Small businesses often find themselves at a crossroads in their journey.
Whether they are in a phase of rapid growth, facing a plateau, working towards a long-term goal or seeking expertise to accomplish a critical strategic objective, the idea of establishing an advisory board becomes increasingly relevant.
As an ICD.D certified corporate director and CEO of a technology company that has benefited from advisory boards for two decades, I firmly believe that many small businesses delay the formation of advisory boards for too long.
Advisory boards have the potential to make a profound impact on early-stage businesses, helping them navigate growth, foster innovation and enhance profitability. Interestingly, their structure and compensation framework make them particularly suitable for smaller and startup businesses. While advisory boards lack legally defined responsibilities to stakeholders, this very freedom opens the door to experienced and influential business leaders who may be hesitant to take on the fiduciary responsibilities of a directorship in a startup. These advisers can freely share insights, opinions and tactical advice on various aspects of the business, from operations to strategy to personnel matters.
The size of an advisory board can be tailored to the specific needs of a business at any given growth stage. My own business advisory board has ranged from two to four members, depending on our strategic objectives and the expertise we sought from our shortlist of potential advisers. Furthermore, advisory boards are not bound by a predetermined lifespan. Most small businesses and advisory boards prefer terms of one to two years, allowing for a deep understanding of the business and its goals. Flexibility is a key advantage, enabling businesses to adjust the board’s composition according to evolving needs.
In terms of compensation, advisory boards offer financial flexibility for small businesses. Advisers often provide their services pro bono, transitioning to a fiduciary board role as the business matures. For more demanding roles, businesses may choose to provide a yearly stipend, cover travel and meal expenses, or offer an equity stake in exchange for greater involvement.
With these elements in mind, let’s delve into the five significant ways in which advisory boards can benefit emerging small businesses.
Founders of small businesses often grapple with the feelings of being overwhelmed during the initial years of operation. Even with a competent management team and an external network of experts, knowledge gaps inevitably arise when confronting new challenges and opportunities. By systematically identifying the competencies that their business lacks – such as sales strategy, family governance, succession planning, regulatory compliance or compensation structures – entrepreneurs can enlist advisers to bridge these gaps. This not only aids in business development but also enhances leadership skills.
Credibility holds immense importance, especially for new small businesses and startups. Associating with experienced, principled and well-respected advisers who are experts in the industry or sector can significantly boost trust and confidence among investors, vendors, customers, employees and potential candidates. The involvement of such advisers signals confidence in the business, delivering substantial public relations and reputational value.
Running a startup is an energy-intensive and time-consuming endeavour, often leaving little room for networking. However, networking is vital for propelling a new business to success. Senior business leaders serving on advisory boards have extensive networks and a history of sharing their expertise, that can result in a diverse range of high-caliber business contacts. They can leverage their networks to connect the business with subject-matter experts, trusted vendors, qualified employees, strategic partners and potential funders. This increased visibility within industry circles can be invaluable.
In the fast-paced world of startups, speed is often celebrated. Concepts like minimal viable product, move fast and break things, and making mistakes quickly are prevalent. While this approach can foster growth, it can lack empathy and prove counterproductive in the long run, leading to technical debt and a decline in customer experience. A proficient advisory board encourages businesses to reflect, report, explain decision-making processes, consider alternative viewpoints and question assumptions. This balance between short-term goals and long-term sustainability is essential. Accountability fosters the rigour required for longevity and promotes the development of superior products and richer customer experiences.
Representation is valuable in and of itself, transcending economic justifications. Overemphasizing the economic benefits of diversity can be problematic, as it often overlooks issues of inequality. Many businesses struggle to achieve diversity in their ranks, limiting their capacity for innovation, continuous improvement, cross-cultural learning, self-assessment and customer empathy. An advisory board with diverse perspectives can combat homogeneity and hold leadership accountable for diversity goals and initiatives.
Unlocking the full potential of small businesses requires more than just operational efficiency. It demands a diverse and dynamic advisory board that shapes your company’s vision, and accelerates growth with increased rigour, understanding and competency. Don’t wait too long to harness the power of advisory boards – they may be the catalyst that propels your business to the next level of success.
Cybele Negris is a serial entrepreneur and the co-founder and CEO of Webnames.ca. She holds her ICD.D designation and serves on multiple boards.