Every privately held business that has employees should have outside advisers. An advisory board's role is to protect the investment of the shareholders. Since the shareholders and entrepreneurs are often the same, the advisory board plays a special role by offering accountability, discipline, and mentoring for the entrepreneur. These dual roles help develop the business owner and business towards the goal of maximizing value. Excuses for not setting up an advisory often indicate that the business owner lacks commitment to the success of the business.

Regularly scheduled quarterly meetings with reviews of the financial results provide a level of governance and discipline that EVERY entrepreneur needs. Advisors can also mentor the entrepreneur and offer guidance from experience. Advisors can often have contacts that can open doors for entrepreneurs.

Setting up an advisory board requires the following:

• Locate 3-5 talented business people who would be willing to serve. Screen them carefully. (More about this later.)
• Each advisor should be paid for each meeting. Adequate compensation sends a signal to the advisors that the entrepreneur is serious about the business and that the advisor is expected to deliver value for the services. The entrepreneur should provide liability insurance for the advisors.
• Set terms for the advisors so that they rotate off periodically (not all at once). After a while, having fresh eyes helps govern the business and give new insight.
• Meetings should be held each quarter and last 3-4 hours. Best time to schedule the meetings is 2-4 weeks after the quarterly financial reports are prepared.

An agenda should be sent out ahead of time with materials to prepare for the meeting. Such materials include:

• Most recent financial statements
• Quick notes on the financial statements
• Sales forecasts and/or sales funnels

Issues to review:

• Strategic
• Tactical problems
• Management and personnel issues

The meetings should be confidential in order for advisors to speak freely about sensitive business issues. The entrepreneur needs to take ownership of ALL decisions made. The advisors recommend, but the entrepreneur makes final decisions.

Who are the right people to serve on your advisory board?

• Find talented experienced business people. Find people who have experienced success.
• Try to find talents in areas in which you are weak. If your weakness is financial discipline, then add a CFO from a medium to large firm. If your weakness is marketing, then add a marketing executive.
• It is not necessary for the advisors to be experts in your industry. Many business problems are universal, however being able to understand the nuances of your business does help.

Who should not serve on your advisory board?

• The rule of thumb is people who can’t give good unbiased advise
• Avoid potential conflicts of interest. Your advisor should serve only your business with their advice and not any other interest.
• Friends and family are often not qualified. In addition, emotional issues may interfere with a perceived conflict of interest.
• Suppliers, customers and competitors should not serve on the board. Each of them has a conflict of interest. If you want a customer perspective, set up a customer advisory board in which customers give solely customer feedback. You do not want suppliers or customers reviewing your financial statements.
• Your personal attorney and accountant should not serve on the board. Get fresh perspectives and avoid another conflict here
• Unqualified business people. Someone may tell you they are successful and have achieved success for their organization. They may not or may have been riding come else’s success. Be sure to find the real successful people to serve as advisors.

Where do I find successful advisors?

There is a variety of places to find advisors. Talk to business people in the community. Attend business network events. Ask for referrals. Ask “Who would make a great advisor?” In Dayton, Ohio, Aileron provides a network of potential advisory board members.

When should you start an advisory board?

When do you want your business to grow and become stronger? The day you are committed to those goals is the day you should begin organizing and advisory board.

Would David Gasper serve on my advisory board?

Normally, I serve on very specific boards that meet my requirements. My preference is high technology firms that are located geographically around Dayton, Ohio. I can add the most value to those firms. Remote tools such as Skype and GotoMeeting allow greater geographical participation.