Jim Balkcom is a friend of 5 years. He is a very respected businessman and loves Christ. Below is his bio and thoughts on building a Board of Directors for your business.

In Christ,

Boyd

How to Build Your Board of Directors

It’s not easy building a high tech startup. But here’s a tip: When choosing your board, take the time and energy to make solid choices. Picking the right players for your board is critical for your company’s success and will save you many headaches down the road.

Here are some suggestions to make sure your board is a good one:

View the board of directors as an independent body

One of the most common mistakes by entrepreneurs is to “stack” the board with members friendly to their cause. While it may be comforting to know that your position is “secure” regardless of how well or poorly you are executing your duties, it deprives you of the opportunity for an honest, independent performance appraisal. An independent board is in the best position to take an unbiased view of the company’s and the CEO’s performance.

Compose the board of directors of outside members only

Sensitive issues arise in any company. Some of them may be related to the performance of key executives or the CEO. Others may be directly related to the future of the company, i.e., succession issues, financing alternatives or merger/acquisitions. These issues are best handled when the CEO is able to speak freely with his board and seek advice without other members of the management team present. A board with too many representatives from management, in our experience, is far less effective and often results in second-guessing and behind-the-scenes discussions and maneuvering.

Seek a balance of skills on the board

If you raise money from professional venture capital investors, they will usually request a board seat to look after their investment. Most reputable venture capitalists have experience in serving on multiple boards and can be of substantial value to your company. However, they are not likely to be experts in your specific line of business. Seek to balance the board’s composition by adding someone with experience in your market segment. In addition, make sure to include one director with a strong financial background and another who is the CEO or VP of marketing of a successful company in a complementary business segment. These people can provide insight not only on issues specific to your company, but also provide a broader perspective on industry trends, etc.

Communicate frequently with the board members

A board will function best when it is prepared, i.e., the members are up-to-date on the state of company and have had time to think through the major issues. One of the worst mistakes for an entrepreneur is to surface major bad or unexpected news during a board meeting. This forces board members into a reactive posture and doesn’t give them adequate time to reflect upon appropriate alternatives. We always encourage the CEOs of our portfolio companies to call all directors beforehand with a brief overview of the major topics to be covered at the board meeting. If possible, provide all board members with necessary materials for review well in advance of the meeting.

Actively seek involvement of the board

Too many companies view their board as window dressing and board meetings as a nuisance in which the management gives carefully rehearsed “dog and pony shows.” Qualified board members have a wealth of contacts that the CEO can and should tap into, whether potential customers, partners or additional investors. Outside board members can be effective in evaluating the company’s strategy and a valuable resource in recruiting other members to the management team. Don’t hesitate to ask and insist on their involvement in specific issues. If board members are unable or unwilling to spend the time necessary to help the company and/or CEO, they shouldn’t be on the board in the first place.

Listen to advice from the board

The board of directors is a legal structure that provides a fiduciary oversight of a company on behalf of all shareholders. Most of the time the board will agree with the strategy and actions proposed by the management. Sometimes, however, the board may disagree and even insist on a course of action that is different from the one proposed by the CEO and the management team. Heed the advice of your board members. They are not after your job, but are merely doing what is, in their judgement, in the best interest of the company and its shareholders.

If you treat your board of directors as an adversary that needs to be overpowered and controlled, you miss out on the value they can provide. But if you see them as an ally, you’ll be able to tap into a significant resource base with a tremendous payoff to you and your company.

Jim Balkcom is an Executive Coach, Leadership Mentor and Consultant. He is currently serving as the Civilian Aide to the Secretary of the Army along with running Corporate Psychology Resources, Inc. He is the Founding Partner of Council Ventures, L.P., CEO Council and Investment Committee 2001-Present and serves as the Chairman for Ikobo, Inc., Online Money Transfer. He has also served as the Director of eVault, Inc., the leading provider of online data protection and quick recovery services and software. A native of Atlanta, Ga., he resides here with his wife of 41 years, Linda. They have two daughters and four beautiful grandchildren. Jim is also a graduate of West Point and served in Germany and Vietnam, being awarded numerous medals for his service.

Lee and I met in a prayer meeting 14 years ago. Six of us prayed over Lee’s health in Dr. Stanley’s prayer closet. God healed him the next day through an uneventful and successful heart surgery. We became fast friends, as Lee served on our Atlanta Crown City Team and currently serves on our Ministry Ventures Board of Directors. He and his wife Kay were childhood friends who grew up in the Midwest. They have an adult son John. Lee’s business was the second largest correspondence school in America. He and his brother-in-law sold to a group of venture capitalists three years ago.

With permission we have listed below Lee’s very thoughtful response to three business related questions…

1. What advice would you give a young business leader looking to start a business?
Research the business type, understanding the need for the product or service. Do you buy something already started which provides cash flow or start from scratch? How long will it take to get a positive cash flow? What is the competition doing? Is there a need for more similar businesses or will you provide a different approach or product? What finances will be required to start and sustain the early development of the business? Can you start this by yourself or will you need help? If you need help, identify the expertise needed, identify when you can bring them on, part-time or full time, salaries/benefits needed, and then hire only the best. Identify whether family members can do some of the services until you can hire it out or until it outgrows their ability. Prepare to work eighty hours or more per week. If you start with a partnership, be sure you are equally yoked in your ethics and standards. One person needs to be in charge of daily decisions or at least divide up responsibilities and then review what was done regularly. Whoever is in charge of the cash flow must be trustworthy and be held accountable for every transaction. Get help from legal and accounting in setting up the company. Be sure to put aside money for taxes as you go. Have a fall back plan. Seek a mentor who can advise you along the way, possibly a group of like business leaders. Pray, pray, pray.

2. How did you keep integrity a priority in your business? Examples?
Pray together. Find accountability partners. Pay all invoices or debts on time. Keep a close eye on the books…income and expenses, and adjust as needed. In the beginning do it weekly, then less often as you grow. Let employees know the ethical standards you expect from each of them. That includes the way they speak to each other on the job and especially to the customers. When a customer has a problem, always solve it to their satisfaction, knowing that it is easier to keep a customer than to find a new one. Don’t allow your employees to see you violate one of your standards, because they will follow the leader. Your customers should always see the benefits of your product or service or they won’t be repeat customers. Treat your employees with respect. Be firm but consistent with your standards. Continue to work hard and motivate your employees. Pray, pray, pray.

3. The sale of your business was unique? What was your strategy?
We had grown our business for about sixteen years and for a number of reasons thought it was time for us to sell. We had become very successful by most measures but knew we could not continue to run the business forever. We knew what we’d receive the first time of sale for eighty-five percent of the company might be all we would ever receive, so the first sale amount had to be enough for us to retire on. We knew we did not know what a more sophisticated organization might be able to do with our organization, but hoped the fifteen percent might develop into something more. It took a lot of effort working with a business broker, lawyers and accountants to find a buyer and come to an agreement which kept us out of any financial responsibility if the company failed, but would gain if the company later sold for more. We did think one of us might have to sign a work contract to agree to run the company for one to two years before a willing buyer would buy us. Many advisors told us to sell for stock, but we wanted a guaranteed minimum amount of cash. We knew several business sellers where the stock deal did not work out. But we were blessed by what happened next. Neither of us had to be involved in the day-to-day operations of the company, but one of us was on the board so that we would know what was happening with the company. Two years later, the company was sold for six times what we had been paid originally, so we were then out of the enterprise all together with money in the bank.