Many small business owners find that it is lonely at the top, and wish they had a sounding board to vet ideas and challenge assumptions. A well-structured Advisory Board can offer business owners the complimentary experience, perspective and contacts they need to succeed.
According to Benjamin English, a partner with Hirschler Fleischer a diverse group of Advisory Board members, provides valuable insights on a wide range of issues relevant to a business, including sales, marketing, corporate partnerships, financing, technology, administration, industry trends, politics and international matters. In addition to professional experience, industry knowledge and personal contacts,
English adds “advisory Board members can serve as an unbiased sounding board, free to express their views on important issues without concern for company politics and other dynamics that often inhibit dissenting opinions.”
English has put together this brief primer on assembling, utilizing an advisory board:
Assembling an Advisory Board
There are a few basic principles to observe in assembling an Advisory Board.
- Advisory Board members should be independent of company management to ensure that they offer frank and impartial advice. A key role of an Advisory Board is to act as a “devil’s advocate,” challenging the strategies and assumptions of management and their business model.
- Advisory Board members should have only non-voting, advisory authority so they will be isolated from the fiduciary duties and legal liabilities of a true board of directors. (Liability exposure is a major impediment to experienced business people becoming involved in small businesses.)
- Advisory Board members should have access to the company’s directors and management, and they should be invited to observe management meetings regularly. When a new Advisory Board is formed or a new member joins an existing group, there should be a routine procedure for sharing information and encouraging active participation.
- Advisory Board members should be selected based on their specific ability and experience relevant to the company’s business needs. Advisory Board membership should be reviewed and adjusted at regular intervals.
Key Attributes of Advisory Board Members:
As an Advisory Board is assembled, include individuals who have:
- Angel investor experience;
- M&A experience;
- Banking contacts;
- Political/lobbying contacts;
- Corporate board experience;
- Regulatory experience;
- Customer contacts;
- Sales and marketing expertise;
- Finance expertise;
- Strategic partner contacts;
- Industry contacts;
- Technical expertise;
- International experience; and
- Turnaround experience.
Board Size: The Advisory Board should include enough members to provide adequate experience across disciplines, but it should not be too large to make meaningful contributions. The ideal size for the company will depend on its specific circumstances, but many small businesses find that an Advisory Board of three to seven members works well.
Board Meetings: Quarterly meetings of the Advisory Board should be sufficient to keep participants informed about company issues and developments without being so burdensome as to discourage individuals from serving. Face-to-face meetings will make the Advisory Board more effective. In advance of each meeting, Advisors should be provided with an agenda, supporting documentation regarding agenda items and company financial statements.
Benjamin English is a partner with Hirschler Fleischer (Richmond, Va.). He may be reached at (804) 771-9544 or by email at email@example.com.