I can imagine what some business owners are thinking at the idea of having a board of advisors, in part because it’s what a lot of owners think before they take that important next step.
Common pushback I hear about forming a board of advisors includes:
- My business isn’t big enough to warrant a group of outside experts;
- I’m concerned about how a group of advisors might judge my ownership and leadership; and
- I have no idea how to utilize a board or run a board meeting.
While I won’t dismiss any concerns that might be real, I also see these as excuses that keep owners from taking action to improve their businesses.
Consider this: my friend Clay Mathile is the founder of Aileron, an organization that helps businesses of all sizes thrive. He says if he owned a popcorn stand and he was the only employee, he’d still have a board of advisors. To me that means every owner can benefit, regardless of size.
The value advisors bring to your business
By assembling the right mix of advisors, you’re convening a group of experts to examine your business and challenge your thinking. They are there for you to lean on their own deep well of experience and give you their honest assessment, that’s in your best interest, regarding the business challenges you’re facing. More than that, they are providing expertise that you otherwise might not find or afford at the moment you need it most.
A good board of advisors provides four benefits that are invaluable to business owners:
- They provide accountability. They hold business owners responsible for following through and doing what owners know they should do.
- They pull owners out of the day-to-day work. Founders and owners need this. They need guidance on how to work “on” the business instead of “in” the business.
- They challenge the business model and strategy. They will confirm and challenge your thinking. They will ask why you’re doing or not doing certain things, and offer up new and different ways of delivering on the strategy.
- They give owners someone to confide in. Your board members have been in your shoes, they’ve encountered the same risks as you, and can empathize and provide guidance. This is valuable, strategically and emotionally, knowing you can have honest conversations about concerns and fears.
Taking the next step: how to form a value-added advisory board
After understanding the value in having a board of advisors, the next step is to assemble one. Figuring out who to invite on your board is an exercise you can perform yourself (which will take longer as owners are busy working in the business), or you can tap into organizations that can help identify potential board members at a fraction of the cost of your time.
Attributes of qualified advisory board members should include:
- People without a vested interest in your success. They don’t benefit directly or indirectly from your success (e.g., not your banker, CPA or lawyer). Advisors are people who want to give back and pay forward, in part because someone has likely given them advice and counsel that they couldn’t repay. It shouldn’t be about their ego, but rather a genuine desire to help.
- Fellow owners who have put their own capital at risk. Ownership is different from leadership. People see things differently when their personal capital is on the line, and that’s perspective you need. Not everyone will be an owner, but you’ll need people with this perspective on your board.
- Leaders who are seasoned professionals. Time in the business matters. You can’t teach experience and wisdom. Seeking individuals with at least 15-20 years of experience in the same role as you means they’ve seen more and have the depth of experiences to call on.
- Individuals with different types of experience. To diversify your board’s thinking, ensure their personal experiences are varied, but also in context of your specific needs (e.g., experience in scaling quickly, acquisitions, international operations).
- Maintain three or four degrees of separation. In short, don’t ask friends or close colleagues to fulfill this role. Great board members know they are serving at your pleasure. They will stay on your board as long or as short a time as benefits you.
Maximizing the value of your advisory board
With a qualified board in place, you need to know how to compensate and facilitate the board’s cadence and activity. The end goal is to tap the value that every board member brings.
- Board members get paid to attend meetings. Most advisors aren’t in it for the money and will work for a minimal amount ($500 – $2,500 per person, per meeting). An organization helping you form the board can provide compensation guidance. View this as an investment and not an expense. It’s a small but essential investment to improve your business and personal leadership. Remember, it should be enough that it makes you want to invest the time to prepare and listen.
- Set a meeting cadence of three to four times a year. Issues will arise outside of those meetings that can’t wait until the next meeting. It’s okay to periodically reach out and ask for advice outside your meeting cadence, and most advisors will welcome it.
- Have an agenda and facilitate the meeting. Advisors are there to help. Communicate in advance what the two or three most critical issues are that you need their input on and ask for their insights. Maximize the face time you have with your board. But also remember your board is there to give guidance on governance, strategy and the big picture, not the day-to-day work of managing the business. If you don’t feel confident facilitating the meeting, don’t hesitate to find a third party to help (let me know if you need candidates).
- Keep an eye on the long game. Businesses are worth more to a third-party buyer the less an owner is operating the day-to-day work. Your board can help you make the necessary shifts to maximize the long-term value of the business regardless of your exit strategy.
Bottom line, your board is there to help you work more on your business, and less in your business in order to grow its value – now, and when it’s time to hand over the reins. With a good advisory board in place, there is no doubt you will run a better business.
Need help establishing an advisory board? Consider connecting with Aileron, or feel free to reach out to me directly.