Is your business ready to get a board?

Someone asked me recently if I thought her business was ripe to have a board of directors. After that conversation, I thought to put together something about what to consider before getting a board or whether your business even needs a board or not. And yes, not every business will require one.

When we talk board about the board of directors, it may be executive or non-executive directors, and it all depends on your business needs at the time. You may want to just stick to your management team and remain chief executive, or go ahead to get a board.

Here are some indicators to consider.

First is the business growth stage you are in.

A board might be premature if you are just in the startup stage. But, if you are already in the growth stage with increasing revenue, expanding operations, and planning your entry into new markets, you are not wrong to consider getting a board. Early-stage startups might not need a board until they seek investment or begin scaling. Founders may choose to rely on informal advisory boards instead.

Second is the complexity of operations. As business grows, operations may become complex beyond what one executive can oversee. If you're managing multiple products, services, or locations, a board can provide oversight and strategic guidance, especially in those areas that might be blind spots for you. They also bring in a significant measure of accountability to the business because, as the Chief executive, you have to be accountable to the board.

Another reason to consider having a board is when there are obvious gaps in your expertise, maybe in finance, marketing, or technology. If you bring in directors with skills in those areas of need, they can provide valuable insights and mentorship. This would also form part of your corporate governance structure, and enhance your business credibility if you are looking to get investors to bring in capital to the business.

On the legal end, some industries or business structures may have specific regulatory requirements that necessitate a board. In such cases, the decision has been made on your behalf so you have to get a board in place to formalize your business structure and processes. Corporations, especially larger ones, typically need a board due to legal requirements. In contrast, LLCs or smaller businesses may not.

And let's not forget what I always say about networks. There are steps you want to take in your business, and you realize that you do not have the network and connections to scale through it. If setting up a board is the way to get people with the right network involved in your business, then it is a good reason to. Having a board is also a significant indicator that you are in for the long haul, and trying to build a sustainable business.

While many businesses can benefit from having a board of directors—especially as they grow and face new challenges—it’s not universally necessary. It comes down to your peculiar circumstances, what you want, and your long-term vision for the business. If as the owner, you prefer to maintain full control, then a board might only complicate your decision-making process. You may want to stick with an advisory board instead of a board of executive directors instead.

Whatever your reasons, try to get the right kind of people on the board. While you do not need Yes-men and women on the board, you need people who see and align with the business vision. They might bring in diverse perspectives, skills, networks, and assets, but they should all be working towards the same vision. You also want to do your due diligence and ensure no conflict of interest may later become a clog in the wheels of progress.

What to note.

Having a board comes with its own cost for the business in terms of compensation, whether through direct fees, equity, or other forms of remuneration; Meeting costs; Administrative expenses; Logistics; Legal and Consulting Fees; Insurance and Advisory Fees. They also come with benefits like helping to identify and mitigate risks, potentially saving the business from costly pitfalls.

You will have to weigh the costs vs the benefits on a scale and see how to work it out for your business.