Find out how advisory boards can help businesses

(Published in Business First, February 7, 2014)
As a certified public accountant, I find myself in the very rewarding position of being a trusted adviser to many highly successful business owners.

The level of trust in these relationships generally results in having conversations around areas that often transcend traditional accounting, tax, operational and transactional advice.

These situations provide opportunities to introduce clients to experts in other fields who are in my network.

While my client is happy that he found a great resource to address his needs and I am happy that I am able to introduce my client to a trusted person within my network, there is something missing.

Why is my client asking me about something he knows is outside my area of expertise? It is often because he simply doesn’t have someone else he trusts to ask or confide in.

What if there were a deeper issue that needs to be surfaced or explored?

What is an advisory board?

The opportunity to dive deeper might begin by creating an advisory board.

An advisory board is a group of individuals appointed to provide outside, objective assistance to an owner, CEO or board of directors.

What is the difference between an advisory board and a board of directors?

The board of directors works for the shareholders and has the power to make decisions given the full authority by the ownership of the company.

An advisory board works for the company and provides non-binding advice, including the following:

  • Assisting with strategic planning;
  • Reviewing organizational goals;
  • Brainstorming new ideas;
  • Holding top management, including the owner, accountable;
  • Connecting to new business relationships;
  • And providing outside opinions.

Objective opinion can be beneficial for companies

Providing an outside, objective opinion can be extremely important for closely-held and family-owned businesses.

For example, if two of the owners disagree on something or are not able to advance an initiative on their own, advisory board members are able to give their opinions without worrying about intra-company or family politics.

The board can remain objective without taking a side.

Many companies might not see the importance of an advisory board because they already contract with attorneys, accountants, bankers and other specialists outside the organization.

These independent outsiders, however, usually contract for short-term engagements and often are working independently of one another with little collaboration.

While an advisory board does not have binding power, its value is derived from the combined and aligned specialized experience in a specific field or set of fields.

What to keep in mind when forming a board

When selecting members for the advisory board, the selection process should include a review of each candidate’s background and area of specialty to see if it is in line with the needs of the company.

An ideal advisory board for a small to medium-sized business would consist of three to five members chosen from outside the organization.

In general, the best performing advisory boards are compensated for their efforts. There are many ways to compensate the members including hourly compensation, a retainer, per meeting fee or, in some cases, even equity.

I have seen fees range from $2,500 to $20,000 per annum. As with anything, you get what you pay for.

An advisory board can be an asset that provides a significant competitive advantage for a company while presenting little risk. Dive in by engaging an advisory board to spring your business to new heights.

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