Ever wish you had some people to bounce stuff off?
Neil Parker, BridgePoint Group Managing Director reckons there are two types of businesses – those that have an advisory board and those that should.
“There is only one thing that disappoints me more than poor performance and that’s the complacency that besets a business that’s doing OK. Under-performance is, in all likelihood, costing you more than you care to know. You can do more and you should.”
In this article, Neil – an experienced board and advisory board member – explains that advisory boards are about working smarter, not harder.
“You’ve heard the saying that two heads are better than one? Yeah? Then you already get it. If you want to make more money, if you want to make your business more valuable, what are you waiting for? Get an advisory board.”
So, what is an advisory board?
An advisory board is a group of mentors, confidantes, and advisors that can offer business owners and entrepreneurs business insight, professional advice and lessons learned from their own experiences. A business owner can benefit from the cumulative wisdom of the advisory board members and can ask questions and resolve issues in a trusting, nurturing, and confidential environment.
Advisory boards typically consist of other business owners, financial advisors, subject matter experts and trusted colleagues from the business and professional world. The advisory board members are usually (but not always) more experienced than the business owner who asks for their support. They will often have specialised knowledge or other characteristics that make them valuable sources of insight and advice.
Unlike Boards of Directors, the advisory board’s advice is non-binding and somewhat more informal. They are not bound by any fiduciary duties and are therefore less focussed on governance. As they achieve very different ends, many businesses will have both a formal Board of Directors and an Advisory Board or Advisory Committee.
The Australian Institute of Company Directors “Advisory Boards Governance Relations” paper provides a more detailed definition.
Why should you establish an advisory board?
An advisory board creates a forum for the business owner to get some clear ‘air’ thinking time, float ideas and canvass fresh perspectives and innovative solutions from a range of people lucky enough to be divorced from the day-to-day demands of the business. This enables you to make more informed decisions in relation to your company’s strategic direction and operations.
“It is a case of having people work on your business, rather than working in it.”
Establishing an advisory board as a learning forum, rather than a decision-making group, will assist you to learn from respected advisory board members’ experiences and will support your personal and professional development, as well as your decision making.
How will an advisory board help your business?
The key function of an advisory board is to help grow the business, so responsibilities generally include:
- Identifying and presenting new opportunities for business growth and development;
- Staying informed about services, programs, products and other business activities;
- Communicating and sharing any developments in the industry/field;
- Providing advice on best practice.
Getting your advisory board to work effectively provides an incredible arsenal for your business.
What can an advisory board bring to your business?
There are many benefits of having a trusted and knowledgeable group of advisors.
- Knowledge: An advisory board consisting of a diverse range of financial advisors, business owners, and other professionals can provide the nuts-and-bolts knowledge you need to operate and grow a successful business.
- Need to solve a difficult manufacturing problem? Someone on your board might know how.
- Need referrals to new suppliers? One of your advisors might have a network of wholesalers.
- Need to understand a law, regulation, or element of employee management? One of your advisory board members may have the knowledge you need.
- Real-world experience: Strong advisory board members bring years of practical, real-world experience, as well as technical knowledge. An advisory board will stimulate conversations, provide perspective and considered advice and recommendations based on their (considerable) experience.
If you’re a start-up, your advisory board members will be able to tell you how the industry you’re in actually works, what you can truly expect to happen every day as you operate your business, and what customers, suppliers, regulators, and others are going to expect from you.
Probably most beneficial for you as a business owner, an experienced advisory board can help you avoid making the same mistakes that others have encountered.
- Accountability: One of the most important functions of an advisory board is to hold you accountable, similar to a business coach. When you have several individuals expecting you to take a particular action, you are much less likely to let that action slip. Advisory boards are not there to punish you for not living up to your responsibilities, but they are there to encourage you, and sometimes sternly urge you, to do what is necessary. You’ll be more likely to act on their advice when you know they are expecting action from you.
- Credibility: Background checks are necessary if you are inviting someone outside your network into your business’s inner sanctum. You’re mad if you don’t do due diligence and check their skills and experience. Mostly though, board members will come from your network. A board member’s industry status can have a positive impact on your company’s reputation.
- Potential partnerships: Your advisory board members sources of information and insight, and they could also be potential business partners. If you demonstrate your determination and resolve, act on good advice (or have a considered reason to reject it), and work hard to grow your company, your advisory board members might be interested in working more closely with you as a business partner.
- Securing resources and funding: Having the experience to identify and acquire resources and external funding is another area that an advisory board member can really influence the future prospects of your business. The members should be adept at communicating with lenders and be able to assist in providing best-practice information on funding applications for a banker/lender to consider. Many lending proposals have been refused by faceless men in institutions’ credit departments due to poorly presented financials.
- Seeing your business through “fresh eyes”: The advisory board is there to help assess the current problems and demands your company is facing and provide counsel around performance issues. This can involve improvements to systems and operations, areas of the business that could be more effective, executives and staff that need training or who should be managed out of the business. While the advisory board won’t necessarily facilitate those conversations, it is critical to have areas of underperformance identified.
Often an external evaluation of your current business practices leads to the identification of areas that require improvement, and this external perspective can highlight solutions. Solutions without clutter or historical circumstances, only focusing on what is best for the business
Who should you include in an advisory board?
An advisory board should complement your skills. You are looking to ‘complete the wheel’ by bringing together external experts with different perspectives than your own. This could mean engaging a marketer, an engineer, strategy experts, scientists or an HR expert to provide fresh insights.
Today’s disrupted marketplace requires innovation and different thinking, so diversity must be front of mind when sourcing members for your advisory board. Your advisory board should embrace experienced professionals from different industries. You might be surprised how good ideas traverse industries.
Having input from ethnic and gender diverse people can present opportunities or exposed areas of weakness. As can a spread of age groups.
Crucially, your advisory board members will be aligned to your company’s core purpose and have a genuine interest in your business. Selecting advisory board members who are passionate about your organisation will ensure they bring their best to meetings and qualify their opinions with confidence.
Your advisory board needs to be robust and articulate, with advisory board members having the communication competence to challenge you, to play devil’s advocate, to provide high-level technical expertise into your business and provide a strategic perspective. A successful advisory board meeting can involve controlled conflict, which may produce some of your best solutions.
If growth is a key objective (and it almost always is) then look for advisory board members that have an extensive network which could generate new clients or alliances.
How should you assemble an advisory board?
Members of an advisory board can come from other local business owners, Chambers of Commerce, business and industry trade groups, local service or social organisations and from a business owner’s professional and social network.
In most cases, business owners assemble an advisory board by asking trusted associates, friends, family members, or colleagues to serve as members. Often, people who are asked to be on an advisory board will consider it an honour and may be keen to support their industry by “paying it forward”.
However, not everyone will be willing or able to serve on an advisory board, so have several potential candidates in mind when assembling your advisory board. If you know of someone who you might want on your advisory board, be confident enough to ask. If they decline, sincerely thank them for their consideration and move on to your next candidate.
How can you get the most out of your advisory board?
Like most business entities, the advisory board will only achieve your desired outcomes when there is effective leadership. Your role is to lead the advisory board, set “house rules” and ensure open and honest communication.
- Define the role of the advisory board: Identify your areas of focus – what specific issues do you want the advisory board to advise on?
- What issues is your business currently facing?
- Where could you utilise some external support?
Your specific issues may include launching a new product into the market, adopting new technology, or financial matters.
- Prepare your advisory board members: Once you identify your preferred advisory board members, prepare a brief setting out your business’ vision and goals. Outline your objectives for the advisory board and how you believe their input can benefit the business.Be clear about the expected time commitment, whether meetings will be virtual or face to face, and whether you will pay or incentivise them to participate in the advisory board (note – undeniably, the best results are achieved when the role is a paid position because it means both parties are committed to the outcome). Even if they’re prepared to volunteer their time, expect to reimburse any travel and accommodation expenses.
- Clarify roles, responsibilities and expectations: Once you have secured your advisory board members, prepare written agreements outlining the advisory board’s roles and responsibilities. Agree how you’ll keep score (what does success look like?) and ensure you protect your business by getting signed non-disclosure and confidentiality agreements.
- Welcome your advisory board members: Make your advisory board members welcome by setting a relaxed and comfortable space for them to meet and facilitating introductions with other advisory board members and key people in your team (if applicable).
- Be organised: To get the most from your advisory board, provide an agenda prior to meetings, respect their time by being on time, and send minutes or action plans following the meetings.
- Use technology wisely: There are many online tools available to support your advisory board, including virtual meeting and documentation storage platforms.
If the meeting is via teleconference, or one or more members are attending online, ensure they are confident using the technology (perhaps have a practice run with them prior to the meeting), adjust the camera and microphone to ensure everyone can see other participants and participate in the conversation without others talking over them.
Agree how correspondence will be shared, such as Asana, Dropbox or Google Drive, and that all advisory board members are familiar with using your online documentation platform.
- Communicate openly: The advisory board is most effective as a learning forum, so communicate openly and be prepared to listen with an open mind and take all insights and feedback into consideration. You’ve selected your advisory board members for their experience and expertise, so use the time to explore and learn from them.
Ensure you articulate your business’ strategic plan to your advisory board members so they understand your business’ overall strategy and can make recommendations that support the strategy.
Follow up advisory board meetings with information and outcomes that have resulted from the meetings Your advisory board members will appreciate staying in the loop because they want to know that their advice has been considered and actioned. Find the most appropriate way for you to share updates, whether through emails or conference calls.
- Take action: It sounds obvious but taking action is crucial. Establishing an advisory board takes considerable time and effort from you and your advisory board members, so ensure you take a disciplined approach to implementing the things that are discussed and agreed and communicating the outcomes.
- Involve your team: Brief your team members about the role of the advisory board, what the advisory board members will bring and how you expect the advisory board to benefit the business.
Neil Parker finishes by saying “There are a lot of considerations when deciding the ‘what, how and who’ of an advisory board. The absolute no-brainer is the ‘why’. If you want to grow your business, an advisory board is a critical piece of your arsenal.”
Contact Neil and the Bridgepoint Group team for further advice on Advisory Boards or other financial matters that can help grow your business.
Ph 1300 656 141