Do you need an advisory board?
It doesn’t matter whether you are an emerging tech start-up or a multi-generational family business, growing a company is challenging.
As a business owner you probably feel that regardless of the number of employees, customers, or complexity of the business, the accountability for the company’s success rests on your shoulders.
That’s why many business owners are turning to an advisory board to create an inner circle of trusted experts who will support them on their journey.
What is an advisory board?
An advisory board is a group of independent advisors who share their knowledge and expertise to support the strategic direction for a company. They’re much less formal than a Board of Directors and they don’t have liability or serve a governance function. Their advice is non-binding and non-governing, which provides flexibility to focus on strategy, accountability and key business objectives.
Think of an advisory board as a strategic support system for CEOs, directors and business owners. The board can fill gaps of knowledge, provide expertise and provide a different lens on the business.
An advisory board may consist of just a couple of members, or it may grow to several advisors. These advisors should be appointed based on the strategic objectives of the business. Company growth, expansion into new markets, succession and exit strategies are all challenges entrepreneurs face. For example, an industry specialist may be invited in as they can provide a deeper knowledge of the sector, or an alternative advisor may be chosen for advice on growing the business, improving valuation or preparing the company for an exit.
Many advisory boards will tend to meet on a regular basis, often quarterly, although the final numbers, structure and schedule will depend completely on the needs of your business.
Why does your business need one?
While advisory boards are a fairly new concept in Australia’s business landscape, we can look to their success in other parts of the world.
In 2014, the Business Development Bank of Canada surveyed 4,000 small-to-medium businesses, revealing that those with an advisory board saw significant and positive impact on their business in relation to growth and productivity. The study goes on to show that businesses with advisory boards were 24% higher in annual sales and 18% higher in productivity than those without one.
This is because it’s sole purpose is to bring a wide variety of experiences to the table in order to help guide the business in the best way possible in areas of growth, operations, finance and future.
The importance of an advisory board for family businesses
With a family-owned business, an advisory board may be more important than ever. Family businesses are often wonderfully close knit, however this intimate relationship may hinder business growth and cause many a rift at the dinner table.
With an appointed advisory board, you’ll be given a chance to hear an outsider's perspective from what is generally a neutral body with no familial ties. Besides giving unbiased feedback, this group could also help settle disputes and aid in any transitions between family members.
What are the benefits of an advisory board?
Setting one up is a simple and effective way to re-energise your business and drive strategic direction.
Gain new business perspectives:
One major benefit of setting up an external board is that it forces business owners to step back from the day-to-day running and focus on the bigger picture at hand. By drawing on the skill sets of your board members, you can tap into their deep well of experience in building businesses, take stock of your current situation and consider solutions from a different angle. Their networks are an equally important asset, which you may be able to leverage as the relationship strengthens, opening the door to more opportunities down the track.
Foster a safe, learning environment:
An advisory board is set up to be a collaborative problem-solving group. The variety of expertise available is a vital resource for management and one that business owners can draw on as required. Think of it as a safe space to discuss challenges or important issues which you normally may not share with other members of your management team.
Boost your reputation:
Not only is this great for your business’ growth, it is also great for reputation. It builds a professional and polished brand in both the eyes of your clients and future talented employees, lending you credibility in the marketplace. This credibility works two-fold. On one hand, it reassures financial institutions that, based on the quality of your team and the care of the decision making, your business is low risk for lending. On the other, this works to drive up the value of your business, making it more attractive to potential acquirers, should exiting ever be on your radar.
How to set up an advisory board
Before you start making lists of preferred board members, take a minute to understand what you are looking to gain. Are there specific blind spots in your business you’d like to address or certain Big Hairy Audacious goals you’d like to plan for? Then you can consult your networks to refer likely candidates.
While the flexibility allows for custom structures and management to suit each business’ individual needs, to get the most out of an advisory board it’s important to impose some written formalities such as what is expected of your nominated advisors, their time commitments and remuneration, if any.
Is it worth the effort?
The popularity of advisory boards are slowly gaining momentum in Australia. While some entrepreneurs may believe the set up and organisation is too time consuming, the benefits heavily outweigh the efforts.
As more business owners become aware of the value an advisory board can bring, then we’ll begin to see a structure where these boards are expected rather than above and beyond.
Are you thinking of setting up an advisory board? Our experts will help you identify and prioritise your objectives and assist you with everything from documentation to appointing the right advisors. If you would like to know more about how we help, feel free to get in touch:
1300 133 540
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