Chief executives at large corporations rely on their board of directors for strategic advice and practical expertise. In contrast, small business owners may feel lonely at the top. Assembling a multidisciplinary advisory board allows small business owners to tap into the knowledge of experienced executives and develop greater confidence in their day-to-day decision-making.
Liability exposure is a major impediment to experienced, successful business executives becoming involved in growing companies. A properly structured advisory board provides the tool for overcoming this obstacle. Unlike a legal board of directors, advisory board members have only non-voting, advisory authority so that they will be isolated from the fiduciary duties and legal liabilities of a true board of directors.
The right advisory board members offer valuable insight on a wide range of topics relevant to small business owners, including sales, marketing, corporate partnerships, financing, technology, administration, industry regulation and international matters. Typically, boards range from three to seven members, depending on the company’s developmental stage, strategic goals, existing resources, investors and complexity. Management should select advisory board members based on their specific abilities and experience relevant to the company’s business needs.
Advisory board members can provide useful contacts. Members with strong business, financial, political or industry connections can open new doors for small businesses.
Because advisory board members are independent from company management, they can provide an unbiased perspective; they are free to express their views on important issues without concern for company politics and other dynamics that often inhibit dissenting opinions. They offer frank and impartial advice, often acting as a “devil’s advocate,” challenging the assumptions of management and the existing business model.
An adviser’s experience can mean insight into the company’s business model, policies and long-term decisions related to growth, and product or service offerings. Members can address specific projects designated by the company, such as identifying potential executives or acquisitions.
Once established, small business owners should review their advisory board members on a regular basis and be willing to replace advisers as the needs of the business evolve.
J. Benjamin English is a partner with Hirschler Fleischer (Richmond, Va.). He helps growing companies develop practical solutions to legal issues. Among other business decisions, he advises on structuring entities and provides guidance related to business plans, capital structure, financing, shareholder agreements, employee compensation and benefits, and intellectual property matters. He can be reached at (804) 771-9544 or by email at [email protected].