When a business grows and the market gets more competitive, owners start to think about adding a board advisor to its internal structure. Board advisors are different from the board of directors in purpose, role, and duties. But they still offer a lot of value that helps businesses stay on the same page for strategic success.
So, what is a board advisor, what do they do, and does your company need one? To help answer these questions and more, we’ve compiled the ultimate guide to board advisors with all the basics you need to know.
Board of Advisor Basics
Before we get into the most frequently asked questions on advisory boards, let’s start off with the board of advisors’ definition. An advisory board or advisory board position is a way for a company to work with outside business experts in a structured way. Advisory boards are used by many organizations when they want to grow, change their strategies, or get access to industry-specific knowledge or connections.
An advisory board versus a board of directors, as for differences, comes down to decision-making. The board of advisors’ role is to weigh in on the decisions that come to the table, but the board of directors’ role is to vote upon them. Before the board of directors votes on an issue, advisory board members often give their opinion or professional advice.
It’s never too late to add advisory board positions to your company’s structure, but it’s also highly recommended that start-up companies begin with one, too. Your advisory team will not only help you figure out how to grow your business, but having a team of well-known names at your disposal will also help investors trust your business.
What is a Board Advisor? The Top FAQs
Of course, even with an in-depth advisory board definition, it’s likely you have a few more questions. Next, we’ll answer the most frequently asked questions about advisory board responsibilities and more.
What does a board advisor do?
The job of the board of advisors is to help, advise, and share their knowledge with the board of directors. The day-to-day or ongoing duties that the board advisor has, however, will vary from business to business. For a board advisor position to be successful, these duties should be made clear when the person starts.
The functions you should be clear to outline are –
- How communication will be facilitated
- How often the advisory board will meet
Some advisory teams will be more casual, while others will want a formal agreement on file. In this agreement, companies will spell out their roles in more detail to avoid misunderstandings, limit their risk of being sued, and protect their intellectual property or confidential information.
Are board advisors paid?
In general, most board advisors aren’t paid directly. However, they often receive stock-based compensation, like options or even equity interest. That means that the board of advisors’ pay is directly tied to how much the business is worth, which further encourages the advisory team to give good advice. Keep in mind that many advisory teams are also made up of volunteers, who can benefit from the position in experience and networking.
Who should be on a board of advisors?
Who should be on your company’s board of advisors varies depending on your business or market type. Most boards of advisors, though, are made up of lawyers, HR professionals, consultants, or other well-known people in your industry.
How do you create a board of advisors?
To create a board of advisors that gets started off on the right foot, here is a quick step by step guide to follow –
- Clearly identify your company’s missions or goals of creating a board of advisors, in writing.
- Explore your network or industry for business professionals that could be beneficial on your advisory team.
- Make an offer to the selected individuals you wish to have on your board of advisors.
- Maintain organization and communication amongst your advisory board.
It’s best to start small at first and grow your advisory board from there. It’s also a good idea to write up an agreement with your advisory board for a year and then reevaluate it after that in case issues arise.
The Final Word – Finding Board Advisors
Now that you can answer the question, “What is a board advisor?”, are you starting to realize that your business or group could benefit from having one? Setting up an advisory board is a simple and effective way to help your business make better decisions that will help it grow.
So, how can you start? It all starts with an expert. At Double Iron Consulting, our co-founder, Bill Smith, is an expert when it comes to structuring your business for success. That includes the skills you need to find, set up, and run advisory board positions that are a good fit for the goals of your company.
Schedule a no-obligation consultation with Bill today to begin thinking about the “bigger picture” when it comes to the size and scale of your business.