I’ve spoken to a lot of business owners about advisory boards over the last few years. Some have decided to move ahead and set one up. Others, for whatever reason, have decided that either the concept isn’t for them or that now just isn’t the right time.

Sometimes they’ll say they have other priorities, or they don’t think they’ve reached the stage where they need a board of directors. Other times the objection is more basic, such as “I can’t afford an advisory board.”

I find it quite frustrating when I hear this, but I do know where they’re coming from.

Businesses need to spend their money wisely, and if you don’t understand the benefits an advisory board can bring you, it could be hard to see why it’s worth investing in. After all, there’s always something else you could use the money for.

When someone says that they can’t afford to have an advisory board, I’m always tempted to ask if they can afford not to have one. Your aim is to grow your business and increase revenue and profitability, and an advisory board is going to help you do that by giving you access to the expertise you need.

Knowing Where To Tap The Hammer

There was a large ship that suffered an engine failure. The owners obviously wanted it back in service as soon as possible, so they went looking for someone who could repair it.

Expert after expert came on board and examined the giant engine, but they all had to admit defeat.

Finally, the owners, in desperation, called in an old man who had been repairing ships since he was a boy. The old man arrived on the ship with a large bag of tools and immediately went to work. The owners watched with interest as he examined the engine from top to bottom, carefully examining every inch of it.

Eventually he reached into his toolkit, pulled out a small hammer and gave the engine a gentle tap. Immediately it roared into life, running perfectly. The old man calmly put his hammer back in his bag and went home.

The ship owners were delighted that their engine was repaired, but they were a bit startled when, a week later, they got a bill from the old man for $10,000.

“What!” one of them exclaimed. “He hardly did anything!”

So, the owners sent a letter to the old man asking him for an itemised bill. A few days later, it arrived:

Tapping with a hammer:                     $2

Knowing where to tap:                       $9,998

This story has always amused me, but it has a moral that’s relevant here. What the story tells us is that there’s a difference between value and cost, and expertise has great value.

Warren Buffett summed this difference up very nicely when he said, “Price is what you pay; value is what you get.”

When you get right down to it, that statement explains how business works. Trade in business is basically exchanging something you have for something you put a higher value on. Both parties exchange money for something that they think is worth at least that amount of money.

It’s value that really matters in the ship story, not price. The price is just a way of putting a number on how much you value what you’re getting.

I know that saying the price doesn’t really matter is a bit startling, but think about it.

When you spend money, what matters is that what you get in return is worth more to you than the money is. We all have our own opinions on what things are worth, so every situation is different.

An advisory board does have a price tag, but you have to balance that against the value it brings you. Are the benefits of an advisory board worth more than what it costs you?

I think they are, because the key benefits you’ll gain are experience and knowledge. These are things that are so valuable it’s actually hard to even put a price on them.