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Savvy Entrepreneurs Surround Themselves With Advisers

Savvy Entrepreneurs Surround Themselves With Advisers

Tips for Creating an Advisory Board for Your Company

BY DAN YATES

An advisory board is a group of industry executives and professionals that is appointed by a company to offer advice and support on a wide range of issues. These issues can include sales, marketing, corporate partnerships, financing, technology, administration, industry trends, politics, international matters, and more. The real value of an advisory board lies in bringing in people who have skills and expertise that the company’s management team lacks.


– An Advisory Board Or A Board Of Directors?

Choosing to form an advisory board or a board of directors depends on a company’s individual needs. A formal board of directors has legally defined responsibilities, the most important of which is representing a corporation’s shareholders. Directors are elected, charged with fiduciary responsibilities, and must be covered with some form of liability insurance.

A board of advisors offers independent counsel and management advice to the CEO without any binding legal authority and without the risks and responsibilities associated with directors.

Think of the advantages and benefits. The benefits of having a board of advisors are clear. A board offers experience and expertise, accountability, objectivity, strategic planning and knowledgeable counsel.

An effective board can prevent a company from making crucial errors. A board typically consists of a group of professionals with a broad range of skills and experience and can provide valuable business insights. This may include people who have already helped make you successful, like your banker, accountant or attorney, for example.


– Creating Effective Communication

Frequent and candid communication between the advisory board and the CEO is essential to the effectiveness of the advisory board. Tips for effective communication include:

– Communicate. Regularly send the board information relating to industry issues and company matters.

– Be organized. Provide materials ahead of the meeting, enabling the board to move through the agenda more efficiently.

– Manage. Factions will emerge in groups of any size. Mediate minor conflicts, resolve disagreements, and win the board’s trust.


– How The Board Works

The advisory board should meet every other month or once a quarter. An outside member should assume chairperson responsibilities so that the CEO can listen and participate. Each meeting should have a special focus (strategy, financials, human resources) with presentations made by different members of the management team as appropriate. The goal is to establish specific action items for the CEO/owner.

Each board of advisers operates differently. Certain practices, however, are usually followed. Get the most out of advisory board meetings by preparing well in advance.

Solicit input from the board when developing the agenda and distribute important information ahead of time. Attach copies of materials sent to the agenda for easy reference.

Set reasonable limits on discussion. Suggested lengths of time can be built into the agenda, with the understanding that more time can be taken if necessary. Review critical organizational activities during the meeting, these may include capital projects, strategic plans, personnel and structural changes, competition and industry activities, and information technology.

Any number of items can require formal board approval, but do not merit much discussion. Send these issues to board members ahead of time and have them approved more quickly at the meeting.

The minutes should be written up and circulated to top management with notes that include recommendations regarding key issues.


– Advisers Should Bring An ‘Outside Perspective’

The ideal size for a company board of advisors depends on the stage of development, strategic goals, existing resources, investors, complexity of the business, number of products, external partnerships, and the company’s technology.

In most cases, an advisory board of around four to six members is appropriate. If an advisory board is larger, it can become difficult to manage the relationships.

Rather than having interactions take place between the advisors and the CEO/owner, it is typically more effective to encourage interaction between your advisors and the management team as a whole.

When forming a board you need to know what specific skills to seek. In general, look for diverse skills, expertise, and experience. Look for members who are problem solvers and quick studies, have strong communications skills, and are open-minded.

Getting a notable person on your board of advisers can give you credibility, but it’s also important to have members who are going to spend the time to give you thoughtful advice or are well-connected.

Family businesses are often tempted to “keep it in the family” and limit the advisory board to family members. This is not a good idea. The purpose of an advisory board is to get an outside perspective. Family members should participate from a management level instead.

It is up to the company and the adviser to agree on the range and extent of duties to be performed by the adviser. Advisory boards can be general in scope or targeted to specific markets, industries, or issues such as technology or marketing. In addition, they can provide knowledge about trends, funding sources, competition and upcoming political, legal, and regulatory developments.

Depending upon whom you are asking and how involved you need them to be, compensation can vary significantly, from monetary reimbursement for their time to taking the board out for a nice dinner at each meeting. Larger companies may choose to create a profit sharing or stock option plan for their advisers.

Yates is president and CEO of San Diego-based Regents Bank.

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