Although an advisory board can be very beneficial to your business, it’s important to understand that the board isn’t there for the business’ benefit – it’s there to help you, the business owner, achieve greater levels of success.
If you want to play the bigger game, and are serious about building your business, you need an advisory board.
From giving objective advice to scouting the marketplace, an advisory board can give your organization the edge it needs to compete at a higher level. This is particularly true if you have a business with over $1 million in revenue and either a business partner or ambitions of passing the business to your children someday.
Not to be confused with a board of directors, an advisory board is an informal gathering of well-respected individuals from the community whose primary purpose is to help your business succeed – not for their financial benefit, but for the mentoring, networking and social opportunities the experience provides.
It’s always a good idea to provide some compensation for your advisory board members; at a minimum, this means paying for their meals during meetings, though many business owners provide a financial stipend, as well. Typically, this small financial investment is well worth the benefits the advisory board provides.
The 8 Benefits of Having an Advisory Board
1. The discipline of preparation – Prior to each board meeting, you’ll need to create an agenda with all the appropriate attachments such as financial statements, operations updates, marketing updates and current business issues. The process of preparing for each meeting in advance is incredibly valuable, as it allows for critical information about the organization to be evaluated on a regular basis.
2. Increased credibility – Although an advisory board is strictly there to help you, the business owner, its presence can go a long way toward giving your organization increased legitimacy in the marketplace. In the long term, this legitimacy can actually improve your business’ chance of survival.
3. Disaster planning and relief – If you’re suddenly unavailable to run your business, do you have someone who is knowledgeable enough to take over? An established advisory board understands your business and will be able to help keep the wheels moving in your absence. This can be a huge relief to your family members and employees if they’re forced to continue the operation without you.
4. A bigger network – Your network increases dramatically through your advisory board – after all, your board isn’t just the board, it’s everyone the board knows. This makes your board a valuable resource when you need a new employee, for example. Through their own professional networks, they may know of the perfect vendor or management professional to join your team.
5. A focus on the future – While you’re busy managing the day-to-day operations of your business, your advisory board can remain focused on the future. This allows you to rest more easily, knowing that you have a team of professionals out there who are looking out for your best interests while not in the day-to-day grind.
6. Someone to blame – If you have a big decision to make, using the excuse that you need to “run the idea by your board” is a great way to buy yourself some more time (and make yourself sound more impressive). The “blaming the board” strategy can also work when you have a difficult decision to make. Need to replace a beloved employee (or family member)? Just saying, “the board made me do it … ”(whether it’s true or not), can help remove some pressure or hard feelings and deflect blame to a third party they’ll never meet.
7. More efficient – Instead of scheduling five different phone calls at five different times, your advisory board allows you to gather all of your most trusted resources in one room for a focused and collaborative discussion about your organization. This gives you the most leverage and value for your time – while still leaving plenty of time for the actual running of your business.
8. Develop your staff – Asking key employees to make presentations to the board can be a great way to develop your staff and see who is ready for leadership. These presentations can be about anything they want – budgets, projects, results – the key is how well the information is delivered. Make sure your board is ready to ask questions and scrutinize the information being presented to them – it will show you how well your staff performs under pressure and help set expectations with accountability.
Additional Considerations for the Franchise Industry
If you are a franchisor or franchisee, an advisory board can add some additional benefits to your organization:
As a franchisor, an advisory board can add credibility to your organization and create confidence in the eyes of your franchisees. It can also prepare you for growth, whether you’re seeking private equity funding, a merger and acquisition or brand development. Also keep in mind that if this board of advisors transitions into a more formal board of directors with fiduciary responsibility, you can add it (and the experience of its members) to the Franchise Disclosure Document for a further confidence boost.
As a franchisee, an advisory board can help you better see what your brand is providing – as well as where it’s falling short. Board members can also provide a great deal of experience to your organization when buying another location, selling a store or preparing for a merger and acquisition.
With so many benefits, it’s important to highlight that there truly should be no downsides to establishing an advisory board. If you’re not seeing the benefits of your board members, or a member isn’t working out, simply make some changes or shut it down. As the business owner, it’s up to you to set the expectations and manage the board in a way that serves your needs. When used effectively, an advisory board can become a great asset, adding an important contribution to the success of your business.