As any business owner can attest, it really is lonely at the top. You are the person in charge and expected to have all the answers. Yet, there are times when you desire someone to bounce ideas off as well as someone to provide accountability. If that describes you, consider creating an advisory board for your business.
What is an Advisory Board?
An advisory board is similar in some ways to a board of directors, but without the power, personal investment, and fiduciary responsibility of directors. Nevertheless, used properly, the advisory board will make you accountable for results and progress, offer insight and counsel, and help to open doors and make introductions. While it is seldom mentioned, advisory board members become promoters and advocates within an industry or community.
How Are Advisory Boards Structured?
The structures vary. Some closely resemble a formal Board of Directors. Others are a loose collection of individuals the business owner can reach out to as needs arise. Most involve regularly scheduled, in-person formal meetings.
For private businesses, advisory boards typically range from three to seven people. For non-profits, the boards tend to swell in size, with some as large as 30-40 people.
There is no set size of an advisory board. The larger the board is, the more difficult it becomes to manage it, to schedule meetings, etc. For private businesses, advisory boards typically range from three to seven people. For non-profits, the boards tend to swell in size, with some as large as 30-40 people.
Who Should Serve?
Everyone on an advisory board should bring something to the party that the business owner lacks or could use more of. It might be expertise in a particular field, such as finance. It might be industry experience in HVAC or service company operations. It might be local community connections. Regardless of what each person offers, every member should be someone the business owner trusts and values.
What Should You Share?
Some business owners are reluctant to fully open up to outsiders. This is a mistake. It is important to share everything with an advisory board. Otherwise, how can the advisory board members offer reliable insight and good counsel? Share financials. Share goals and strategy. Share personnel issues. Share concerns about competitors. Share marketing and sales approaches, looking for suggestions on how to improve. Ask advisory board members to sign non-disclosure agreements if concerned about the sensitivity of the information shared.
If something is embarrassing, such as financials, it becomes even more important to be open. The advisory board should be a safe space with people serving who have your best interest in mind.
How Often Should You Meet?
Meet too often and you will burn the advisory board out, not to mention yourself. Most advisory boards meet quarterly or semi-annually. This gives the business owner time to make progress in between meetings. The meetings also become stakes in the ground for the business owner, so that more gets done in advance of a meeting because the owner does not want to report minimal progress.
While the full board may only meet a couple of times a year, the business owner should tap into different advisory board members on a more frequent basis.
While the full board may only meet a couple of times a year, the business owner should tap into different advisory board members on a more frequent basis. Sometimes these are simply touch base phone calls. Other times, they are to alert advisory board members about a particular situation and to request advice. An example might be how to proceed when terminating a key employee, how to look at an unsolicited offer to buy the company, and so on.
How Are Advisory Boards Compensated?
Some advisory boards not only lack compensation, they require payment. Typically, these are non-profits where membership on the advisory board is considered somewhat of an honor and the members are already inclined to make financial contributions. For most commercial enterprises, compensation may take several forms, including direct and indirect payment. Direct payment, of course, is straight forward. Indirect payment might involve perks provided to the board members, recognition if membership on the board carries prestige, and so on.
Compensation, even if minor, tends to result in better and more serious participation by board members. Payment implies obligation. Payment results in a more serious and thoughtful approach by board members.
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