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The importance of advisors for small businesses

An Advisory Board can provide valuable input to any business, and fuel growth. Here’s how you can tell whether your Advisory Board is cutting the mustard, and what can happen to businesses who choose to fly solo.

4 minute read

When does a business need a formal Board?

The whole purpose of an Advisory Board is to drive a business forward – but when should a business start a Board? A formal Board of Directors usually comes once there are multiple shareholders in a company. Those who make up the Board of Directors are more often than not appointed by the shareholders to legally manage, direct and supervise the company.

However, there is a middle ground that start-ups and SME businesses can set up called an Advisory Board. An Advisory Board is set up by the owner-manager of the business, and exists to provide advice and information in an informal and flexible manner. There may be a number of reasons why your business is seeking out governance from an Advisory Board, including:

• to gain further insight and oversight into specific areas of the business
• you are looking for early stage market validation
• needing help with succession planning and/or to become investment ready
• you want your business to become more professional.

If the above sounds like you, and you’re willing to share information, then no matter what your size or stage of growth, chances are you’re ready for an Advisory Board.

Why have an Advisory Board?

An Advisory Board is like having a business coach or mentor on steroids. Rather than having one experienced person to help you with accountability and act as a sounding board, you can have two or three, which can provide you with big picture thinking but also with the diversity that a single coach or mentor can’t offer.

The purpose of an Advisory Board is to drive growth, so it’s important to be very selective when it comes to choosing your members. The right members will not only have experience and knowledge, but also the networks and connections that can help your business to fast track. To make sure you get the right advice, you want members that encourage open and robust discussion of ideas – hence why family and friends are a strict ‘no-go’ zone.

Will my prospective board members add value to my company?

To be able to answer this question, you need to have criteria (formal or informal) in place. Knowing that a strong Board should have diverse members that either have experience, knowledge, or networks and connections that can move the business forward is one of the first steps. Diversity means bringing the full breadth of relevant skills and experience from across all of the fronts the business has to operate in.

Your Board can provide immense means, adding value to your business. They will be reading the reports in advance, contributing positively to the discussions within the meeting, challenging assumptions, offering knowledge, sharing their experiences, and following up with action points after the meetings. If they’re not doing this, then it’s time to cut them loose and move on. Fortunately, there are few legal headaches surrounding this – a Board is designed to be flexible so that you can change them as your business needs change. The sooner you can exit and replace poorly performing members, the better.

Who should be on my Board?

An Advisory Board may be published/associated with the business i.e. they feature on the company website or in materials such as business plans for fundraising. Therefore, it’s important that you not only conduct a background check before they sign on but you also set ground rules around what is expected of them.

If a member has anything in their past or has a tendency to be ‘loose lipped’ with the media, then what they have done or what they say can have an impact (both positive and negative) on the business. Just like employees, they are essentially an extension of your company and brand.

When you’re trying to really grow your business, flying solo can feel lonely as well as dangerous. You want advisors that have experience in an industry that is relevant to your business and who have operated in a larger and more complex organisation. You often can’t see the wood from the trees, or you’re blind in your thinking because you’re too close to the business. Sometimes this can lead to small issues, other times it can lead to you wasting valuable time, money and resources.

Although it’s not crucial for a business to have an Advisory Board, it certainly helps to fast-track your business while keeping you and your team focused. Much like having your own personal business coach, Advisory Boards can help with acceleration, avoiding common pitfalls in your market, opening doors to influential people, and establishing the bigger picture.

Looking to someone who will walk with you, inspire you, champion you and celebrate success with you can make the journey seem a lot less lonely. Finding an advisor who sees your potential and relishes your accomplishments as much as you do really makes the world of difference.

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