Q&A: What is an advisory board and what are the benefits?

Leading a business can be challenging. Decisions need to be made. Things need to get done. People, both employees and customers, are relying on you. 

We know how it feels. It’s a lot of responsibility to have on your shoulders, and having the right support around you is essential. 

This support can come from those you’re in business with, including other directors and, of course, your family and friends. But these people may not always have the right expertise to guide you or be in a position to look at things objectively. Enter the business advisory board. 

What is an advisory board?

An advisory board is a group of people who provide strategic advice, analysis, critical thinking and recommendations to the management and owners of a business or company.  

These people are selected for their expertise and experience to provide business advice and bring specialist skills or knowledge to the owner and business. This expertise could include things like strategy, industry trends, marketing, financial management or product development. 

How many people should sit on an advisory board?

How many people sit on an advisory board depends on the size and needs of your business. As a guide, three is generally sufficient for SMEs, as too many cooks can spoil the broth. For larger businesses, it can be around five to seven. 

How is an advisory board different to a board of directors?

An advisory board is more informal than a board of directors. It has no binding decision-making authority or fiduciary duties, as highlighted in the Corporations Act 2001. Because of this, the structuring and management of an advisory board is flexible. 

What is the role of an advisory board?

By providing valuable insights and advice, the role of an advisory board is ultimately to help businesses make more informed decisions—decisions that will work to help them achieve their goals.

How often do advisory boards meet?

Advisory boards don’t have a set number of regular meetings. However, it’s common for them to meet at least four times a year to provide advice. This allows for regular updates, strategic discussions and timely counsel while not overburdening board members with too many meetings. 

If an advisory board's input is critical for ongoing projects or fast decision-making, they could be more frequent, such as monthly or bi-monthly. 

What happens in an advisory board meeting?

During an advisory board meeting, attendees, including advisory board members, a chair and business directors or executives, will generally cover the business’s strategic direction, growth plans and other functional business needs. 

Discussions and the agenda will be aligned with the business’s evolving needs. This generally relates to key strategic plans and goals rather than daily management or operational aspects. 

Importantly, make sure you plan ahead to get the most out of your meetings, including providing an agenda beforehand. 

What are the benefits of an advisory board?

The main benefit of an advisory is the same as its role: to provide objective, informed insights and advice that can help business owners make informed decisions and achieve their goals. 

In addition to this, advisory boards can also provide guidance and encouragement, much like a business mentor. This can help reduce stress and keep owners motivated. 

Advisory boards can be highly beneficial for start-ups and small businesses to help them grow. They can also be invaluable to not-for-profits, who may have less business-specific skills in-house. 

What is the role of an advisory board member?

The role of an advisory board member is to attend advisory board meetings and provide their expert insights and opinions with due care to the benefit of the business. 

On top of this, they can also help in problem-solving, provide guidance and support, leverage their connections to provide opportunities to the business, such as making introductions, promote the business in wider circles, and offer ethical oversight. 

What are the benefits of being an advisory board member?

While serving on an advisory board does require time and commitment, it offers several benefits. These include:

• Boosts your professional prestige – It’s an honour to be asked to be on a board. It can elevate your visibility and credibility. 
• Gives you practical experience – Such as understanding the intricacies of organisational planning and decision making, problem solving and collaboration.
• Expands your professional network – Engaging with other board members, executives, and stakeholders provides opportunities to build relationships. 

Do advisory board members get paid?

Advisory board members of businesses may get paid or they may simply have expenses paid. However, in many not-for-profit organisations, advisory board members generally serve without direct compensation. 

How can I set up an advisory board?

Setting up an advisory board involves several key steps to ensure that it effectively serves your business’s needs:

Step 1 – Identify the skills and expertise required

What internal expertise are you lacking that could benefit your business? Consider areas such as industry knowledge, strategic planning, finance, marketing and operations. Creating a skills matrix can be helpful for this. 

Step 2 – Seek out professionals with these skills

Use professional networks, industry associations and referrals to find potential members. Avoid friends or family members as they may not always be able to be objective. When you approach people, provide a clear explanation of the advisory board’s purpose, expectations and time commitment.

Step 3 – Clearly establish expectations 

Once you’ve found the right people, create an advisory board member’s agreement that outlines the roles, responsibilities, expectations and 

remuneration. Include details about meeting frequency, duration and agenda-setting processes. Plus, define the term length.

Step 4 – Evaluate and improve your board

Periodically assess the effectiveness of your advisory board and its contributions to your business. Gather feedback from advisory board members and your leadership team to identify areas for improvement. Make adjustments to the structure, processes or membership as needed.

Step 5 – Show your appreciation 

Being on an advisory board is a commitment. Because of this, acknowledge the contributions of your board members and show appreciation for their time and expertise. Consider benefits such as networking opportunities or professional development.

Does my business need an advisory board?

While your business may not need an advisory board, having one can be hugely beneficial for the reasons shown above. 

Instances where it may not be worth setting up an advisory board can be when you already have strong internal expertise and external advisors or when you’re operating in a relatively straightforward market or industry.

If you think an advisory board would benefit your business and would like advice and support in setting one up, reach out to your Maxim advisor or contact our team today.