With today’s fast-paced, ever-evolving and competitive market, a lot of companies decide to create a board of advisers that can give them fresh ideas and recommendations to keep up with today’s world.
For small companies, creating a well-run advisory board can give them an edge over their rivals. An advisory board that is composed of experienced people can help a company increase sales and flourish in their chosen industry. Seems pretty straightforward, right? But not a lot of companies do this or, if they do, do it right.
The Basics: What is an Advisory Board?
An advisory board is a group of consultants who provide advice and give support to the management of a company. They have no authority or power to arbitrate in corporate matters. They provide advice only. The company can choose to use the advice or not – there are no requirements or obligations, though the advice is almost always taken quite seriously. The business owner or CEO is usually the one who decides to form an advisory board to seek outside counsel.
What are the Advantages of Forming an Advisory Board?
There are many advantages that a business can get from having an advisory board. An advisory board can help you with the following:
- Discuss ideas in an objective way
- Provide recommendations to further improve the efficiency of the CEO and the management team
- Improve your reputation with the potential investors as well as with the customers
- Enlighten the management to avoid making wrong decisions
- Check the knowledge and skills that those in the management or administration should have
- Give sound suggestions, ideas and strategic advice for the business to grow
- Assist in making connections within the industry
- Boost company’s sales
- Provide strategic advice and input on such things as finance/funding, M & A, partnerships, go-to-market, messaging, etc.
- Share ideas on how to handle situational crisis
- Help and recommendations with new employee hires
- Assist in analyzing the market trends
Simple Steps in Producing an Effective Board of Advisors
- Assess first the strengths and weaknesses of your company’s management. Easy to say, hard to do.
- Think of the critical areas in your business that needs improvement or changes. Consider advisors who already have an experience in those areas/fields.
- Determine clear company objectives and expectations. Your advisors will need to know what you need from them and what their commitments are.
Prior to forming a board of advisors, the CEO and management team should sit down and ask among themselves the following questions:
- What are the main areas that we need guidance in?
- What specific help do we need from the advisory board?
- Who are the right people to hire for the board?
- How can we avoid handing too much info to these people?
- What are their powers and limitations?
- How much are we willing to compensate for this advisory board?
- How often to we want to meet – enough to be beneficial but not too much to be a burden?
- Start choosing the right people for the board and invite them to join. An advisory board is usually composed of 2 to 10 individuals. The number of people you choose will depend on the company’s needs. For small business, 3-5 advisors are enough. The company may add more experts later when deemed necessary.
When choosing the right executives that you want for your advisory board, concentrate first on their necessary skills. Some business owners rely on recommendations by relatives and close friends. Certainly there are pros and cons to this, as you might imagine. Friends and relatives can keep a business owner grounded, but if they lack the industry know-how and experience they might not be the right fit.
Consider an outside service provider if you need help with the formation of the board and/or approaching potential advisors who might be a great fit but that you may not know yourself. Running meetings and keeping the group on track requires time and effort and is often difficult for folks to handle in addition to their “day” jobs. A poorly run or organized advisory board is doomed to fail (it happens all the time). You may be missing out on real growth and knowledge if you DON’T have an advisory board …… but don’t assume it will run itself. Get help if you need it.