How-To Articles

How to Create a Board of Directors

When it comes to creating a board of directors for your small business, the first thing you need to do is decide if you really need one. As a small business grows, so does its need for direction and guidance from professionals with experience in the field. Look at the areas of your business where additional input would be beneficial. Also consider how the presence of a board of directors could enhance your image, particularly to potential investors. Not all businesses need a formal board of directors, especially if they are small and still in the early stages of their business, so carefully consider the benefits and drawbacks before you form one.

After you've made the decision to go ahead and create a board, you should start putting some organization around it. A board is typically composed of a chairman, vice-chairman, treasurer, secretary and regular board members, so decide how many board members you want and begin the selection process.

First decide if you are going to be the chairman, which is common for a CEO, or if you?re going to appoint someone else to be the chairman. While it's tempting for business owners to appoint their friends and family as board members, this can sometimes be dangerous. What you should really aim for is diversity? a range of preferences, professional experiences and expertise. You want to surround yourself with strong-willed people who are willing to challenge you and aren't afraid to offer blunt feedback. Before you officially bring someone on to your board, however, make sure you interview him or her to gauge interest and value.

You'll also need to figure out how the board will function. Establish what their purpose and duties will be. What areas of your business will they be involved in? What sorts of management decisions will they have say in? There should be some sort of mutual accountability between the executives of your business and the board or directors. Whatever you decide, just make sure that you're board does more than just meet and talk. They should be an integral part of the forward movement of your company.

Here are three other questions you'll need to answer before you create your board of directors.

1. How often will the board meet?
   A typical board of directors will meet quarterly, some board even meet monthly. The frequency with which your board meets and the schedule you create should address your company?s unique needs.


2. How much will you pay board members (if anything)?
   The amount of money you decide to pay your board members will vary greatly from business to business. Basically the bigger the company and the more complicated it's issues, the more you'll have to pay to retain quality board members.


3. How long will board members serve?
   Board members usually serve terms that last anywhere from a year on up, but they typically don't exceed three or four years. You should also stagger your terms between board members so that you don't have to find new board members all at once.