focus on the top strategic issues that will truly change the way the business operates and performs. The key is to concentrate on the decisions that will have a significant impact and prioritize them over other tasks.
00:18:14 - The Need for Guidance and Confidence,
After experiencing a challenging business situation, the guest realized the importance of having good people around her and gaining confidence in her decision-making process. By creating an advisory board, she sought outside perspective and support to make more informed and strategic decisions.
00:23:17 - Using Advisory Boards for Exit Planning,
Advisory boards can play a crucial role in exit planning, whether it's evaluating the decision to sell, preparing the business for sale, or maximizing the asset value of the business. They can provide external perspective and guidance to help owners make the right choices and achieve successful outcomes.
00:26:57 - Exploring Alternative Exit Strategies,
Exit planning shouldn't be limited to a binary decision of selling the business. There are various options to consider, such as staged exits.
00:30:42 - The Importance of Having a Clear Plan,
It is crucial for business owners to have a clear plan and some ideas about what they would do after selling their business. Without a plan, an identity crisis can occur after leaving the business.
00:31:24 - Shortcomings of Exit Planning,
Exit planning often focuses on financial aspects, but fails to address the question of what the owner wants to do afterwards. It is important for owners to seek advice from others who have been through the experience and explore different options.
00:32:10 - Alternatives to Selling,
Some business owners may fall back in love with their business after preparing it for sale, leading them to reconsider selling. Other owners may choose to maintain a smaller business or scale back to focus on income rather than revenue.
00:33:46 - The Value of Advisory Boards,
Advisory boards can bring many advantages, such as a network of contacts, industry experience, and unemotional detachment. They can provide objective frameworks, accountability, and help owners see their business from a buyer's perspective.
00:37:21 - The Importance of Outside Counsel,
Owners should consider seeking outside counsel to help them navigate the challenges of running a business. It is important to have someone who can hold them accountable, provide objective advice, and help them focus on what really matters.
The resources mentioned in this episode are:
@Advisory Board Centre - there you can learn more about their services, how they can help your business and explore the membership model offered by the Advisory Board Centre to become a credentialed advisory board professional and join a global community of like-minded individuals
Connect with me here:
@michaelkerr @smallbusinessbanter
Thanks for listening. Visit the Owner To Owner Podcast website to subscribe, listen back, or check out any resources or information mentioned on the show.
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Reach out to Michael Kerr via the website if you need personal assistance or advice for your small business.
michael.kerr@kerrcapital.com.au
www.ownertoownerpodcast.com.au
[00:00:00] So welcome into another edition of Small Business Banta.
[00:00:03] Very pleased to be joined today by Louise Brockman,
[00:00:06] who's the CEO and founder of the advisory board center.
[00:00:11] Big thanks for coming in today, Louise.
[00:00:14] Nice to be here, Michael.
[00:00:15] We had a discussion about 12 months ago,
[00:00:18] who certainly touched on advisory boards,
[00:00:20] but we also talked about broadly the levels
[00:00:23] and types of supportlaying that into, you know, how you can help other business owners to go global, to create succession and be more successful through the use of advisory boards. So, if you could just recap on the advisory board centre, where that business is at and
[00:01:40] what you're aiming to do there. Sure, boards. So we operate now in over 25 countries. We select in our membership less than 10% of those that apply because advisory boards... They come here, they invite... The individuals, that's right. Yeah. And then they then build advisory boards into their portfolio of work they do or they use that best
[00:03:01] practice methodology to implement inside on those decisions. And so business owners generally will informally operate as directors, as business owners, they will blend the role of being a director as well as being an owner into their role
[00:04:21] in the way they make decisions.
[00:04:22] And advisory board is different.
[00:04:24] Advisory boards do not make decisions.
[00:04:26] It's a problem solving model that it's not just one voice. And so this is problematic where you look at the where advice is provided and where it's consumed. When you're
[00:05:43] a business owner expecting one person to have the answer to everything for your business,
[00:06:43] to then ultimately what advisory boards are about. It's not about the construct, it's about the purpose.
[00:06:46] And the purpose of any advisory structure,
[00:06:49] whether it's advisory boards or other advisory structures,
[00:06:51] is to ensure someone is really confident
[00:06:53] about the decisions that they're making.
[00:06:55] I'm really proud of those decisions that they're making.
[00:06:57] And so when you're dealing with three independent voices
[00:07:01] around a table that escalates that trust
[00:07:04] in that conversation, to be first of all vulnerable,
[00:07:06] but also to be able to And then what people do we select that are going to meet those needs around that purpose? And generally, most businesses will choose three priorities that the advisory board focuses
[00:08:21] on.
[00:08:22] And you get those now where the market is most typically in public companies, I think, would that be or NGOs or government organisations? Yeah, corporate organisations, yeah. Three-year timeframe or whatever it might be and broad objectives around. So, yeah, so this is very much getting down to not problem of the day, but almost tactical
[00:09:42] in the sense that every business evolves has a different set of problems and you need next, but the purpose of advisory boards do shift by the different complexities. Just a smaller business is not less complex than a larger one, it's just different. So you get the most common starting point for a business with an advisory board is still relatively small. So it's between $1 to $1.5 million in revenue, which is the most common starting point for an advisory board.
[00:11:00] And I'm so excited by that information, emerging industries like energy, they're all really
[00:12:21] good examples of where the market is today. can really hurt you if you don't resource it the right way and have the right mindset to do that. And so we call it, you know, surviving your own ambition. And I'm one of those that are included. It's a scary pathway. Yeah. Understanding that and accepting that you're on that pathway and not takes a lot of reflection and a lot of thinking.
[00:13:40] And I'm not sure that all owners have the time and space they need it, but that find
[00:13:45] the time and space to reflect on this because it to 2016 and we're now constantly researching it now since 2017. Those dynamics really haven't changed. So we've still got this mindset of speed and I've got to be busy.
[00:15:02] And I'm probably one of the worst offenders of that, the decision reveals itself because it's not just one option. And this gives us the confidence then to think about what's the consequence of that decision if it's different. And this then changes it from being a
[00:16:20] working capital discussion into being an investment conversation. How do I invest in my business for an advisory board? Well, it was a series of things. So, and it's not a pretty story actually, the year before we developed a software package that we took to market. This is pre-sastase, right? So, remember the CDs and you load the CD? So, that's exactly right. So, we developed this
[00:18:43] if I did it badly, it would end up badly, as well as I didn't want to mess it up.
[00:18:46] There was an opportunity to do something really good.
[00:18:49] And I was making, I personally was making decisions
[00:18:51] in my business and going, is that a good decision?
[00:18:54] I don't know, I think it might be,
[00:18:57] but I'm going to do it anyway.
[00:18:58] And I just thought we've got this incredible opportunity
[00:19:00] with this business to do good work.
[00:19:03] That's not good enough.
[00:19:05] For me, I felt like I'm not proud of the way
[00:19:08] that I'm making these decisions. It is deeply fascinating how many... I don't even like the term entrepreneur all that much. I prefer that people are in business and they do the hard things and many of them don't call themselves an entrepreneur. So anyway, that's by the by. But being so brave is also... You feel like when you're running your business, you've got to be brave and you've got to make these hard
[00:20:23] calls as well as being busy. And you were right whatever choice I've made at that time committed to do that or to let it go and then do something else, whatever it would have been. It kind of doesn't matter as long as you're committed to the choice. At the time, there's probably many things you could have spent money on, but to
[00:21:46] engage in advisory board on whatever terms you... an external perspective on your business, make it more robust, make it more profitable, make it more sustainable, more scalable, all those good things. And I can't but help think that there's a good intersection there between a pop-up exit
[00:23:01] planning board using that advisory board is actually focusing on that gross piece. So it's really interesting in that way how you get your advisory board involved. The other model that I see, Michael, is that there's a case that I referred to yesterday So what are you going to do with your time and that incredible knowledge that you've built in business to be able to share with other people and work in a different capacity? So it gives people a sense of purpose when you're leaving something, you're actually not just leaving something, you're actually going to something as well.
[00:25:40] Look, it's vitally important.
[00:25:43] And this is what I was means, but the logic of employee, employee buyouts or employee shareholding or bringing on other shareholders as operating partners. There's so many different ways to look at it. Do you find many, Michael, are able to really open to having that conversation about the other alternatives? Yes, when there's a level, what I think happens in for a lot of small businesses is that
[00:29:24] If there was a pathway to putting in a good manager or bringing in the team as a part shareholder, might that change things?
[00:29:27] And it becomes a business and a personal discussion.
[00:29:32] You all know what do you want to do?
[00:29:35] Yeah, and this is the conversation around succession planning that I find needs to go
[00:29:41] deeper in the market.
[00:29:42] So we talk about succession planning.
[00:29:44] There's two different types of succession, right?
[00:29:46] So there's external. to change the way the business operates. But I think they're better with a business than without. I have seen some hollow owners, they've kind of got to a point where they're tired and they sell and then golf doesn't quite cut it or walking the dog or whatever it is, and I think that it was a reaction to say been through the experience is about as good as potentially as good as it is you're going to get. Yeah, because there isn't without a doubt an identity crisis that happens when you've left it. I'll give you two examples, two of other ways. So I was chairing an advisory board for a business that says we want you to set up the
[00:32:23] advisory board so we can get it ready for sale.
[00:32:26] So we built an advisory board for the 18 months. two of some accountants. I remember probably going back 20 years ago, the model applies equally today, but I've met some of these and they went through a pathway of growing their accounting practice and they just got the point, they felt like they're saying here to get in that external council. And this is the pop-up advisory boards as an exit planning board. You're still going to need to engage the right experts, tax, legal. So whether they come on need a board, look, counsel about what life before and after business. So bring out of them what they really want to do personally. Unemotional detachment, they can use that to say, well, this is how your business might look to a particular buyer. So I've had so many owners that are so caught up in their business and it turns out it's
[00:36:21] a lot different to a buyer than it is to the owner.
[00:36:24] They just see external stuff is so critical. And so it forces you to be on your A game. That's for me. I want to be on my A game. I want to be the best I could possibly be. And it forces me to know my business. And so you go, oh, well, I got prepared for the advisory board meeting. I get so much value. Don't tell my advisory board members this, but I get more value in preparing for my advisory board meetings.
[00:37:44] Because I go, what is important?
[00:37:46] What actually gets on the agenda? seen owners that get to a point. And the next step is not just all about them. It's actually about getting somebody, some people involved that can help them to get the business to its next stage, which might be scaling and it might be scaling back. It might be selling it. It's getting some in exploring having an advisory board for themselves, there's many things to consider. So we've got a free service that's called the Advisor Concierge. We're not a recruitment agency, we're not a broker. So we help you to evaluate what are the priorities for your business that
[00:40:21] you're wanting to achieve, what are the different options you could have for an advisory structure, Some have very effective working relationships beyond compliance with their accountant and that's great. You have a lawyer on hand if you need. What we're saying here is there's a much broader pool of people with experience beyond one industry or deep within your industry who have out of their own business and can
[00:41:41] add a lot of value.
[00:41:42] There's a lot of people around looking to add value back as various reasons.
