H O W T O F O R M A L LY TA P I N T O I N D U S T R Y E X P E RT I S E

KEY HIRES AND FORMING AN ADVISORY BOARD

Bob BurkeDecember 2, 2012

Beverage School at BevNet Live

Advisory work in assisting bringing natural, organic and specialty products to market across most classes of trade

Write business plans for raising capital and growth strategies for management teams

Co-Author/Publisher of the Natural Products Field Manual, Fifth Edition and The Sales Manager’s Handbook

Co-produce and co-lead seminars on “Becoming a More Effective Sales Manager in the Natural and Specialty Channel” and “Financing your Natural or Specialty Products Company”

Serve as outside director of: Orgain, EcoFish, Nutrabella, American Halal, FoodState

Advisory boards: Mamma Chia, Runa, Theo Chocolate, Galaxy Nutritional Foods Former director: Stonyfield Farm, Equal Exchange, Stirrings, NASFT Former VP Marketing & Sales, 11 years, Stonyfield Farm Named one of the "Top 25 Business Builders of the Natural Products Industry

for the last 25 years” by Natural Foods Merchandiser Magazine

Contact: 978-975-9902; Bob@NaturalConsulting.com 8 Cobblestone Lane, Andover, MA 01810Website: www.NaturalConsulting.com

TAKING YOUR BUSINESS TO THE NEXT LEVEL?

• Beginning with the end in mind• Mapping out a plan• Who’s executing?• Internal • Outsourced• Upgrades

• What resources are necessary• Capital• Service providers• Advisory board/board of directors• Share groups

DOESN’T ROLLING UP YOUR SLEEVES AND WORKING 100 HOUR WEEKS BUILD CHARACTER?

• Think Boston …or Marky Mark• “Work Smahter not Hahder”

• Each additional person frees you up to do higher return activities• What does making you 40-50% more productive do for the company

• Have the courage and smarts to hire up• Each key new hire should raise the bar in the organization

• What are your experience gaps? • Where can you make the most impact

• Set S.M.A.R.T. goals• Align goals and incentive plans across the team and with

the company and shareholders• Set the pace

KEY ROLES

• Head of Sales (not you) or outsourced brand management company/contract sales

• Sales Operations/Sales Support/Sales Admin• Hub of the wheel (accounting, operations, sales, marketing, CEO)• Anchor in the office for sales team and brokers

• Controller/CFO or outsourced• Marketing Assistant to Mid Level Marketing person• Collateral• Trade shows• Manage service providers

• Operations• Sourcing• Managing co-packers• Inventory management• Transportation and warehousing

ADVISORY BOARD VS. BOARD OF DIRECTORS

• Advisory Board• Informal organizational role• Strategic guidance• Support the CEO and management team• Advise only• Often pre-institutional capital• Don’t hire/fire• No D&O insurance needed

• Board of Directors• Formal organizational role• Strategic guidance and governance• Support CEO and represent investors/shareholders• Advise and decision making authority

• E.g. hire/fire CEO, approve budgets, cap-ex, comp plans

• Fiduciary duty/liability• Potential liability

• Defined• Group of business executives who meet on a consistent basis to provide leadership, support and constructive

feedback to the executive leadership of a company

PURPOSE OF FORMING AN ADVISORY BOARD

• Scheduled time to:• Think strategically• Hear objective feedback• Accrue knowledge and expertise • Fill experience gaps

• Gain valuable insight:• Strategic thinking • Growth strategy• Invest in getting a core group of people up to speed and not just ad hoc advice• Advice on HR and organizational issues• Advice on raising money

• Personal development• Coaching/mentoring of entrepreneur/CEO/team• Expands company network• Some accountability for CEO• Introductions

• Boost credibility with potential investors, customers, suppliers, service providers

IDEAL BOARD COMPOSITION

• Consider needs of the business and stage of the business• Critical objectives/hurdles• Experience gaps (of founder/team)

• Individuals who are committed to engage the business, not dilettantes

• Team oriented, collegial, honest, respectful, constructive, problem solvers

• Diverse group with complementary functional skill sets and industry experience and life stage expertise – also “employed vs. retired”

• Willing to tell you what you need to hear, not want to hear.

• Members that help build credibility, offer introductions• Generally 3-6 members

TYPES TO AVOID

• Domineering, alienating personalities, oversized egos• Unable to build trusted, respectful relationships• Inexperienced in the specific areas you need help• Too busy, not enough capacity/bandwidth• Rarely express a divergent opinion• Conflicts of interest

HOW TO RECRUIT MEMBERS

• Be clear that you want a commitment, not community service or “giving back”

• SBA’s SCORE (Service Corp of Retired Executives)• Entrepreneurs in your industry who have cashed out• Network with your peers, brokers, suppliers, NASFT,

BevNet• Develop an ideal bio of what you are looking for• Age, gender, industry diversity• People you know, people you don’t know

• Find an anchor advisor • Develop a pool• Audition

SETTING THE EXPECTATIONS

• Create a mission statement

• Define the scope of issues

• Annual schedule/ frequency of meetings • Set dates up front and far in advance

• Turnover of board members

• Prepare for meetings – arrive prepared

• Legal bases covered – e.g. NDA’s

• Honorarium/equity

COMPENSATING YOUR BOARD MEMBERS

• Compensation sends the message that you are serious• Contingent on:• Your type of company• Number of advisors• Time required of advisors• Opportunity cost for some

• Equity, Cash or Free lunch?• Opportunity to invest• Compensation plans• Stipend ($500-$1,000-$1,500/meeting)• Equity/options (.5%-2%)• Reimbursement of related out of pocket expenses

• Perks, tickets, industry events, recognition• Peer networking with other successful people• Fresh ideas, perspective, inspiration,

SOME GENERAL BEST PRACTICES

• Respect their time• One on one meeting to get them up to speed• Set expectations, also what do they want to know?

• Keep them informed• Monthly email updates• Conference calls for timely input on big issues• Board packets in advance so they can arrive prepared

• Remove underperforming members• Term limits, good idea• Check in with them periodically on their interest

level/bandwidth

RUNNING PURPOSEFUL MEETINGS

• Your commitment• Open and honest• Materials in advance• Setting expectations for meeting• Staying on agenda and allocated time for each topic

• Data review• Sales, financial, operational results

• CEO temperature• Sales funnel• Discussion on agenda items• Note key action items, follow ups

IN CONCLUSION

• Advisory board members can be advocates, mentors, a resource and provide perspective for a CEO

• You can be open and honest – they can’t fire you• Generally focus on how to execute better and grow

the business • How can they help with industry contacts and

relationships? • Trusted individuals dedicated to seeing you succeed• No company is too small to not benefit from having

an advisory board

Advisory Board Agreement¶

Whereas ____ (Company Name) (Company) desires to have ____ (Board Member) (Member) participate as a member of the (Company Name) Advisory Board (Board) and Member desires to participate in such a capacity, this advisory board agreement establishes the business relationship between Company and Member.

Scope of Board of Advisory Agreement: The sole purpose of the Advisory Board is to provide the CEO of Company with the varying perspectives of the respective Advisory Board Members. All topics to be discussed at Board of Advisory meetings will be chosen by CEO of Company. The Board of Advisors will not provide a consensus or vote on a course of action for Company. Member agrees to interact with Company in an advisory capacity only and will have no responsibility or authority in the operations of Company’s business. The use of any information, perspectives or opinions provided by members of the Board will be at the sole discretion of the CEO of Company. In deciding to take action on topics discussed at Advisory Board Meetings the Company absolves Advisory Board Members of any and all responsibility and liability. Company bears the sole responsibility of deciding what recommendations made by Board of Advisors or Board Member to accept or reject. Company also bears the sole responsibility regarding any implementation and/or success of any recommendation made by Board of Advisory or Board Member.

Frequency of Advisory Board Meetings: The Advisory Board will meet three (3) or four (4) times a year. Company will notify Members the first (1st) of each year the dates of the meetings for that year.

Member remuneration: Company agrees to pay Member (??) hundred dollars ($??.00) for each Advisory Board Meeting attended.

Termination: This Board of Advisors agreement can be terminated by either party with thirty (30) days prior written notice.

Termination notices will be mailed to the following addresses:

______________ (Company)______________ (address){BR} ______________ (city & state)______________ (Member)______________ (address){BR} ______________ (city & state)

Confidentiality: Company will make Member aware of all conversations and/or materials that are deemed confidential. Any information in the public domain will not be deemed confidential.

The terms and fees of this Advisory Board agreement are deemed confidential.

Governing State LAW. This Advisory Board Agreement is executed pursuant to, is intended to be performed under and shall be governed in its interpretation and effect by the laws of the State of (?).

______________ (Company)______________ Date

Sample agreement – www.WikiCFO.com

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