Where can small companies turn for objective advice? To each other, thanks to peer groups such as The Alternative Board
When Daryl Rossman, president of Merco Manufacturing, wanted feedback about expanding his family-owned aerospace parts manufacturer or needed advice on strategy and marketing, his options were limited. He could go to the expense of hiring an outside accountant, lawyer, or business consultant. Or he could discuss his views internally with 1 of his 16 employees.
"Being a small business, I didn't really have anybody to sound off my ideas with other than my own employees," he says. "But I always felt they were biased. They would say what I wanted to hear and give me the response I was looking for."
However, since last March, Rossman has sought the objective advice of The Alternative Board (TAB), a peer advisory group that brings together small and midsize business owners from noncompeting companies to share their collective wisdom and act as a professional sounding board. A kind of small-business think tank that meets on a monthly basis, TAB offers a forum for entrepreneurs to discuss everything from personnel to management and finance issues, and come up with goals and plans to address them.
Rossman says joining TAB has proven very helpful in moving his $2.7 million Placenta (Calif.) operation forward. For one, he says, his TAB group of 10 executives helped him come up with a plan to delegate many daily tasks to managers so he could concentrate on ways to build the business. "As [the owner of a] small business I tend to do everything. I was doing machine maintenance and dealing with shipments," he says. "[TAB] really freed me up to broaden my customer base and work on bigger-picture areas like marketing."
Indeed, last month aerospace giant Northrop Grumman (NOC) accepted Merco as a new supplier able to compete on contracts. "This is a huge step for us -- it's potentially worth tens of millions of dollars," says Rossman, who credits his TAB group with helping him snag the deal.
"Some of the other members had experience with these [big aerospace] companies, and they explained to me how to market my own business to a $1 billion organization and how to focus on what it needs from a supplier," he adds. When he gave his presentation to Northrop Grumman, Rossman says he built it around the advice that his board had given him.
Entrepreneurs often find themselves so engaged in the daily details of running their businesses that it can be difficult to look at the big picture, let alone plan for it. Large corporations often benefit from having an outside board of directors that can work with the company on a range of issues to take it to the next level. However, small-business owners rarely have the time or financial resources to hire a board that can give them thoughtful and objective views on tackling problems and coming up with practical strategies.
The emergence of peer advisory boards has become an affordable option for small companies to sharpen their focus and allocate their assets and time to improve their businesses. In addition to TAB, a number of advisory groups, such as Growth Coach in Woodland Hills, Calif., and Chief Executive Boards International in Greenville, S.C., have sprouted up, offering a menu of services such as mentoring, coaching, and network advisory meetings.
Allen Fishman, a former president of the St. Louis-based Tipton Centers, created TAB in 1990, four years after taking his electronics company public and retiring to Colorado. Fishman says he came across a number of informal peer groups and business networks in Colorado. He was intrigued by how they helped small businesses in much the same way as Tipton's board of directors had helped him. "There was no question that people [outside] your industry can address challenges and bring about out-of-the-box solutions," he says.
For nearly two years, Fishman spoke with these groups and asked them what worked for them and what didn't. He began putting together a formal program that he thought could be implemented across the country, specifically geared to small and midsize companies.
"There were three key challenges," he says. "How [to] take people that already have decades of experience and help them to form peer boards; how to teach people to facilitate, regardless of professional backgrounds, to business owners who all have egos; and finally, how to get people who are used to giving orders a process where they're able to listen." Fishman developed a series of exercises that addressed his three challenges and established TAB. He set up a number of boards, perfected his system, and in 1996 he franchised the concept.
TAB now has 140 franchises in almost 40 states with 3,000 business owners and board members, up 20% from last year, according to Jason Zickerman, TAB's president and chief operating officer. Board members participate only at the invitation of franchise facilitators, who screen potential members with a series of 22 questions developed by Fishman. TAB's franchise owners and facilitators are required to have at least 10 years of senior management experience.
Each peer group has between 4 and 12 business owners, comprises similar but diverse industries, and meets each month for about four hours. Between meetings, TAB facilitators can meet with business owners one-on-one. All members must sign a confidentiality agreement.
The boards themselves are divided into three categories: president boards comprise companies with an annual revenue of less than $1 million and fewer than 10 employees. Strategic boards are designed for companies with revenues over $1 million and more than 10 staffers. And chairman boards serve companies with $50 million or more in revenue and more than 50 employees. Typically, membership costs between $350 and $700 in monthly dues.
"At each meeting, board members present a challenge or an opportunity they or their businesses are facing, and fellow board members offer suggestions and advice," says Tina Corner, a former Tessco Technologies executive, who established a Washington (D.C.)-based TAB about four months ago.
"This is attractive for business owners," she says. "They love being held accountable. As an owner at the top, no one asks you if you have done this or what are you doing to better the business. They have goals, but nobody is holding their feet to the fire. The board and the facilitator hold them to account."
TAB has a few goals of its own, specifically expansion. According to TAB President Zickerman, it will increase the number of franchises this year to 200, and it plans on building its network membership to 10,000 in three years.
Already in Canada and Venezuela, TAB expects to roll out new international locations in Britain, New Zealand, Australia, Singapore, and Malaysia. "We're primarily looking for English-speaking places where the concept is easy to adapt," says Zickerman. Good advice is global.