One reason many business owners don’t think an advisory board would help them is that they don’t really know what an advisory board does.

They know what a traditional board does from their statutory directorship of their own company and from exposure to ASX listed companies but an advisory board?

That’s a bit of a mystery.

This isn’t a surprise. After all, advisory boards haven’t been around all that long and, so far, only a very small percentage of businesses use them.

When most people think of an advisory board, what often comes to mind are customer, medical, technical, and educational advisory boards, for example. These boards have been around for a while; however, they’re not the same as a business advisory board.

These boards tend to be large in number. They usually meet quarterly, and their role is to advise on content, customer relations, technical and medical excellence and so on — they don’t give business advice. They can be very useful, but they won’t help you with running your company and helping it grow.

If that’s what you’re thinking of, I’m not surprised if you’re not sure what an advisory board can do for your business. I find that, once people know what an advisory board is and how the work, they tend to be a lot more enthusiastic about the idea.

At its simplest, an advisory board is an individual experienced chair combined with an internal team. When I set up an advisory board, I usually start at this level so as to work out the best way forward. Over time, working with the owners and other people can be added to the board as required.

This is a lot more flexible than a traditional board. A formal board of directors has legally defined responsibilities and obligations to all shareholders, and, while it can be a valuable asset to a business and is required for publicly listed companies, it has governance requirements that can weigh it down.

Typically, I find traditional boards of directors spend 80% of their time on governance compliance and reporting and 20% on strategy. My advisory boards spend 80% of time on strategies.

My advisory boards do have a common feature to a board of directors: a chairman to facilitate and a formal procedure to conduct the meeting.

An advisory board isn’t regulated under the Corporations Act or corporate governance codes. There are two major benefits to this.

Firstly, its structure and activities can be tailored to suit what the business needs. Secondly, the owner isn’t legally required to act on what the board says.

Let’s go back for a minute to what an advisory board can do.

The name gives you a clue about an advisory board’s main function — to give advice. With an advisory board in place, you’ll be able to…

• rely on unbiased advice, insight, opinion, and experience
• develop and execute strategy,
• raise ideas, plans, or issues,
• identify roadblocks and risks that face your business, and
• have a mentor and coach to strengthen your entire leadership team.

Then you can use their contributions to support the decisions you make.

What might you need advice about? Well, there’s quite a list. An advisory board provides a valuable resource in many scenarios for a company, including:

• Experiencing rapid growth and seeking improved bottom line performance
• Wanting to grow by acquisition
• Needing to raise capital/funds
• Facing major decisions and/or changes in direction, including entering new markets or regions
• Wanting to establish a more formal management structure
• Contemplating succession
• Wanting to develop its leadership team and improve accountability with less reliance on the owners
• Overcoming tensions and discord among shareholders, partners, or family members
• Seeking to elevate the visionary and strategic skills of the executives and create a shared vision
• Wanting to get ‘board ready’ to attract investors and first non-executive directors

Additionally, all businesses today are facing new challenges. There’s never been a time when technology was advancing so fast, and it’s having an enormous effect on businesses.

New opportunities are mixed up with new dangers, such as more and cheaper competition from online businesses as one example. If you’ve built a traditional, private business, you need to be agile enough to cope with threats from disruptive start-ups, either by proofing your business model against them or adopting new ways of doing business.

How do you do this? Well, a good start is to get advice from people who have already faced the same challenge.

An advisory board can give you advice about things you haven’t even considered. Its collective experience means it can see risks or opportunities that you haven’t identified yet and bring them to your attention.

Growing to a nine-figure annual revenue might be new to you, but others have been through it before. They know what to expect, and their advice can help ensure you’re ready for it when it comes.

Having a board can also save you from the pitfalls of groupthink. It’s inevitable that any successful business will have its own corporate culture. Working together in a team will generate ways of thinking that suit the team.

Most of the time this is a positive thing, but it can also lead to problems being overlooked or papered over.

The most common example I hear is “We’ve always done it this way.” That’s fine — it’s always worked up to now, or you wouldn’t have kept doing it that way.

Will it work in the future, though? It might not, either because new technology has changed the way you do business or because your company has grown such that your existing processes and structures are still based on the previous phase of growth.

A board brings fresh eyes to the way you do things. It will look at your business from a new perspective and can identify things you could be doing differently. There are almost always multiple ways to do something, and while the way you’ve used up to now works, it’s possible that one of the alternatives would work better.

Working with an advisory board can help you understand your business better. That sounds counter-intuitive; after all, it’s your business and surely you understand it better than anyone else does. How can an outside advisor help you with that?

In fact, it’s quite likely that you’re too close to the front line to understand everything that affects your business. You probably know the company itself inside out, but there’s more to it than that.

Most business owners spend an extraordinary number of hours working in the business and they spend very little time working on the business.

How much time have you been able to spend on analysing the market you work in, for example? Do you know what the trends in the industry are? These are questions that a board can help you answer.

Your board members will be familiar with your business — one of their responsibilities is to learn as much as they can about it — but they aren’t involved in its day-to-day running. Maintaining some distance from the detail of operations lets them provide insights and ideas that you can’t always see when you’re busy with the minutiae of running your company.