How to Build an Effective Advisory Board
Comprised of business professionals with different areas of expertise, advisory boards counsel companies, corporations and other organizations about best practices for operating their businesses. A carefully constructed advisory board can be a huge boon to businesses of all sizes, so taking the time to carefully create one is an important step for your company.
Why Create an Advisory Board
Unlike corporate boards of directors, advisory boards lack the financial and legal authority to make decisions for your company. But they are also different from business mentors, mainly because their commitment to work as a group provides for focus and debate on specific issues. As a business owner, although you retain control, you must be willing to listen and accept their advice. After all, even the most successful business owner likely has gaps in his or her knowledge base. Advisors can help make up for any shortcomings you may have and offer objective points of view for decisions regarding marketing, finance, expansion and more.
Additionally, advisory board members help businesses grow their professional networks. Thoughtfully chosen advisors lend credibility to your company and may help you build connections in the business community. From introducing you to potential investors and clients, to finding celebrity spokespersons to represent your business, advisors are crucial for growing and strengthening a company’s network.
Steps for Creating an Advisory Board
Of course, an advisory board is only as strong as its members. Here are six essential steps for building an effective advisory board.
1. Determine Your Goals
Identifying your company’s goals in advance is essential to choosing the most effective advisors for your board. For example, business owners who want to build their client base may select different types of advisors than owners who are looking to expand into additional markets or build intellectual property. Additionally, determining goals ahead of time enables you to communicate clearly with potential board members before they commit to your business. If the goals between you and a potential advisor do not align, you’ll have a much easier time overcoming these differences.
2. Build a Diverse Team
While the temptation can be strong to seek out advisors who think like you, the most effective advisory boards include a diverse group of individuals. In general, business owners should choose advisors with experience in the fields of marketing, accounting, law and finance. Although it’s fine to start by contacting friends and peers, finding top talent may mean stepping outside of your comfort zone. Your LinkedIn network is a great source to start mining for potential advisors, as are online boardroom communities, like BoardProspects.com. Apart from the internet, you can meet potential advisors by networking with board members of similar organizations, well-connected people from your local Chamber of Commerce, or former employers and managers with relevant experience.
3. Evaluate Your Candidates
Whether you’re looking to add members to an existing advisory board or create one from scratch, it’s important that you take the time to evaluate candidates carefully. Along with considering qualifications, contacts and experience, business owners should assess candidates’ availability to make sure they will follow through on commitments. Additionally, you should make sure new advisors will fit in well with the culture of the current board. After all, your advisory board will hardly be effective if members feel uncomfortable working with one another. Take the time to introduce potential advisors to one another or to the current board before you bring them on.
4. Clarify Expectations
No matter how savvy your advisory board is, you will be unlikely to achieve all your goals if members do not know your expectations. Before inviting advisors to join your team, establish a schedule for meetings and other events. By communicating your expectations at the start, you can avoid misunderstandings down the line. Put them down in writing, and review them on a regular basis, making adjustments as you and the board see fit.
5. Protect Your Intellectual Property
Advisory board members will have a hard time providing sound counsel if they lack insight into the inner workings of your company. However, as a business owner, you have a responsibility to protect your intellectual property and trade secrets. When constructing your advisory board, take the time to ensure all your advisors sign non-disclosure and non-compete agreements to avoid any and all legal disputes that can occur in the future. Unless you are already an expert on the procedure, you should consult an attorney to make sure you and your company are sufficiently protected against IP infringement.
6. Select a Manner of Compensation
While friends and colleagues may be willing to serve on a board for free, most advisors expect to be compensated for their counsel. Before pitching your prospective advisors, determine how you will compensate them for their services. Whether you plan on offering stock options or just the occasional meal, you should set up a compensation package upfront to ensure everyone is on the same page.
Build a Better Advisory Board for Your Business
Whether you’re looking to build a business from the ground up or expand an existing company into new areas, it’s important to find advisors you can trust. Take the time to find the best possible advisory board members, and give yourself the greatest chance at success.