Advisory board can help

If you’ve ever checked out who is on the board of directors for major public companies you’ve found that they are generally filled with CEOs and senior managers from — wait for it — other major public companies. So the big companies get the benefit of seasoned business leaders providing them with advice on a regular basis. But what about the little guys? While boards of directors are mandatory for publicly traded companies, small privately-held companies can benefit just as much from sound business advice. For these companies, an advisory board may be the right solution.

An advisory board is typically a more informal group of business people who help a company work its way through business issues. Unlike the boards of public companies, advisory boards are voluntary and do not have fiduciary responsibilities. Advisory boards are in no way a requirement, but they are another resource to help small companies navigate their way through a challenging business environment.

If you want to form an advisory board for your business, here are a few guidelines.

Focus on finding people who have business experience which they are willing to share that has relevance to your company. It’s nice if you can get people from your industry to serve on your board, but due to competitive reasons it’s more realistic to approach individuals from other industries who have experience with situations similar to what your company faces. Professional acquaintances such as bankers, lawyers or accountants with broad business experience are also potential candidates. Start with one person you can trust who is willing to volunteer their time and share their knowledge.

As you progress, identify an additional person or two to join you, but be sensitive to the group dynamics. You want your advisory board to be comfortable with one another, so allow existing advisory board members to have a say before adding new members. Ultimately a three- to four-person group of advisers is a good number. Consider a term limit for board members so that you have the opportunity to bring new people with new perspectives onto your board.

Use your advisers as a sounding board to discuss issues impacting your business. If you’re looking for ways to grow, ask your advisers how they’ve added sales to their businesses. Are you facing cost increases from suppliers and trying to determine how to pass these costs along to your customers? Ask your advisory board how they have handled this situation with their companies and in their industries.

Schedule regular meetings at least on a quarterly basis, and provide your board with an agenda prior to the meeting so they can be thinking about the topics you want to cover.

Joining an advisory board is voluntary, so your board (probably) does not expect compensation. However, it is good form to pay for a meal (particularly if you’re meeting over lunch) and as your company grows and becomes more profitable you should consider a modest board fee.

We all need people who can tell us the hard truth and provide unbiased feedback, so consider the advisory board. You probably won’t get Steve Jobs for your board, but you will get sound advice that helps your business.

Do you have a business question or topic that would make a good column? Send your ideas or questions to jeff.neuville@b-assistnc.com and share your business experience with others.