How to Form an Advisory Board

An advisory board is an informal group of outside advisors with no legal responsibilities to the company except for a formal non-disclosure and a non-compete agreement.

An advisory board is an informal group of outside advisors with no legal responsibilities to the company except for a formal non-disclosure and a non-compete agreement. Most often members of an advisory board have no financial interest in the firm and may receive a nominal honorarium for serving on the advisory board.

In the case of SCORE volunteers the honorarium, if offered, is donated directly from the company to the local SCORE chapter. These advisors share their knowledge to help you be more competitive, think strategically and offer specific advice in key skill areas.

The benefits of an advisory board include:

  • setting aside time to think strategically,

  • obtain feedback and insights from outside the company, and

  • gather information and expertise from persons who have knowledge in different areas than your own.

In general, a three to six person board will likely meet your needs.

What you should look for in a board:

  • Objective and honest.

  • Knowledge and expertise outside your skill set.

  • A genuine interest in helping you/your business succeed.

  • Problem solvers who are good communicators.

  • Diversity of skills, work and life backgrounds.

  • Top or well-respected individuals in their field.

  • Persons well-connected with networks that might be leveraged to assist you may also be a possibility, but it comes with a warning.  Advisory board members will almost always be willing to make a few introductions, but don't expect them to be your sales force.  No advisor wants to feel used for something other than what was expected when they agreed to serve.

How to form the board:

 

Before approaching anyone to serve:

  • Carefully consider if you will be able to maintain a reasonably high level of professionalism in dealing with board members including preparing for meetings as well as sending out materials and an agenda defining what you expect to accomplish during the meeting 10 to 14 days in advance.

  • Ask yourself, how will my business be different in one year because of this board?

  • Write a mission statement for the board and define the scope of issues the board is expected to address.

  • How often do I plan to rotate members?

  • Is this ongoing or just a one time board?

  • Develop a standing agenda and annual schedule; i.e. four time per year to review performance to goals, a draft quarterly plan highlighting elements to be discussed, and a tentative forecast.

  • Set expectations of the time commitment you expect from members and how they will contribute. i.e. Only four meeting a year or do you want to be able to call them and send email between meetings to get input?

  • Decide if there will be an honorarium or not.

  • Have a non-disclosure and a non-compete agreement prepared.

  • Draft an invitation letter for discussion with the candidate covering the specifics and including the attachment listed above.

  • Think about the questions you want to ask your advisors.

Meet with potential members to discuss the idea. 

  • Express appreciation for the meeting. 

  • This is mostly a honorary role so focus on your respect for his/her expertise.

  • Let the candidate know the specific type of assistance you hope to gain from him/her.

  • Discuss the points covered in your draft letter, but don't refer to the package you have prepared, wait and provide that for review after the meeting. 

  • Respect his/her time and when you get a positive indication, say thank you. 

  • Tell him/her that you have pulled together the details of what you have in mind and would like his/her comments.

  • Ask when he/she will be able to get back with comments.