Here’s what I learned from creating one for my business.
According to a 2014 BDC study, 86% of entrepreneurs who’ve had an advisory board say it’s had a significant impact on their business. It can boost sales and help you plan for the future. I will be honest: it requires a lot of upfront work and can be stressful. But it’s worth it for a few reasons that I’ll discuss in this blog.
I started my advisory board for True North Accounting because I needed a space to discuss business strategy on a deeper level. For me, it was a way to bring people into the inner circle — and really delve into the business issues so they could truly provide insightful advice.
It’s important to know what sort of value you want from your advisors, and how you’re going to extract that value. Members of your advisory board aren’t going to know how to help until you tell them. Does “help me help you” ring a bell?
What’s the difference between an advisory board and a board of directors?
A board of directors votes on decisions that are binding to the corporation and management.
Advisory board participants are there to provide advice, but they may or may not have skin in the game. They do not need to be a director of the corporation, nor own shares. Ideally you’d want as many, or more, external people as internal people in your board.
The decisions of an advisory board would not be legally binding, and advisors could not be pulled into legal disputes, unless they are also a director or shareholder. Some advisors may resist being a director of the corporation because there is risk involved.
Tips for choosing an advisory board
When choosing advisory board members, look for people that you connect with and trust. They should be committed, want to participate because they care, and buy into what you’re doing. Here are more tips for choosing an advisory board:
- Find a mix. You want advisors to bring a range of perspectives, so recruit people that will bring the diversity you seek: diverse cultures, backgrounds, experiences, political views, etc. The more diversity on the board, the better the decision-making will be.
- Look for experience. Get people who have done what you’re trying to do: built a business like yours, commercialized something, built technology, or expanded to another market or geography. You might want to find someone with industry experience, but this isn’t necessary.
- Try for balance. Look for people that are strong in the areas that you’re weak. For example, find someone that knows governance, someone that understands people issues, marketing, finance, etc.
- Look outside your company. Having too many internal people can steer the discussion into the weeds. If you want to keep it high level, get a good balance of external people that are high-level operators and thinkers.
- Network. Advisors can be great connectors, so you might want to find someone that can introduce you to people you need to meet.
How do you compensate your advisors?
Your advisors shouldn’t be in this for the money, but you should compensate them for their time. Don’t worry, their advice should pay for itself many times over. If you have successful people on your board, their time is far more valuable than the money you pay them, so it’s more of a stipend. One rule of thumb is $1,000 per day.
How to set a board agenda: What value do you want from your meetings?
- Set an agenda and have everyone read the materials in advance of the meeting. Ideally, send your agenda and materials a week in advance (give enough time so everyone can review things beforehand). Preparation for meetings can be a time commitment and requires a lot of mental horsepower.
- Know the metrics you will report on. Having specific goals and metrics to review will keep the meetings focused and keep your business advancing in the right direction.
- Consider these questions:
- What business problems do we have?
- What problems are priorities right now?
- Do I understand the problem enough to know what question to ask the advisors?
- What background info do they need; how much is too much information?
- Simplify the problem into one question. It can take a lot of time and energy to simplify an issue, especially in business when there are so many factors and influences. Building up your data points on a problem until you feel like you understand it can be a big process.
- Look at it from a higher level. Cut out all the crap that doesn’t matter. You need to look at the business as a whole, not just isolated issues. If you have one good question for your advisors, they can offer pointed guidance for you. (I found this is easier said than done.)
Advisory board roles and responsibilities: the chair
The chair sets the agenda and runs the meeting. A good chair can help keep the group on track, and ensure enough time for each agenda item. An agenda with timing allocations for each item makes it easy for the chair to know when to start wrapping up a topic.
Generally, the business owner is the default chair. However, if there’s someone else experienced in running meetings and governance that can chair the meetings, it allows the owner to be more involved in the discussion.
Be clear about what decisions you’d like to have clarity on at the end of the meeting. This will dictate discussions, and set action items and responsibilities.
The chair will also follow up with each advisor between meetings.
What is the time commitment for advisors?
We did a four-hour meeting each quarter. We also tried a three-hour meeting each quarter, with an hour check-in call between meetings. Decide what’s right for you. If things are moving fast, monthly meetings might be great to have, but that may be too frequent for some board members. Find the right balance.
Tips for running a successful advisory board meeting
- Keep attendance consistent. Get everyone onsite or keep everyone remote — a mix does not work well.
- Less is more when it comes to agendas. I found it difficult to find time and space to go deep into an issue with only 20 minutes allocated to it.
- Ensure everyone is prepared and has read the background info, and is ready to dive into issue discussion and solving.
- Don’t get too detailed. Be careful not to get into the details of processes, policies, marketing campaigns, etc. Your advisors don’t have all the information to discuss specifics, and you might get frustrated if they start providing advice or “should-ing all over you” when they only have a superficial understanding of the situation (and you’ve spent hundreds of hours on it).
- Give your advisors what they need. They want the big thinking strategy, the macro trends in the industry, society and the market, and to advise you on how to navigate a changing business world.
How to take advisory board minutes
Taking minutes or notes during the meeting is a challenge. Whenever I did it, I tended to be less involved in the discussion. It’s good to remember that whoever is tasked with minutes will also be less involved. I have also tried recording and transcribing the meeting, and aggregating everyone’s notes. Ultimately, the meetings were never really documented well unless I invited a staff member or assistant to take notes.
After a four-hour meeting, I am usually so drained that I don’t have the desire to compile notes and send them out right away. I recommend giving yourself a few days to get the notes to everyone. (But not too much more. Before you know it, a week goes by, then months, and it’s time to start planning the next meeting.)
Immediately after the meeting, send a quick thank-you email with some action items. Ideally, get your notetaker to edit their notes and send them to you for review. Send the complete notes to the board within the week.
What did I learn from my advisory board?
The advisory board meetings helped me grow the vision for my company by bringing in people that think bigger than me. They lifted me out of the day-to-day operations and gave me the capacity to work on the business itself. I started solving for some of the bigger issues and thinking about how to grow the business. I also got a ton of good advice — tactical ways to improve how we’re managing our business, which has proven super helpful as we grow.
One tip: be prepared to take criticism and be challenged on ideas. I had a tough time with this and would get defensive, which surprised me. I found it emotionally and mentally draining. It’s tough to hear some of the comments when you’re in the moment, and maybe for that night. By the next day or next week, you’ll be grateful for the advice and your business will benefit in the long run.
Remember that the advisory board is there to challenge and vet your ideas — it’s literally why you’ve asked them to be there.
Find more Strategic Advisory topics relevant to you and your small business.