The Importance of Good Advice

Posted on December 15, 2009

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An October 20 article in The Wall Street Journal highlighted the crucial role advisors and mentors can play in small businesses. According to Sarah Needleman of the Journal, “Some small business owners say their firms are surviving tough economic times thanks in part to advisory boards they regularly turn to for fresh perspectives and support.”

For many retirees and established business people, an advisory position is the perfect role to take in a new or emerging company. “An advisory board allows a company to get advice from a group of mentors/friends/professional advisors without having the advisors incur the liability of being on a board of managers/ directors,” Mike Goodrich of Red Mountain Law says. “Managers and directors have fiduciary obligations to shareholders/owners.  Advisors are not held to the same standard.”

By the same token, Needleman points out that one of the greatest draws of an advisory board for the business itself is that unlike the say of a board of directors, no one is obligated to follow the advice of an advisory board. It is, after all, just advice.

Setting up a formal advisory board for the dispensation of advice can be beneficial to the business owner and board members in that all parties are held accountable to their responsibilities. “Entrepreneurs inevitably have a group of people they call upon for advice.  It is necessary to have this for a good business — you cannot build a business in a vacuum.  Sometimes putting more formality into by doing a formal board of advisors – with agreements that spell out terms of compensation (often equity) expectations as to meetings, etc. – forces both the owner and the advisor to provide more diligent service,” Goodrich says.

For many small business owners, the problem then becomes where to begin finding the right blend of experts who are also interested in helping a young company. Red Mountain Law has vast experience in setting up advisory boards and groups for small business owners. If this is something that you would be interested in for your own company, please contact Red Mountain Law today.

For more information, red the full-text of The Wall Street Journal article.

Athena International, the group mentioned in the article for women-owned businesses does not have an office in the Birmingham area. The Central Alabama Women’s Business Center is an area resource, however.

Other business resources in Birmingham include:

Birmingham Business Resource Center
B’ham Business Journal Advice Library

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