Business Strategy

Operating a Small Business Advisory Board

Published by Debra Murphy

Operating a Small Business Advisory Board

We now know what a Small Business Advisory Board is and why we need one. Now we need to understand what the objectives are for the advisory board and how it will operate to achieve those objectives.

Objectives of the Advisory Board

The business owner and the advisory board must understand exactly what is expected from the advisory board on the whole and from its individual members. For smaller businesses, advisory boards advise the business owner directly. In larger businesses, owners may create the advisory board to advise specific subgroups, such as marketing, sales, manufacturing operations, finance, and so forth. Who is receiving the advice and counsel of the advisory board will determine the skills required by advisory board members.

If you and the advisory board does not understand objectives and expectations, it is likely to lead to a disorganized and ineffective advisory board. This creates frustration not only for the business owner, but also for the advisory board members alike.

If the business already has a formal board of directors, you need to be clear about the boundaries between activities and responsibilities of the advisory board and the board of directors. The advisory board provides guidance, but has no formal authority over decisions made. That authority rests with the business owner and the board of directors.

How big should an Advisory Board be?

There is no right answer to this question. The advisory board must be the “right” size. You should create it with current, short term and long term goals of the business in mind. Company culture plays a role in selection of advisory board members and the size of the advisory board. If the culture is more informal, the advisory board must work well within that culture. The opposite is also true.

An advisory board with too many members provides challenges. There could be confusion with what information is required for it to be effective. It can also be confusing when trying to organize meetings. It is often best to begin with one or two advisory board members and grow from there. The advisory board can increase as the business owner becomes more experienced in managing the advisory board. Group dynamics suggest a maximum size of eight.

How often should the Advisory Board meet?

You recruit members for the advisory board because they have expertise you need for the business. Most advisory board members are actively involved their own businesses. You should schedule meetings well in advance and on a fixed schedule. Quarterly or semi-annual meetings work very well. It all depends on the objectives the advisory board is addressing. It is important for you to schedule the meetings far enough in advance to be sure all members will be in attendance.

Advisory board members are typically not involved in the business on a regular basis. They must be provided enough information prior to meetings to use the meeting time as effectively and efficiently as possible. Distributing information in advance can make all the difference in a well-functioning advisory board and an ineffective one. If information is not provided beforehand, your meeting will waste a lot of time going over background details. Advisory boards can be most effective if given time to reflect and digest information about the issues at hand before providing valuable feedback. Get confidentiality agreements executed and on file so sharing of confidential materials won’t become a roadblock to having an effective advisory board.

Do you need a meeting agenda?

Effective meetings require a well-thought-out agenda. The business owner should think about the biggest unanswered question or challenge facing the company, then form the basis of the next meeting.

Prepare and distribute the agenda in advance along with the background materials so the attendees can prepare for the meeting. Topics should focus on a few core strategic matters. This allows you to have the right people at the meeting and keep the meetings productive. Managing the advisory board members’ time is crucial.

How long should members serve?

Recruiting advisory board members can be difficult. However, it can be more difficult to terminate advisory board membership. Setting the objectives of the advisory board will help this situation. For example, you form an advisory board to help address several specific issues in the business. Once those issues are resolved or solidly underway towards resolution, you should discuss a new set of issues and the resources needed. Briefing advisory board members of this intention at the beginning will help make these transitions easier.

Do Advisory Board members get compensation?

Advisory board members choose to serve for a variety of reasons. These reasons range from personal ties to direct compensation to equity in the business. It is entirely up to the business owner to determine how to appropriately compensate advisory board members to reflect the value anticipated from participation. No single formula exists, but the best way to calculate compensation is to base it on the anticipated benefit received from having an outside source to provide advice and counsel.

Don’t go it alone

Nobody can build a great business alone. It is a lonely job. The most common complaint from business owners is the feeling of isolation. An advisory board, put together thoughtfully and purposefully can alleviate some of that isolation and help make the business even more successful.