By William Shanklin
The vast majority of businesses in the Thoroughbred racing and breeding industry are privately held and many are family-owned. Most are classified by the United States government as “small” businesses.
Unlike big public companies with deep pockets, small firms normally cannot afford to employ the most sought-after executives or retain the services of preeminent professionals and technical specialists. Moreover, a proprietor or partner of a small business has fewer experts outside the firm to confer with confidentially about matters he or she may not want to discuss with employees. The chairman of a large company has independent directors on the board to turn to, and the pick of consultants, while the average small business owner does not.
Business advisory boards are popular among small businesses because they provide some of the human resource advantages of a sizeable company and do so without the corresponding costs. An advisory board is typically comprised of four or five members, with everyone except the business owner or president coming from outside the company.
A racing-related board, for example, might consist of the company owner, plus four outsiders with different skill sets, such as in finance, law, marketing, and veterinary medicine. All of the members do not need to have a background in the racing industry; one of the potential strengths of advisory boards is that people with assorted perspectives are apt to formulate superior solutions to problems.
Advisory boards can often attract people who otherwise might be reluctant to serve on a conventional corporate board of directors out of concern for legal liability. Because members of advisory boards have no official standing as directors, they are not accountable for acts of the company.
Small business owners are able to entice some surprisingly high-powered managers and professionals to serve on advisory boards for a per-meeting stipend in the range of $600-$1,000 for each member. Retired executives and independent contractors are productive sources for recruitment. Thus, for a total annual cost of perhaps $10,000-$16,000, a company president can periodically discuss major strategic and tactical issues in confidence with a select group.
Various companies and partnerships in the racing industry could benefit from an advisory board, and some already do. Board members can assist a business owner with decisions running the gamut from mundane operating matters to sensitive emotional questions of succession in family enterprises.
The imperatives for board effectiveness are astute members, low turnover, regularly held meetings, and commitment of the business owner to listen with an open mind.
William Shanklin, a longtime contributor to The Blood-Horse, is the publisher of the Web site horseracingbusiness.com