Advisory Boards are becoming more popular and can be a great tool for growing companies to use to bring in additional expertise and experience. They are can provide a crucial sounding board to entrepreneurs as they growth their business, and also bring in the accountability of regular senior level meetings. The flexibility, powerful skill sets and impartial advice are highly attractive for well run businesses.
All businesses need strong advice to grow and become the best versions of themselves. In my view an advisory board can be the best way to bring this advice to entrepreneurs in a workable, flexible and diligent way. They can be an excellent sounding board for management and can be structured and organized around the specific needs of each business.
Advisory Boards offer many of the advantages of traditional Boards of Directors, but with more flexibility for the company and without the regulatory obligations of a formal Board.
What is a good advisory Board
A good Advisory Board can have numerous benefits for entrepreneurial companies:
- Knowledge. The skillsets of a good Advisory Board complement and fill in the gaps of the skills within the company. This might include legal skills, marketing, new market launch, fundraising, operational or public relations. The company may not require or be in a position to bring these skillsets on in a fulltime capacity.
- Independent perspective. External Advisory Board members, likely including the Chair, will be independent from the company and able to provide a non-conflicted perspective that is at a remove from being at the coalface. This can be extremely valuable to management.
- Flexibility. Advisors can be brought on as appropriate, sometimes for shorter tenures, and the number of advisors on the board can be increased with relative ease.
- Accountable to Management. Traditional boards have fiduciary duty to shareholders. An Advisory Board is accountable only to management (or to the Board of Directors in larger companies) and where corporate leadership wants to take the company.
- Reputational. A well constituted Advisory Board with strong members can burnish the reputation of companies – the ability of the company to attract quality candidates to commit as advisors is a statement of credibility to team members, consumers and potential investors.
- Discipline. The discipline of preparing for Advisory Board meetings, which should not be too onerous and take you away from the business, it helpful to management of itself. It reminds leadership of exactly where they are and what challenges you face.
- Been there, done that. A well selected Advisory Board will have been through many of the situations faced by management previously. Use the learnings of others to avoid having to make all the mistakes yourself.
- Fund Raising. For companies looking to raise funds for growth or acquisitions, an advisory board can help attract investment through the networks of Board members and also because of the credibility they bring to the company.
- Prelude to Board of Directors. The disciplines put in place for the Advisory Board can ease the eventual introduction of a more formal Board of Directors, including having some or all of the advisory board may move onto the formal company Board at such time it is put in place.
For early and mid-stage growth companies, an Advisory Board can be a crucial enabler for company leadership to navigate the many challenges and changes that come with growth. They can also be powerful in attracting funding from investors and giving confidence to high-quality new hires.
Steps to put a successful advisory board together
To put together the most effective advisory board, there are several important steps that will ensure the process works well for both the company and advisor.
- Purpose. Given the purpose, vision, mission and values of your company, what type of Board do you want and what type of board members? What specific benefits will it provide you, the business leader? Is the purpose of the advisory board to assist with a new product launch or more general post-Covid recovery planning? How will it work and how will you work with it – for example, what is the path of advice from the board to the business? How long will the Board be in place for? They questions need to be addressed up-front, and clearly documented so there is clarity for all involved.
- Formal Structure. Some advisory boards will be less or more formal, but it is important to clarify the key operating aspects properly. Confirm key elements such as: board charter, meeting processes (minutes, quorum, resolutions, agendas etc.), tenure of advisors, scope and limits for areas of advice. Advisors will need to sign confidentiality agreements and there also needs to be a process for disclosure and dealing with conflicts of interest. Again, this needs to be documented simply and clearly to bring everyone onto the same page.
- Skills matrix. Prepare a skills matrix – what are the skills of you and your team compared to what you need to progress the business over the next period of the company’s growth or through a particular situation. The advisory board should fill in the key gaps you have identified.
- Build your pitch. What will you offer the Board members, what work will they do and for how long? Have a clear idea of remuneration, which can take a number of forms and needs to be workable for both parties. You need this to convince the sort of people you are likely to approach.
- Select your Chair and Advisors. You want positive but skeptical advisors, that are willing and able to commit the time you need. Diversity in perspective is important – don’t just select friends or investors, or people from the same industry. It’s also important that advisors buy into the company’s purpose and vision – you need them to believe in you and what you are building. We recommend an independent chair. Generally, a strong chair can attract other strong advisors, getting the right Chair is important.
How to make sure it keeps working well
Once the advisory board is in place, a few simple steps can keep things working well. The entrepreneur and the Chair will work together to plan for meetings and agendas, and to keep the right processes in place. For example, get information to advisors in reasonable time ahead of meetings, and make sure to disclose business events to advisors in reasonable time. Discussions at meetings should be held in a structured and professional manner – this will build the confidence of the advisors to keep committing their valuable time and also advocating on behalf of the business.
A good entrepreneur or CEO will learn how work best with each advisor and also the advisory board chair. Building respect and a constructive chemistry on the advisory board is important.
Its important for the entrepreneur to monitor the Board’s effectiveness against its purpose and goals on a quarterly, half yearly or annual basis will assist keeping things on track. This may include changing advisors when necessary and even changes in the number of advisors.
We are seeing strong growth in advisory boards for entrepreneurial companies, they are a powerful tool that can enable entrepreneurs and their companies to work more effectively.
“Who Advises the Entrepreneur?”, Harvard Business Review. October 22, 2013, Kerrie MacPherson.
“Advisory Boards”, Australian Institute of Company Directors, www.companydirectors.com.au
- Advisory Boards are growing in popularity, and can be a powerful tool for entrepreneurs to use to bring accountability and high-level skills to their business.
- The Advisory Board should be structured around the need so the entrepreneur and the company and are particularly helpful as the company moves through specific challenges, such as seeking more funds, adding new products or managing growth and strategy.
Entrepreneur Purpose assists our clients systemize effectively using our best practice methodology and platform. We also work with our client to set the right foundation with purpose, team alignment and business planning, though to investment for growth or business sale. Contact us for a complimentary introductory discussion.