What Is An Advisory Board? Should I Form One?
What is an advisory board?
This is a question that a number of small business owners like you are asking today. More specifically, they are wondering what is the difference between an advisory board and a board of directors?
Despite what some owners think, they aren’t the same thing. A board of directors represents the interests of shareholders and the president or CEO typically reports to this board. An advisory board is more informal, serving as an advocate, advisor, and resource for the owner and management team.
So what do advisory boards do?
Typically, advisory board members meet periodically with the owner and other company leaders to offer leadership, support, and objective feedback. Advisory boards are usually comprised of executives and other professionals such as financial advisors, business consultants, vendors, clients, and other business owners who can bring expertise in the areas of marketing, operations, technology, and sales.
Filling Knowledge Gaps
“The best entrepreneurs use advisory boards with subject matter experts to fill gaps of knowledge,” said business author and thought leader Jesse Torres in an article published on Entrepreneur.com.
“Advisory board members are not directors in the traditional sense: They do not serve a governance function or represent shareholders or other stakeholders. They simply provide advice to the entrepreneur about achieving current business goals.”
Your business could realize many benefits by forming an advisory board. Perhaps the biggest benefit is the objective, unbiased advice and input you’ll receive from like-minded professionals who have the best interests of your business in mind. Advisory board members can leverage their experience and expertise to help you with a wide range of tasks like strategy development, decision-making, brainstorming, and long-term business planning.
Board members can also help identify new business opportunities and bring technical expertise and capabilities that you don’t currently have on your staff. An advisory board can also offer an objective perspective on the performance and outlook for your business over the short, medium and long term.
The best entrepreneurs use advisory boards with subject matter experts to fill gaps of knowledge.
Choosing Your Advisors
Maximizing your benefits from an advisory board starts with choosing the right board members. You want to choose advisors who will challenge your ideas and disagree with you, pushing you out of your comfort zone. You also want members who will provide a diversity of opinions from various viewpoints, not just a group of “yes men” who will agree with everything you say.
Business owners typically meet with their advisory board several times a year, such as quarterly. Meetings are often conducted in a hotel conference room or private dining area of a restaurant and last for several hours. You should prepare an agenda listing the items you want to discuss and share this with board members ahead of time so they can be prepared to participate.
For example, maybe you’re facing a particular challenge or big decision that you need help with. Perhaps you’ve been presented with a new growth opportunity and need to weigh the risks vs. rewards with others whom you trust. Or maybe you’re seeking new ideas for boosting sales and revenue and growing your business, or you need help creating a business succession plan.
7 Success Tips
Here are seven tips on how to deal with advisory boards and get the most benefit out of your investment of time and energy into a board:
- Lay your business foundation first. It’s your job, not the job of your advisors, to establish the mission, vision and values of your organization. Foundational tasks such as drafting a mission and vision statement and creating a business plan should be accomplished before you start soliciting advisory board members. Then you can share this with advisory board members and ask for their input at your first advisory board meeting.
- Seek advisors who have gotten to where you want to go. “Choose advisors who have already achieved what you are trying to achieve so that you can learn from both their successes and their mistakes,” said Marissa Levin, the founder and CEO of Successful Culture in an article published on Inc.com. “You don’t want to sit around a table with others who are exactly where you are.”
- Start out small. It’s usually a good idea to start with a group of about three or four advisors, Leven added. This should be enough people to obtain a variety of different perspectives and input without becoming unwieldy and difficult to manage. Over time, you may decide to add additional advisors as your business grows and your challenges become more complex.
- Ask advisors for a one-year commitment. This will give you the flexibility to re-evaluate the effectiveness of your advisors after a reasonable period of time and replace any who might not be a good fit. “You want the option of re-evaluating each advisor at the end of each year to determine if they are aligned with your goals for the coming year and if they have met your expectations,” said Levin.
- Set realistic goals and expectations. Some business owners view an advisory board as kind of a business panacea that’s going to solve all their problems and resolve all of their issues. However, this is rarely the case. It’s critical to decide early on what you can reasonably expect from your advisory board so you aren’t disillusioned or disappointed with the results. Be sure to share your goals and expectations with your advisors.
- Keep communication ongoing. Torres noted that the periodic meeting frequency of advisory boards “can result in business matters slipping from top of mind.” Therefore, it’s important to communicate with board members between meetings to keep everyone updated on the things you discussed. For example, you can send your advisors copies of your monthly financial statements and other reports to keep them apprised of your progress toward meeting financial goals.
- Reward your advisors appropriately. Serving on an advisory board is generally considered to be a voluntary activity — most board members don’t serve because they expect compensation. However, it’s usually a good idea to provide them with some kind of reward to show your appreciation for their time and effort. “Compensation could include meals, travel expenses or a small stipend,” said Torres.
Valuable Wisdom and Insights
Forming and maintaining an advisory board will require some time and effort on your part. But these efforts could be worthwhile when you consider the business wisdom and insights you could gain from a board of seasoned and experienced professionals.