Best Practice - Business Advisory Board

Business Advisory Board

Business advisory boards are most helpful to startups, young and growing companies.

Purpose and Benefits

Business advisory boards provide advice to the business on key business decisions such as business plans, finances and large business deals. Advisors provide the experience necessary to help young companies be forward thinking even with their immediate decision making, and may helpful in providing guidance to team development and new hires. Advisors can often provide introductions to other key contacts, and help a new company navigate the development of critical relationships.

Advisors have no fiduciary, goverance responsibility or liability, as does a board of directors. Advisors function in more of a mentorship role.

For some companies a business advisory board and who the advisors are is important also for its credibility with customers, employees and investors.

Different companies use different approaches

There are a vast range of startup and young companies that will have different capacities to attract business advisors. Their challenges and needs will also vary. For example many businesses are retailers such as a coffee shop, bakery, running shoe store or auto repair shop. These businesses face a full array of challenges and competition. Startups in the tech sector, bio tech or manufacturing may differ with strategies for high and rapid growth, an eventual public offering and a global market place they compete in. The type of business advisors these businesses need is different and their ability to attract advisor varies. A tech startup in a region with many tech startups can find advisors experienced in this field and can offer equity as an incentive. A local retail startup will not be able to offer this type of value to an advisor.

Business Advisory Board Best Practices

Who to recruit: Three to five individuals that have relevant expertise and skills the business management does not have. Ideal advisors have years of experience in start-ups, growing companies and even mature companies.

Lawyers, bankers, accountants, business owners and SCORE mentors that you know are examples of who to recruit. Recruit a variety of expertise, skills and viewpoints that will provide both objective and broad advice. Recruit people that will challenge you; a rubber stamp will defeat the purpose.

Role: Provide objective advice, bring a breadth of other experiences and a network to management. Have a specific mission for your advisors for a defined timespan. Having a written agreement on the role, mission and time committments will help align expectations.

Written agreements: A nondisclosure agreement may be a good idea depending on size and type of company. An indemnification agreement may be helpful in recruiting some adviors to assure them of their liability status.

Compensation: 20% of small businesses provide some type of compensation, coverage of expenses or other benefits. Compensation is more common the larger the company.

Related Best Practices

• How to be a Mentor - ins and outs of mentoring and mentoring programs
• Effective CEO - skills and techniques of effective leaders
• SCORE - US nonprofit group providing business advice and mentors

Other Resources

• A 2014 study from the Business Development Bank of Canada (BDC) finds that advisory boards have a significant impact on a business’s financial performance, yet only 6% of Canadian small and medium-sized enterprises use one. Read more about this study.
• Creating an Advisory Board to Help Your Struggling Business, by NOLO author Beth Laurence, J.D.
• "THE ROLE AND VALUE OF AN EFFECTIVE ADVISORY BOARD" by Ivey Journal author Barry Reiter.
• "Don't Go It Alone: Create an Advisory Board" by Business Week author Christine Comaford
• "How To Set Up An Advisory Board" by Forbes author Mary Crane.

Author

The author of this article is Terry Gardiner.

Terry Gardiner is the founder and President of Silver Lining Seafoods and NorQuest Seafoods - a medium-size Alaska seafood processing company; and currently a Board member of the Anvil Corporation, an employee-owned company specializing in oil and gas engineering.

His co-operative experiences include member director of the Commercial Fishermen Co-operative association; creation of legislation for the Alaska Commercial Fishing and Agriculture Bank; and advisor to the US Dept of Health and Social Services for the state Health CO-OPs.

Terry served ten years as a member of the Alaska House of Representatives -several legislative committee chairmanships, Speaker of the House, Chairman of the Alaska Criminal Code Commission and board member on various state and federal boards and commissions.

His non-profit experiences include National Policy Director for the Small Business Majority in Washington DC; working with the Herndon Alliance and ForTerra.

Terry authored the leadership book, "Six-Word Lessons to Build Effective Leaders: 100 Lessons to Equip Your People to Create Winning Organizations".

For more check: Terry Gardiner Long bio