Advisory boards provide flexible and informal advice and can be structured to suit the current and specific challenges or opportunities of your business.
The best advice we can give clients for managing current challenges and planning for future growth is to use good governance and the strategic guidance of creating an advisory board.
While large businesses have the benefit of a board of directors and an elaborate management hierarchy, due to cost constraints SMEs are often left to navigate these challenges themselves.
The concept of implementing an advisory board has gathered momentum with business owners as they increasingly seek an independent and safe forum to ask for non-binding advice and support that will challenge them to think strategically.
An advisory board is different to an ordinary board in that it is informal in nature, is quite flexible, owes no fiduciary duties to the company, has no authority to act on behalf of the company and each is uniquely structured to meet the needs of the business and its owners.
Each company will need to determine the roles and responsibilities of its advisory board to best suit its particular circumstances and needs.
An SME might need an advisory board when:
- Experiencing rapid growth
- Needing to raise funds
- Facing major decisions and/or changes in direction, including entering new markets, products or geography
- When dealing with succession issues
- Looking to merge or acquire another business
- Facing challenges between shareholders
- It has specific technical and functional issues
What are some of the benefits of an advisory board?
- Draw on the skills and knowledge of advisors and industry experts who have practical experience in growing a business
- Enhance the company’s reputation and credibility in the marketplace
- Increase consumer and investor confidence
- Attract superior employees by demonstrating a commitment to company growth
- Create a potential source of members for the ‘main’ board as the company grows
Typical members of advisory boards include accountants, lawyers, marketers, industry experts, HR experts and entrepreneurs. There are no rules as to how many members make up an advisory board, but it is important to maintain an efficient and effective group, to understand why people are there and what value they bring to the table. One key to board composition and size is diversity, so look for members who are compatible, but think in different ways.
Advisory boards are a cost effective resource that usually meet 6-8 times per year, however this depends on the owners’ requirements and the types of issues that the business is facing.
Advisory Boards for Family Business
While advisory boards can help bring a fresh perspective to opportunities and problems, establishing a board is not without its challenges.
Owing to concerns about sharing family secrets and family business issues, many owners are reluctant to appoint an advisory board.
Some business owners also view them as onerous and unnecessary. However, for many family businesses, they are generally regarded as essential and beneficial, especially where the outside members are genuinely independent, have industry knowledge and are financially literate.
There are many issues that a family business could be facing. An experienced advisory board can help relieve tensions and resolve problems such as:
- Continuing disagreements between family members
- Broken communication between generations
- Narrow ways of viewing things
- Emotionally charged decision making
- Problems attacked without objective perspectives
- Distorted assessments of each other’s talents
- Loss of commitment to the family and/or business
- Questioned motives
But a family business doesn’t have to be experiencing problems to benefit from an advisory board. Other opportunities where an advisory board can help include:
- Aiding in the selection and development of the next generation of owners and leaders
- Helping expand and diversify the business
- Counselling regarding succession and retirement plans