How Do Small Business Advisory Boards Operate?

Advisory boards play a crucial role in the growth and development of many small businesses. They provide invaluable guidance and insights from experienced professionals, helping companies make informed decisions. This article explores the operations of two small business advisory boards, highlighting the differences and commonalities in their structures and functions.

Types and Structures of Advisory Boards

Advisory boards can vary widely in size, membership, and structure, reflecting the unique needs and goals of the businesses they serve. Two examples can be observed in different contexts: one managed by an independent consultant and another by a larger, full-time employer.

Independent Consultant

The advisory board of an independent consultant operates on a more informal basis. It consists of two colleagues who are willing to provide periodic advice and act as a sounding board. This board is unpaid, and both members are close friends who do not expect any compensation. The board does not hold regular meetings but comes together a couple of times a year for business dinners as a token of appreciation. Their advice is informal but documented for business purposes.

Full-Time Employer

The advisory board managed by a full-time employer is a more formal setup. It was established just last year and involves a rigorous selection process. The employer screened down a list of 12 potential members to the top three, who were then offered a paid position on the board. Each member receives a nominal payment of 500 dollars per meeting and 1000 dollars annually. Meetings are held quarterly, lasting 2-4 hours, and cover a set agenda. Minutes and action items are documented after each meeting. Recommendations and advice are sought on various aspects such as marketing, recruiting, and general business operations.

Key Differences and Commonalities

1. Payment and Compensation: The independent consultant's advisory board is unpaid, relying on the goodwill and friendship of the members. In contrast, the full-time employer's advisory board is compensated, providing a financial incentive for the members to contribute their expertise.

2. Frequency and Structure of Meetings: The independent consultant's advisory board meets informally a couple of times a year, usually for casual dinners. The full-time employer's advisory board is more structured, holding formal meetings quarterly with a set agenda and documented minutes.

3. Purpose and Scope of Advice: The advice provided by the independent consultant's board is informal but focuses on business growth and decision-making. The full-time employer's board seeks more specific and professional advice on marketing, recruiting, and general business operations.

The Role of Advisory Boards in Small Businesses

Advisory boards are valuable resources for small businesses operating under various models, from independent consultants to large employers. They provide strategic guidance, help in problem-solving, and bring a wealth of experience to the table. The key to a successful advisory board is clear communication, mutual trust, and a well-defined structure to ensure that the board's objectives align with the company's goals.

Key Benefits of Having an Advisory Board

1. Access to Expertise: Advisory boards can provide access to a diverse range of expertise, helping companies address specific challenges and opportunities.

2. Strategic Guidance: Board members can offer valuable insights and strategic direction, helping companies make informed decisions and steer clear of common pitfalls.

3. Network Expansion: Members of the advisory board often bring with them a network of contacts and partnerships that can be beneficial to the business.

Conclusion

The operations of small business advisory boards can vary widely, reflecting the unique needs and goals of the businesses they serve. Whether informal or formal, advisory boards provide a valuable resource for strategic guidance and expert advice, helping companies grow and prosper.