Running a small business can put a lot of decisions on one person’s shoulders. Hiring, finances, operations, growth, technology and long-term planning can all compete for an owner’s attention.
You don’t have to make every decision alone.
A small business advisory board can give you a trusted group of experienced people to turn to when you’re facing a challenge, evaluating an opportunity or planning what comes next. Advisory board members can bring expertise your business doesn’t have internally and provide an outside perspective that can be difficult to find when you’re immersed in daily operations.
Building relationships with experienced professionals is already an important part of business planning. Finding the right small business financial advisor, for example, can give you another perspective on both immediate needs and long-term goals.
What Is a Small Business Advisory Board?
A small business advisory board is a group of people selected to provide advice, expertise and perspective to a business owner or leadership team.
Advisors might help evaluate growth plans, review financial performance, identify risks, address operational problems or ask questions that push the owner to look at an issue differently.
An advisory board is different from a board of directors. A corporate board may have formal governance responsibilities and fiduciary duties. An advisory board typically does not have decision-making authority. Its role is to offer guidance and perspective.
That distinction gives small businesses considerable flexibility. You can build an advisory board around the needs of your company rather than trying to recreate the structure of a large corporation.
When Does Your Business Need an Advisory Board?
There isn’t one milestone that tells you it’s time to create an advisory board. The need may become clearer as your business grows and its decisions become more complex.
An advisory board may be useful when:
- Your company is entering a new stage of growth.
- Major decisions continually fall to one or two people.
- Your leadership team has knowledge or experience gaps.
- You’re considering expansion into new products, services or markets.
- You want to strengthen long-term strategic planning.
- You’re preparing for an eventual ownership or leadership transition.
- You spend so much time running the business that it is difficult to think about its long-term direction.
Outside perspective can be particularly useful during periods of change. The U.S. Chamber of Commerce identifies access to expertise, strategic guidance and objective feedback among the potential benefits an advisory board can provide.
Seeking advice doesn't mean giving up control. It means surrounding yourself with people who can help you examine a decision from more than one angle.
Who Should Be on Your Advisory Board?
The goal isn't to assemble the most impressive collection of résumés you can find. It's to bring together people whose experience can help your business make better decisions.
Depending on your needs, potential members might include:
- Experienced business owners or executives
- Industry experts
- Financial professionals
- Marketing or sales leaders
- Operations specialists
- Technology experts
- Professionals who have scaled, acquired or sold businesses
Look for complementary expertise. If your leadership team already has deep marketing knowledge but lacks financial and operational experience, adding three marketing professionals probably won't give you the range of perspective you need.
Strong advisors should understand your goals, bring expertise your team lacks and be comfortable providing independent opinions. You want people who will ask thoughtful questions and respectfully challenge your assumptions rather than simply agreeing with you.
A broader network can be useful, too. Your attorney, accountant, banker or other professional advisors may each play different roles in helping you evaluate major business decisions.
How Big Should Your Advisory Board Be?
More advisors don't automatically mean better advice.
A well-rounded advisory board can bring together expertise across different areas of the business, including finance, operations, competitive strategy and organizational planning.
Start by identifying the expertise you're missing rather than deciding how many seats you need to fill.
Ask yourself:
What perspectives would make our leadership team stronger?
You might discover that you need three advisors. You might need five. What matters is creating a useful range of perspectives without making the group difficult to manage.
Set Expectations Before the First Meeting
An advisory board can be informal without being unstructured.
Create a simple charter or written agreement explaining how the group will operate. It might cover:
- The purpose of the advisory board
- Member roles and expectations
- Meeting frequency
- Preparation before meetings
- Confidentiality
- Length of service
- Compensation, if offered
- Potential conflicts of interest
- How members can leave or be replaced
Set expectations about the type of advice you want, too.
An advisory board shouldn't exist just to confirm decisions you've already made. Members need room to challenge assumptions, identify weaknesses and disagree with the owner.
That candor is part of what makes the group useful.
What Should Your Advisory Board Talk About?
Advisory board meetings should focus on areas where outside experience can improve decision-making.
Topics might include:
- Financial performance and cash flow
- Growth opportunities
- Hiring and workforce needs
- Competitive threats
- New products or services
- Capital investments
- Technology needs
- Operational challenges
- Risk management
- Long-term goals
- Succession or exit planning
The agenda should reflect what's happening in your business at that moment. A company considering a second location will have different questions from one experiencing declining margins or preparing for an ownership transition.
Financial performance can be a productive recurring topic. Understanding how cash moves through your business can give you and your advisors a stronger foundation for discussing hiring, investments, expansion and other decisions with financial implications.
Make Advisory Board Meetings Productive
An advisory board loses much of its value if meetings turn into lengthy status updates.
Send relevant information ahead of time and tell members which questions you want to discuss. This gives them time to think about the issues before the meeting begins.
A simple 60- to 90-minute meeting could include:
- A brief business update
- Review of key financial or operating metrics
- Progress on issues discussed at the previous meeting
- One or two major challenges or opportunities
- Open discussion and advisor recommendations
- Decisions, action items and follow-ups
You don't need a complicated agenda. What matters is giving the group meaningful questions to discuss.
One of the most useful questions an owner can ask may be:
What are we not seeing?
When you spend every day inside a business, assumptions can become difficult to recognize. Someone who has faced a similar challenge may spot an issue or opportunity that isn't obvious from inside the company.
Common Advisory Board Mistakes to Avoid
Creating an advisory board doesn't automatically make it useful. How you select members and work with them matters.
- Choosing people who always agree with you. Trusted advisors should be comfortable challenging your thinking respectfully.
- Recruiting too many people with similar backgrounds. Look for different skills and experiences rather than multiple versions of the same advisor.
- Holding meetings without clear questions. Give members meaningful issues to consider instead of asking for broad feedback about the business.
- Turning advisors into managers. Your leadership team runs the company. Your advisory board provides perspective.
- Failing to follow up. You don't have to accept every recommendation, but members should know their input was considered.
- Never changing the board. Your needs will change as your company changes. The people who were right for one stage of the business may not provide the expertise needed for the next.
Let Your Advisory Board Grow With Your Business
The advisory board you need today may look different several years from now.
A growing company might benefit from advisors with experience in sales, operations, financing and hiring. A more established business could need greater expertise in leadership development, valuation, succession planning or preparing for an eventual sale.
Review the board periodically and ask whether its members still reflect your biggest opportunities, risks and goals.
This long-term thinking becomes especially useful when your business and personal financial plans begin to intersect. Wealth management planning for business owners can include questions about succession, retirement and how the future of the company fits into your broader financial goals.
Build a Team You Can Turn To
Business ownership can feel isolating when the biggest decisions are yours to make.
A thoughtfully assembled advisory board can give you a place to test ideas, challenge assumptions and benefit from experience you may not have inside your company. Start with a clear purpose, choose members based on the expertise you actually need and give them meaningful business questions to help you solve.
The final decisions will still be yours. You'll just have more perspective when you make them.
Build a stronger foundation for the decisions ahead by exploring more business planning, financial management and growth resources in the Central Bank Learning Center.
