Author: Doug Walker

What is an Advisory Board?

An Advisory Board is a group of trusted mentors and advisors who provide you with guidance and feedback, based on their skills and interests. An Advisory Board has no governance or fiduciary responsibility, although many Advisory Boards transition to Boards of Directors over time, as a company matures. Advisory Boards are in place simply to advise. Advisors add value by asking the tough questions at the right time, helping you to find the answers. In fact, their most valuable contribution may be to ask probing questions, rather than “provide advice”.  

Why should my business have an Advisory Board?

An Advisory Board can bring broad skills, experiences, and credibility to a business and its owners, depending on the Board’s composition and mandate. If chosen carefully, an Advisory Board can provide access to specialist and generalist skills not held by the owners, decades of experience in the right industries, and a network of connections for building your business. Simply having an Advisory Board signals your willingness to seek outside counsel, an important attribute when looking for new investors and business relationships. An Advisory Board can help provide you with the discipline to periodically re-assess business strategy and success. Having to succinctly describe your business challenges to your Advisory Board will help you tackle them successfully.

When should I set up an Advisory Board?

An Advisory Board should be established at the earliest practical time. Although you may believe that you don’t have time to set up and maintain an Advisory Board, you should quickly see better decisions and accelerated success by bringing more brains to bear on your challenges. Expenses are generally limited to travel and meeting costs, because most Advisory Boards aren’t paid, at least not initially. Time and money should not be constraints. 

Who should be part of my Advisory Board?

Advisory Board members should bring skills that complement your own, filling gaps in functional areas such as strategy, finance, marketing, and technology. At least one of your Advisors should have deep knowledge of and connections within your target markets. Look for a variety of skills and perspective among your Advisors. Try to explicitly define knowledge gaps and search for the right individuals. Keep the number of Advisors to a modest level (3-6). Having too many dilutes individual relevance and challenges quieter members to be heard. All your Advisors should be strong communicators, with great networking and listening skills. Avoid celebrities, unless you are confident these individuals will remain actively engaged. Remember that prospective investors often will want to speak to your advisors, so make sure yours are all active and up to date. Finally, make sure that your Advisors support your company values and remain excited about your company’s success.

How do I find and appoint Advisors?

Individual Advisors are typically recruited informally, often following a successful business relationship or through networking. This works fine until you decide to bring your Advisors together for a common purpose, such as reviewing a product launch strategy. At this point your advisory relationships need to become more formal, through a simple letter outlining elements such as time expectations, meeting frequency, expense reimbursement, deliverables, termination, and term expiry dates. Developing a consistent letter for all Advisors will help ensure unity and consistency in Advisory Board operations.

How do I compensate my Advisory Board Members?

Initially you need not expect to compensate your Advisors except for expenses and meeting costs. Be careful to not expect your Advisors to freely provide services (e.g., accounting) for which they normally charge other clients. When you reach the point of compensating your Advisors, more-formal contracts will be needed. Eventually you may wish to invite one or more of your Advisors to join your Board of Directors. This could happen when you secure significant outside investment or begin to hire middle managers. Compensation, when implemented, could involve retainers, meeting stipends, stock options, etc. Stock issues, if used for compensating Advisors, should be kept modest and symbolic (e.g., 0.1% per year served). Even though you will not be financially compensating your Advisors initially, look for ways to acknowledge their contributions, such as through client introductions and referrals, recommendations, and feedback on the effectiveness of their service.

How do I operate my Advisory Board?

At the outset, Advisors need to be provided with a good understanding of company vision, core values, and business strategy. This information should be provided in written form about a week in advance of the first meeting. Adequate lead time is needed for review, allowing the initial meeting to focus on discussion, rather than presentation. The initial meeting should be face-to-face and have a formal agenda, allowing each participant adequate time to interact with others and establish comfortable communication. Allow 2-4 hours for this meeting. Most subsequent meetings can be virtual, once this comfort has been established. Face-to-face meetings are not needed more than once or twice per year. Between meetings, Advisors can be kept abreast of company progress through periodic reports. Advisors should be contacted when and as needed, keeping communications responsive and relevant. Advisor engagement ought to be straight-forward and compelling.

That can seem like an odd question to some business owners. They don’t see themselves as passionate about selling automotive supplies, doing tax returns, or cleaning houses. These individuals often go on to tell me they do it for money and security; they are in this business because it provides them a living, and they certainly aren’t passionate about their work.

Interestingly, businesses owned by these people tend to operate satisfactorily at best, providing adequate customer service sufficient to sustain the business at a modest level. Sound mediocre?

The truth is, the owner’s passion goes a long way to determining whether a business will excel, or merely survive.

The automotive supply store owner who is genuinely committed to seeing her customer leave the store feeling great that he has the solution to his steering issue is passionate about helping people solve DIY problems with their cars. In turn, her customers are enthusiastic about the service she provides, building the store’s positive reputation. The store owner who isn’t passionate sees the customer as just another clunk who doesn’t know what he is doing. Even if the customer leaves with the right solution, he is likely frustrated by the owner’s bored or even condescending attitude. The store’s reputation remains merely adequate, at best.

The accountant who is passionate about ensuring his clients get the best possible tax advice will ask the right probing questions of his clients when they show up to have their tax returns done, making sure that all the relevant information is used. He will also offer suggestions about business and bookkeeping practices that could have favorable tax implications for future years.The client is confident that her accountant has completed the tax return accurately and is sincerely interested in helping her business perform better. The complacent accountant will take the information provided by the client, check for completeness, request missing pieces, and crank out yet another tax return. Guess which customer raves to her friends about the great service.

The house cleaner who is passionate about his work gets satisfaction from the knowledge that his customers’ expectations have been exceeded. He relishes the genuine joy and pride that the customer feels when her home has been cleaned so well. This house cleaner has very low client turnover, a loyal staff base, and a backlog of clients wanting his service. The house cleaner who sees her business simply as a way to make a living struggles to keep both clients and staff, as she continually pushes to find efficiencies (i.e., cut corners) in her engagements.

The examples above are composites based on real business owners I have encountered, both passionate and otherwise. There is a common thread in the passion displayed. It’s all about the customers. All three passionate business owners are truly committed to helping their customers have the best possible service experience. Their passion for great customer service drives business success. Those who cannot find passion in their businesses are doomed to mediocrity.

Now, can you find something to be passionate about in your business?