Your informal advisory board, when the right fit for your company’s needs, can be very valuable to your family business. There are infinite sources of people who can serve in an advisory capacity for your business. Unfortunately choosing advisors based purely on personal relationships can be a challenge to deal with and hinder your and your company’s growth. In a family business, on the surface, it would seem valuable to bring in someone you know personally and trust such as an uncle, cousin, fraternity brother, or college roommate but those individuals may lack the experience and objectivity you need. Choosing an informal advisory board is a business decision, not a personal one.
Let’s take a look at how to build a highly valuable, functional informal advisory board for moving your family business forward.
Introduction: What is an Informal Advisory Board and How Can it Help Your Business?
Entrepreneur.com says, “An advisory board is an informal group of local business professionals who can help you run your business better”. They are unofficial advisors and not a corporate board of directors.
To be effective, an advisory board’s function must be clear, measurable, and specific, and be able to demonstrate a return in value to the business. Just filling up seats at a conference table of friends and family members is not going to help your business. Advisors need to be qualified and chosen for their skill sets and trustworthiness. You want advisors who will fill in the skill gaps and help you navigate forward in different areas of your business. Examples could include finance, tax management, industry regulatory changes, market changes, company structure, and legal considerations.
A Board of Governors is Not an Informal Advisory Board
Knowing that an advisory board and a board of governors are separate entities, what makes a board of governors different?
A board of governors is responsible for overseeing the management, policy, strategic direction, and major activities of a company. It works directly with the executive team, who will implement the policies, decisions, and direction advised by the board.
An advisory board is not required to listen to the CEO, company filings do not require input from an advisory board, and further advisory members are not legally responsible to your company. A board of governors though is bound by those listed requirements and responsibilities.
Different Advisors Have Different Specialties – What Do You Need?
Gene Siciliano states, “A good advisory board can combine the benefits of a team of consultants, a focus group of your customers, and the leading knowledge experts in your industry, all in one room at the same time.”
First, assess your business needs by identifying internal skill gaps, and business challenges, and reviewing your current strategic plan. Perform a SWOT analysis to gain objective data on your business. This will allow you to see areas that need improvement, have not been functioning well, and are missing skills.
Second, start your advisor research. Ask for referrals from current advisors such as your company accountant or lawyer. Research roles advisors play in other companies. Look at the gaps you identified in your analysis of your company in step one. What type of skill sets do you need? Look for individuals who can fill those gaps. You may find the skill sets you are looking for in titles such as legal, accounting, financial, consultants, coaches, strategic advisors, leadership advisors, marketing, and human resources consultants.
Third, you will want to look for an advisor who can be objective, business focused while having the personality, and skill sets that meet the needs of the business – someone with whom you can build trust. As I noted at the beginning of this article, avoid choosing people who are too close to the business and thus cannot be objective. Friends and family members without the skill sets are not the right fit for an advisory board. Don’t get caught in the trap of giving them an advisory role simply because they are family, they need work or always have a lot of ideas.
How Do You Get The Most From These Advisors?
Assemble your advisory board, and get them up to speed on what is happening, where the problem areas are, and what areas are working well. Provide the data and metrics you have sourced. Get specific about what you need and what you expect. Advisors are not there just to join in on a good brainstorming session – they are there to provide specific, practical, measurable advice. If this is followed, the right members are on board, you will see positive, measurable growth in your company.
- Ask questions
- Define metrics and goals – decision-making needs to be informed
- Implement their recommendations that are the best fit
- Don’t hesitate to let go of the advisor if they are not the right fit
How Do You Build Trust With Your Advisor?
Building a trusted relationship is not easy or quick. It is common in the modern digital world for people to market themselves as experts, without having the solid background, experience, and designations to back up what they say they can do. Be diligent in researching individuals for your advisory board. Take the time to choose thoughtfully.
Here are a few tips to consider
- Have a non-disclosure agreement for the advisor to sign to maintain confidentiality and protect intellectual property (IP).
- Build a professional relationship with the advisor that is based on authenticity – this relationship is different from having a technician in to fix your dishwasher
- Ensure you feel listened to, respected, and comfortable with the advisor
- The advisor must be comfortable providing challenging and factual advice, not serve just to please you or agree with you on all points
- It isn’t necessary to have the advisory members close by. You could choose to hold quarterly meetings either in person or virtually to curate the wisdom from a wider geographic range
Many owners feel very isolated when making decisions and an informal advisory board can help with those feelings. If the board members have sound experience, are willing to do the work to offer recommendations based on the data, and are committed to the growth goals of the company, a business owner can leverage the knowledge that these people have to jump-start their company’s growth.
BDC (2023). How an Advisory Board Can Boost Your Business.
Have you been considering forming an advisory board for your company? Do you need help pulling together the data, assessing skill gaps, and identifying what you need from an informal advisory board? For many years I’ve specialized in working with family businesses to overcome multiple business challenges and successfully move their companies forward into the future.
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Join me for the next online Lunch and Learn event, Tuesday, April 25, 2023, where we will be discussing how to set up an advisory board for business success. Click here to join!