An advisory board is easy to set up, fun to manage and can be valuable to you and your business: attracting expertise, innovation and credibility to your venture while providing a break from the isolation that sometimes comes from running your own business.
So what is an advisory board and how does it differ from a board of directors?
A board of directors is a group of seven to twelve individuals whose decisions and advice are legally binding and their participation in the business is formal and, in the case of for-profit businesses, financially compensated. An advisory board, on the other hand, is a group of two to five mentors who have been selected by a business owner to help them with business issues and to lend advice; advisors do not have the authority to vote or make decisions on behalf of the owner(s).
Is your business too small to have an advisory board?
Even a sole proprietorship can benefit from the insights and expertise of business mentors. Small businesses are especially well suited to having an advisory board because they help owners – who are passionate and driven to see their business and ideas succeed – access knowledge in areas they are less familiar with; whether it be financing, supplier relationships, marketing etc. Other benefits include:
1) Introductions to people who can help your business – a few timely introductions can benefit your business enormously and expand your professional network;
2) Credibility– from an outside perspective, your business gains credibility when you have reputable experts on board who are seen as guiding and helping you reach your business goals;
3) Objective analysis – whether it be advice on succession planning or an honest opinion on your financial projections, advisors can help you see the forest from the trees- or the trees in the forest!
Creating an Advisory Board
The key to creating an effective advisory board, both for you and for your advisors, is keeping it simple, balanced and transparent.
You can start by thinking of your business objectives and by writing down challenges you see in reaching those objectives. You can then turn the challenging areas into the short term objectives of the advisory board. This exercise can help you identify the type of advisors you need to meet your objectives.
There are a number of articles available online that tell you how to choose an advisor. It comes down to you and your business. Choose people that you know and trust and that complement your skill set. This doesn’t necessarily mean another designer or people in the design business. Sometimes the best advisors are those who have different industry expertise but can assist with specific business advice or experience in an area you might want to explore. You should consider inviting people whose opinion you can depend upon and who are not afraid to challenge you.
It’s important to be open and transparent at the beginning; describe your needs and the short term objectives of the advisory board. Set expectations regarding their time, how you will compensate them and the duration of their term as advisor to your business (twelve to twenty four months is common). You can find specific information from your local business association about these items but, in general terms, an advisor should be willing to help you out for free, meet with you a few times a year and should expect the reward of seeing you and your business succeed. Tackling these details at the beginning will ensure you and your advisors are expecting the same things; you can then minimize organizational details and maximize the relationship and expertise of your board advisor.
Advisory board meeting schedules are up to you and your advisors. Being that it is not a formal structure like a corporate board of directors, you can meet as a group or individually and when and where you want. Regardless of your meeting schedule, it is useful to keep in touch with your advisors regularly because this ensures that you don’t fall off their radar screens and you are able to benefit from timely expertise when you need it (even if you didn’t know you needed it!).
Be Open to Challenges
Small businesses are based on vision and entrepreneurial drive; they are about seeing an opportunity to create something valuable and useful for your clients. As entrepreneurs, you may agree with what I’m going to say about innovation; innovation is unexpected connections between things and advisory boards can make businesses more innovative. How? They create spaces for dialogue and support different points of view and diverse ways of doing things.
Having an advisory board means you are open to innovation in your business and to challenges that may include expanding your network, the product or service you offer, or even how people pay you. An advisory board lends you support as a person and as a business.
After experiencing the benefits of an advisory board, your next challenge may very well be joining an advisory board as a mentor in order to encourage innovation or help another business owner reach their full potential.