Creating a small business advisory board is an important step toward building a stronger, more successful business. But assembling a group of experienced professionals is only the beginning. The real value comes from how effectively you manage the board and put its advice to work.
Having a well managed advisory board means that you have a team of external experts providing you with new ideas and impartial advice. They will be able to support you in working through any challenges and identifying opportunities to grow your business.
But if you haven’t defined your goals, expectations, and productive meetings, then having an expert advisory board won’t make much difference.
Once your advisory board is set up, consider how to make the most of your team’s time and expertise.
Below are some tips on how to run an effective advisory board.
1. Establish Clear Objectives for Your Advisory Board
Before your advisory board holds its first meeting, everyone needs to understand its purpose.
What do you want the board to help you accomplish? Do you want them to provide guidance with growing your business, increasing profitability, building leadership, or putting yourself in a position for an eventual exit?
Your objectives should be based on your current challenges and opportunities.
Typically, advisory boards are used for:
- Strategic planning: Helping define your long-term business goals and how to achieve them.
- Business growth: Identifying new opportunities to grow your business.
- Financial performance: Providing guidance on how to improve profitability, cash flow, budgets, and financial planning.
- Operational efficiency: Finding new ways to improve processes and increase productivity.
- Leadership development: Helping business owners improve their management skills and build an effective leadership team.
- Succession and exit planning: Preparing the business for an ownership change, sale, or future changes to leadership.
Smaller businesses will usually work directly with the owner. Larger businesses may create advisory committees to provide guidance in certain areas of the business, such as marketing, finance, operations, or technology.
Whatever structure you choose, make sure each member understands the board’s objectives and their individual responsibilities.
If you also have a formal board of directors, clarify the boundaries between the activities and responsibilities of each entity.
2. Determine the Right Size for Your Advisory Board
When it comes to advisory boards, bigger isn’t necessarily better.
A small team of experienced individuals will often provide more value than a larger advisory board. This is because they will have the experience and knowledge of your business and will provide diverse skill sets.
Many small businesses will start by having between three and five. Some may start with just one or two people they trust and then grow it as needed.
Consider these factors when determining board size:
- The business complexity and the challenges you face.
- How diverse your skill set needs to be to achieve your objectives.
- How well you can manage meetings and coordinate schedules.
- Costs of paying board members.
- Company culture and preferred working style.
Try not to include extra individuals just for the sake of it. You want to ensure everyone brings specific knowledge, experience, or connections that could help you reach your goals.
As your business grows, you can adapt the size and make-up of your advisory board.
3. Set Expectations for Advisory Board Members
Advisory board members are usually busy professionals with their businesses and other commitments. The first step to respecting their time is to set clear expectations.
Before someone agrees to join your board, outline what you will expect from them.
Discuss:
- The board’s mission and what it hopes to achieve.
- Time and meeting frequency commitments.
- What preparation is required.
- Other commitments in between meetings.
- Whether there are any confidentiality or conflict of interest issues.
- Whether there will be any payment.
- How long you expect them to commit.
It can be helpful to have a written advisory board agreement outlining these expectations.
As members may gain access to sensitive financial, operational, and strategic information, you should have confidentiality agreements in place before providing confidential business documents.
Having clear expectations will create a professional relationship and make it less likely to cause any confusion.
4. Establish a Consistent Meeting Schedule
An effective advisory board provides meaningful guidance only if it meets regularly and is involved consistently, not just during crises.
Set up a regular meeting schedule that works for both the business owner and board members.
Many small businesses will find quarterly meetings are a good middle ground. This will allow you to assess how things are going, discuss any new challenges, and see how your previous recommendations have worked.
Some businesses may want to meet more regularly if they’re growing quickly or going through significant changes. Some may only need to meet every 6 months.
Whatever you decide, it’s important to be consistent.
Try to plan ahead and avoid cancelling too many meetings. Occasionally having virtual meetings can make things easier.
As your advisory board members are not involved in the day-to-day running of your business, it’s important to give them enough background information.
Before each meeting, provide them with:
- A summary of your financial performance.
- What’s happening with your strategic objectives.
- A report on how your previous recommendations are doing.
- Big changes in the market or industry.
- Specific questions or challenges you’d like advice on.
Give them plenty of notice for members to review them. This way you can talk about finding solutions and opportunities rather than explaining background information that could have been shared earlier.
5. Create a Focused Meeting Agenda
Every advisory board meeting should have a purpose.
Rather than trying to cover every issue facing your business, focus on the most important strategic questions.
Ask yourself: What is the biggest challenge or opportunity where outside advice could really add value?
This will help you set your agenda.
A typical advisory board agenda may include the following:
- Business performance update: Review key financial and operational results.
- Review of prior recommendations: What has been done and what remains outstanding.
- Primary strategic discussion: Focus on one or two significant business challenges or opportunities.
- Recommendations and next steps: What can be done, priorities, and who will do it.
- Future priorities: What issues should be addressed at upcoming meetings.
Keep the discussion focused on strategic issues rather than day-to-day operational details.
Promote discussion and encourage new perspectives. One of the main benefits of having an advisory board is getting a fresh perspective.
You don’t have to agree with everything. Healthy disagreements can result in better decisions.
Make your advisory board meetings more productive with our free, easy-to-use meeting agenda template. Organize discussions, review business performance, capture recommendations, and create clear action plans.
Download the Free Advisory Board Meeting Agenda Template
6. Turn Advisory Board Recommendations Into Action
One of the major mistakes people make when running their businesses is not acting on the helpful advice they receive.
Your advisory board should give you recommendations that will help you decide what to do within your business.
After every meeting, take some time to review the advice you have received and which recommendations will help you achieve your business goals.
Build an action plan detailing:
- What needs to be done.
- Who needs to do it.
- When it needs to be done.
- How you will know if it has been successful.
Not every recommendation needs to be implemented. Some may not fit your current priorities, resources, or business strategy.
However, your board members should know how their advice has helped you make your decisions.
Give them an update on what you have done and the outcomes at your next meeting. This will keep them accountable and show they are valued.
7. Define Terms of Service and Review Board Membership
As your business grows, your advisory board may need to change with it.
As your business matures, the people who have been giving you valuable advice may no longer have the right skills to help at a time when you are looking to grow, sell, or hand over.
Having a service agreement in place means that you can easily make changes to your advisory board.
You could agree to set term limits of 1 or 2 years. This means they can be renewed depending on your needs and their interest.
Review your advisory board regularly to ensure they have the right skills and knowledge.
Ask yourself:
- Are members active and contributing?
- Do they have the skills to help support your current issues?
- Are there any skills gaps?
- Has your company changed its priorities?
- What fresh perspectives could be valuable?
Be honest with your members from the start that your advisory board may change as your business develops.
This way you can keep your advisory board effective while being respectful to those that have contributed.
8. Decide How to Compensate Advisory Board Members
Compensation will vary depending on the size of the business, the skills of the individuals on the board, and the level of engagement required.
Some advisors may wish to help out based on a personal relationship, professional interest, or simply wanting to give back to other entrepreneurs. Others will expect to be compensated for their time and skills.
Common types of compensation:
- Meeting fees: A fixed payment for attending a set number of advisory board meetings.
- Annual retainers: A set amount paid for ongoing participation and availability.
- Project-based compensation: Payment for help on certain projects or strategic problems.
- Equity arrangements: An ownership stake in the business. This option is usually for advisors who will provide significant value over time.
- Unpaid participation: Sometimes used when members have a personal connection to the business or a mutual professional interest.
There is no single compensation model that works for every business.
Think about what level of experience you want, how much time you want to invest, and how much money you have to spend.
If you offer compensation, make sure it is well-documented. Equity arrangements deserve particular attention because they can affect ownership, control, and future business transactions.
Ultimately, you want to find a way to compensate them for their contribution while also making it financially viable for your business.
9. Measure the Effectiveness of Your Advisory Board
As with any investment in your business, you should see value coming from your advisory board.
While not every meeting will deliver instant value, some of the most valuable benefits, like making better decisions, having a stronger leadership team, and improving strategy, will be achieved over time.
However, you should periodically review whether the board is helping you achieve your objectives.
Look for evidence of progress on things like:
- Improving profitability or financial performance.
- Successfully executing strategy.
- Improving operations efficiencies.
- Creating new business opportunities or professional relationships.
- Having a stronger leadership team.
- Gaining more confidence when making key business decisions.
- Making progress toward succession or exit plans.
Ask board members for feedback as well. Ask if they’re getting the right information they need? Are meetings productive? Do they believe their expertise is being used effectively?
Regular reviews will help you see where you can improve how your advisory board operates.
10. Avoid Common Advisory Board Mistakes
Even a good advisory board can fall flat without the right approach.
Common mistakes:
Selecting people who always agree with you. A good advisory board will challenge your thinking and give you objective advice. Surrounding yourself with people who simply confirm your opinions limits the board’s value.
Failing to define the board’s purpose. Without clear objectives, meetings may become unfocused conversations that accomplish little.
Sharing too little information. Advisors need to understand exactly what is going on within your business to give useful advice. If you don’t share key information, the advice you receive may not be helpful.
Not listening to advice. You don’t have to follow every suggestion, but constantly ignoring it without any reason can put off members.
Allowing meetings to become operational updates. Advisory board meetings should focus primarily on strategic issues, not routine business activities.
Failing to follow through. Advice won’t be of much use if there is no action or decision taken from it.
By avoiding these mistakes, you’ll have a productive, engaged, and focused advisory board.
Make Your Advisory Board a Valuable Business Resource
As a small business owner, decision-making that affects your employees, customers, finances, and future can often leave you feeling isolated.
Having experts on hand who can provide unbiased advice will help you make informed decisions.
But an advisory board will only be effective if you have clear goals, the right people on board, productive planning, and the ability to implement the recommendations.
When managed properly, a small business advisory board will be a valuable asset to your small business.
You don’t have to make all important decisions on your own.
At Mosaic Business Advisors, we help you look at challenges that may come up in your business, create practical strategies, and help you make informed decisions on how to grow your business. Whether you’re considering an advisory board or looking for experienced guidance to move your business forward, having the right support can make a meaningful difference.
Debra Murphy is a marketing coach and consultant helping small businesses navigate the complex maze of online marketing. Experienced across all traditional marketing channels, Debra specializes in organic search and content marketing to help small businesses gain visibility and generate inbound leads. She is also a certified coach in the 90 Day Year® Peak Performance System. Debra regularly writes about small business marketing on her Masterful Marketing blog.
