- Jan 5, 2022
An advisory board consists of a group of carefully selected advisors to help support and build toward the potential of your company. In this video, you'll examine the ways how an advisory board differs from a board of directors; why you might consider forming an advisory board; how you can attract and retain advisory board members; and how you can enhance the effectiveness of the advisory board for your start-up.
Hello, my name is Lise Stewart and welcome to the EisnerAmper Entrepreneur Academy, EA Squared. And today we're going to be talking about advisory boards. What's so special about them and how you can make the most of them. So, first of all, what is an advisory board and how does it differ from a fiduciary board? Well, an advisory board is made up of a group of experts, advisors, people who have some special knowledge that they can share with you to help you to grow your business. Now they're different from a fiduciary board because their job is to give advice. They don't have a legal or a financial responsibility and so it means that they don't get to vote. As an advisory board, they get to share their thoughts and their ideas and their experience, their backgrounds and knowledge to help you to make better decisions. But in the end, it is your job to make the decision, it's up to the shareholders. And it got to be in accordance with your bylaws and your operating agreement. That's what helps you.
So your advisory board, they're there really to support that decision making process. So what makes an advisory board so useful? Well, you have a room full of advisors who are generally really anxious to share their knowledge and expertise. They can help you to fill the gaps, those areas where maybe you don't have the knowledge that you need to be able to run a successful business. As an example, maybe in your growing company you don't have a strong background in HR, but you could add an HR specialist to your advisory board. It can be a very cost effective way to be able to get advice about these things, or perhaps you're looking at growth opportunities or new partners or new investment opportunities. You might want to include an angel investor or somebody with venture capital background on your advisory board. So they're really there to fill those gaps, they can be wonderful mentors and coaches for your senior executive team. They can also help you to minimize some of your risks in terms of the decision making.
How do you attract and retain really good board members? Well, this is where it becomes pretty important. First start with your strategic plan. Think about where it is that you want to be in the next three to five years. And what kinds of knowledge, skills and ability are you going to need to get yourself there? If you notice there is a gap in terms of the knowledge that you need, but that's required by your strategic plan this is where finding experts to join your advisory board can be so helpful.
Start by identifying the competencies that you really need and also the behavioral skills, the behaviors that... The kinds of people that you'd really like to be able to work with. Once you've done that, and you can reach out into your network to find that sort of talent, you need to help them to understand what is the role, the responsibility of being on your advisory board, how much time is it going to take? What's going to be the structure of that relationship and what's the timing? These are some of the questions that your advisory board members are going to have. If you want to make sure that your advisory board is really effective there's somethings that you're going to need to do.
First of all, make sure that you provide them with the information they need to do a really good job. That might mean that you're sharing with them your strategic plan, your business documents, the direction that you're going, all of the things that are going to be important to them. Let them know what you need from them in order to be able to be effective. Also, when they share their advice with you, be sure and listen. I've worked with a lot of advisory board over the years, and some of the things that are most frustrating to them is when they give some advice and the people that they're working with, the executives in the business simply shrug it off or keep saying, "Well, we've tried that or that won't work because."
That's really frustrating for an advisory board member instead, thank them for their contributions. And then later a report back on what you were able to use and perhaps what you were not able to use and remember celebrate the successes. They also want to know, are they helping you? Are you doing a good job? Is this really successful? Make sure that you're able to give them some positive feedback and always listen to their feedback in return. Advisory boards can be highly effective, but it's important to make sure that you've got the right people. So remember base your invitations on the gaps in your strategic plan. You don't generally bring your best friends or your attorney or even your accountant, I hate saying that out loud, to be on your advisory board, nor even your shareholders. These are truly advisors and it could be one of the most cost effective way for you to be able to get the consulting help that you need in order to grow a really strong business.
Eisner Advisory Group has a really long history in working with advisory boards and helping startup entrepreneurial companies like yours to make sure they get the right people in the right seats, at the right time, providing the most effective, efficient, and helpful information possible. So please feel free to reach out. We're here to help.
Transcribed by Rev.com
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