Page 131 - Business Plans that Work A Guide for Small Business

122 • Business Plans that Work

supplier or key customer, it may make sense to invite that person onto your
advisory board. Typically, these individuals are remunerated with a small
equity stake and compensation for any organized meetings. The key in
building your advisory board is to identify the most important needs and
the milestones your organization will face during its launch phase.
By law, most organization types require a board of directors. This is
different than an advisory board (although board directors can also pro-
vide the needed expertise). The primary role of the board of directors is to
oversee the company on behalf of the investors. This fiduciary duty carries
legal rights, obligations, and liabilities. As we have seen with the demise of
large corporations such as Enron, AIG, and others, board directors may
be sued if a corporation fails and shareholders believe the board members
did not exert sufficient oversight of company officers. Sometimes a key in-
dustry expert will be willing to join the company as an adviser but not as
a director because of these liability issues, but also because being a board
director implies a long-term commitment to the company. Potential board
members may not be willing to give the extra time that board directorship
suggests. In any case, the business plan needs to briefly describe the size of
the board, its role within the organization, and any current board mem-
bers. Most major investors, such as venture capitalists, will require one or
more board seats. Usually, the lead entrepreneur and one or more inside
company members (e.g., chief financial officers, vice presidents, etc.) will
also have board seats. At its present stage of development, the Lazybones
board consists of insiders. If it seeks and secures outside equity infusions,
investors will likely take board seats as well.
Strategic partners may not necessarily be on your advisory board or
your board of directors, but they still provide credibility to your venture.
In such cases, it makes sense to highlight their involvement in your com-
pany’s success. It is also common to list external team members, such as
the law firm and accounting firm that your venture uses. The key in this
section is to demonstrate that your firm can successfully execute the con-
cept. A strong team provides the foundation that conveys your venture
will implement the opportunity successfully.

Compensation and Ownership

A capstone to the team section should be a table containing key team
members by role, compensation, and ownership equity. A brief description