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, often at the same time.
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 trying to figure out 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 day-to-day operations.
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 simply 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 job is to advise. SCORE describes a board of advisors as a more informal, non-binding group that can provide strategic direction across areas such as finance, operations, competition and organizational planning.
That distinction gives small businesses flexibility. You can design the 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 a single milestone that tells you it’s time to create an advisory board. The need often becomes clearer as a business grows and its decisions become more complex.
An advisory board may make sense when:
- Your company is entering a new stage of growth.
- Major decisions continually fall to one or two people.
- Your leadership team has clear knowledge or experience gaps.
- You’re considering expansion into new products, services or markets.
- You need to strengthen long-term strategic planning.
- You’re preparing for an eventual ownership or leadership transition.
- You rarely have an opportunity to focus on the direction of the company rather than its daily demands.
Outside advisors can be valuable during periods of change. The U.S. Chamber of Commerce identifies objective perspective, specialized expertise, strategic planning and risk management among the potential benefits of an advisory board.
The idea fits into a broader principle of entrepreneurship: seek expertise when your business can benefit from it.
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, that 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 to the advisory board probably won’t provide the range of perspective you need.
Strong advisors should be able to understand your goals, bring expertise your team lacks and provide independent opinions. They should be willing to ask difficult questions rather than simply agree with the owner.
How Big Should Your Advisory Board Be?
More advisors don’t automatically mean more useful advice.
A smaller group can make conversations easier to manage and give each member a meaningful role. SCORE suggests five or six members as one possible model, with advisors bringing experience from different business disciplines.
Your company may need fewer. Start by identifying the expertise you’re missing rather than choosing a number and trying to fill seats.
Ask yourself:
What perspectives would make our leadership team stronger?
The answer might reveal that you need three advisors. It might reveal that you need five. The right number is the one that gives you a useful range of perspectives without making meetings 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 can cover:
- The purpose of the advisory board
- Member roles and expectations
- Meeting frequency
- Preparation required before meetings
- Confidentiality
- Length of service
- Compensation, if offered
- Potential conflicts of interest
- How members may leave or be replaced
Be clear about what you want from the group. An advisory board shouldn’t exist just to confirm decisions you have already made. Members need permission to challenge assumptions, point out weaknesses and disagree with the owner.
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 is happening in the 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 gives advisors a clearer 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 become lengthy status updates.
Send relevant information ahead of time and tell members which questions you want to discuss. That gives them time to think before they arrive.
A simple 60- to 90-minute meeting might 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
The most productive question may be something as simple as:
What are we not seeing?
An owner may be too close to a problem to recognize an assumption that needs to be challenged. Someone who has managed a similar situation may see it immediately.
Common Advisory Board Mistakes to Avoid
Creating an advisory board doesn’t guarantee useful advice. The structure needs attention if it is going to provide lasting value.
- Choosing people who always agree with you. Trusted advisors should be comfortable challenging your thinking respectfully.
- Recruiting too many people with similar backgrounds. Seek 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. The leadership team runs the company. The advisory board provides perspective.
- Failing to follow up. You don’t have to accept every recommendation, but members should know their input was seriously considered.
- Never changing the board. Your needs will change as the 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
Think of your advisory board as a resource that can evolve.
A young company focused on growth may benefit from advisors with experience in sales, operations, financing and hiring. Years later, that same company might need more expertise around leadership development, valuation, succession planning or an eventual sale.
Periodically ask whether the board still reflects your biggest opportunities and challenges.
The same long-term thinking applies to your personal plans as an owner. Building a succession strategy early can help you think through how the company may eventually transition to a family member, employee, partner or outside buyer.
Build a Team You Can Turn To
Business ownership can feel isolating, particularly 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 questions to help you solve.
The final decisions will still be yours. The difference is that you won’t have to make them without perspective.
Build a stronger foundation for the decisions ahead with more business planning, financial management and growth resources from the Central Bank Learning Center.
