Kayode Omosebi: This is Why Your Business Needs an Advisory Board

You can do a lot of things by yourself, including starting a business. But how far can you really go if you’re flying completely solo?

In today’s tough operating environment, starting and growing a business is complex and challenging, and it is impossible for you, the business owner, to have all the answers. Your undying optimistic spirit which can be a great advantage also has its disadvantages too. Because of your ‘can-do” spirit, you sometimes miss the obvious red-flags that can ruin your business. There are also times when you lose sight of the big picture and become obsessed with the same way of doing things, despite recurring signals that indicate that things are not working as you thought. You may become too internally focused and miss vital opportunities, or even lose sight of your own shortcomings. The answer to this poser is an Advisory board – an impartial third party with an immense amount of business expertise.

An advisory board is an informal group of experts who can help you run your business better. However, unlike a formal board of directors, the board has no decision-making powers and carries no legal liability towards your company, thus you have a great deal of latitude on how you set it up. Advisory boards are structured to help you make better business decisions and develop a long-term vision for your business. They also help advise you regarding several business issues and keep you informed on various business, legal and financial trends that may affect your business.

Many people confuse an advisory board with a board of directors. However, they’re completely different—a board of directors consists of people who act as shareholder representatives and have certain legal and business powers (including firing the CEO). An advisory board doesn’t have any official authority.

We can all benefit from advisers, they are friends from the troughs who have been on the business battlefield longer than we have. Or they’re friends from a different industry or field who provide a unique perspective. Or they’re seasoned or high-profile executives who lend you credibility, thus helping you secure customers, financing, or a crucial introduction. You need advisers to bounce ideas off, to provide a reality check, to tell you when you’re about to mess up, to confide in when you’re alone at the top. An advisory board can boost your company’s performance in a whole range of areas, including innovation, risk management, sales and productivity. You might have a nose for business, but surrounding yourself with people who know more than you do, and have experience in business, can help you set realistic goals for your business journey; the more information, talent, and resources you can access, the greater your chances of success.

Regardless of whether you’ve just started your business or if you’ve been at the helm of it for a while, an advisory board can help you optimize your business and help you find growth where it previously didn’t exist.  A group of advisors committed to your success not only provides a sounding board to test and strengthen your ideas, it gives you access to important competencies and resources.

Now, here’s how to have the best advisory board for your business

Despite the benefits, many entrepreneurs find the task of building an advisory board daunting. Whose strengths would complement yours and counter your weaknesses? Who might bring an insight to the table that would otherwise be missed?

Other main stumbling blocks in creating an advisory board include; Getting the right people on board; Ensuring you get the desired objective from the board; Maintaining control of your business; Finding people who will take an hour or two out of their lives to help you for “free”; and finding a meeting time that all these people can agree on.

Formulate a strategic plan before setting up the board. If your company does not have a plan about where it is going, then the board will not have goals to measure their actions. This will ensure that everyone is headed in the same consistent direction.

Define the purpose and the goals of your advisory board. One key step is pinpointing your goals. What do you want the board to do?

Who to choose? Ask yourself what expertise and knowledge you need for your business. What values matter most to you? Your advisors should be people with qualities you’ve identified above. This includes not only industry expertise, but should also embody skills in marketing, finance, HR, IT, Legal and distribution. Get help where you and your team are particularly weak. They also should believe in you and want you to be successful. Although it is prudent to establish diversity on the advisory board, it is equally important to have dedicated and committed advisors who will ensure the stability of the business. Be careful with choosing well-known executives to your board for the cachet of their name alone, you should also be careful of inviting friends because they may not be honest and if they are blunt, your friendship could suffer. You should avoid someone who is not a true personality fit, not fully onboard with your mission or can’t commit to the meeting schedule. Stick with experts who are accessible and committed.

Create your pitch and complementary package
Why should someone become an adviser to you? What’s in it for them? Getting involved in a developing company in a super-cool field? Access to thought-provoking people, such as your executive team and other advisers? Focus on the “soft” benefits first, as you likely won’t have tangible financial benefits to offer just yet. You should be able to explain the opportunity to them in five minutes or less. Like your financing pitch, your adviser pitch must be concise and compelling.

Formalise the board
Once you’ve successfully gotten a buy-in from your advisory board, you need to formalize this by creating a contract agreement, this will help keep your advisors accountable. The key agreement for an advisory board are: Terms of Reference; Intellectual Property Assignment Agreement; Advisory Board Agreement; and Confidentiality Agreement.

Set Expectations
When inviting a prospective member to join your advisory board, you should lay down the ground rules about what is expected in terms of time, responsibilities and term of office. Specify the areas in which you’re seeking help. If the advisory board is going to discuss issues that include private information, members should be notified that they will be asked to sign a confidentiality agreement

Build agendas around the biggest issues of the year. Set focused goals on a limited number of topics that can help you this year. Being over ambitious on how the board can help will dilute results.

Make sure that the board members are prepared. Send out material to the board members at least two weeks before meetings. The quality of the advice that the board gives is based on the information they receive. This will also ensure that not only are the board members prepared, but you are also prepared.

Compensate Your Advisory Board
The matter of compensation is tricky. Some experts say it’s entirely unnecessary, and nearly all warn against advisers who take their position for money. You can attract anybody for pay but you’re not necessarily going to get the kind of advice you want. You want people who are attracted to the type of business that you’re building. Committed and passionate advisory board members won’t be in it for the money; simply being an active part of your business will be enough payment, it will expose them to ideas and perspectives they may have otherwise been missed. It will also expand their own networks and provide them with a way of giving back. However, people also like to feel appreciated, so offer them some sort of compensation. Host an upscale lunch each meeting, or pay each member a modest per-meeting honorarium. And, of course, thank them often for their time and reward their ideas, whether you use those ideas or not.

Keep Board Members Informed
Once they’re on the board, keep members excited about your business by giving them updates at times when you aren’t soliciting their advice. The fact that they’ve agreed to be on your board means they care about your company, so keeping up-to-date will help them be of greater value to you. Remember that these people are evangelists for the company.

Set term limits. Much like board members have term limits, advisory board roles should also have term limits-such as 12 months or 24 months. It is awkward and may even be potentially damaging to your business’s reputation to kick out an advisor if he or she is not performing. Setting term limits makes the transition happen naturally.

Always run the meeting
This should never be run by an outside consultant or board member. When the owner runs the meeting, they are more likely to get the results they want. If you do not know how to run a meeting, you will learn with time, just start now.

Maintain a professional edge
Lastly, remember that your advisors are neither employees nor suppliers, and they should not be treated as such. Advisors should in no way be held accountable for the decisions of the company nor for any fallout those decisions trigger. They are there to make suggestions and observations based on the quality information with which you provide them. It is up to you as the owner to make the decisions and to implement the plans.

If you don’t grow, you die—and you need an advisory board to grow,” Dan Weinfurter

Photo Credit: Shannon Fagan | Dreamstime.com