As the Business Development Bank of Canada (BDC) says, “it’s impossible for one person to know everything about their industry or business” (BDC, 2017).
The concept of an Advisory Board, made up of knowledgeable business people, can provide experience and perspective that you may not have within your organization. These types of Boards are being used by entrepreneurs as they offer a credible and affordable source of guidance and advice.
According to one BDC study, 86% of entrepreneurs said Advisory Boards had “a big impact” on the success of their company. Further to that, in the first three years following the setup of the Advisory Boards, companies experienced the following:
- 66.8% sales growth, compared with growth of 22.9% in the three previous years
- Average 5.9% productivity growth, compared with 3.2% in the previous three year period (BDC, 2017)
Virtually all entrepreneurs ask others for help and advice – be they bankers, accountants, lawyers or other types of advisors such as ourselves, advisors on the people side. Often these advisors are your de facto Advisory Board for a long period of time.
The idea of forming an official Advisory Board takes that advice to a next and more formal level. Examples of the types of people that one might want on a formal, more arms-length and professional Advisory Board include: others from complementary or different businesses, lawyers, HR experts, financial experts, etc. The key is to have a range of expertise that is both additive and diverse when compared to the professional expertise inside the company. It is also crucial to choose individuals who do not have a conflict of interest or anything to gain by being at the Advisory Board table.
Working with the type of Advisory Board described above requires a set of skills for the owner and/or President of a company to manage. It means they have to be open to outside suggestions and feedback, and they need to be in a learning mode when dealing with such suggestions. Concurrently, the role of an Advisory Board member is that of an independent observer with perspective, so their role is always to look at the health of the business overall.
On the tactical side, a couple of things which are important to consider when running an Advisory Board:
- Organization at the Advisory level is, at first, the role of the owner/President and then may be taken over by a member of the Advisory Board, however setting the agenda would always be a back and forth conversation between the two
- A planned agenda, recent financial statements and relevant information regarding items to be discussed at the Advisory Board meeting should be provided ahead of time, so that all participants are well informed and prepared for the meeting as best as possible
- It is recommended that minutes in the form of a chart be taken and kept for the Advisory Board meetings, including the follow-up items required
- Various forms of compensation include hourly rates and/or covering costs of meetings at interesting locations
Fundamentally speaking, an Advisory Board can bring the advice presented to a company to the next level of expertise, without needing to have a whole new set of professionals inside the company immediately. While there is much to consider when establishing and working with an Advisory Board, the many benefits received will, without a doubt, far exceed the efforts applied.
BDC. (2017). Tips for entrepreneurs on running an effective advisory board. [online] Available at: https://www.bdc.ca/en/articles-tools/business-strategy-planning/manage-business/pages/corporate-governance-how-run-advisory-board.aspx [Accessed 16 Jun. 2017].
BDC. (2017). Steelworks Design: Build a stronger business with an advisory board. [online] Available at: https://www.bdc.ca/en/articles-tools/business-strategy-planning/manage-business/pages/build-stronger-business-with-advisory-board.aspx?type=B&order=1 [Accessed 16 Jun. 2017].