When was the last time a piece of advice transformed you or your business? Did that advice come from someone inside or outside your organization? What if you could significantly increase the chance of receiving the same kind of highly valuable business advice in the near future, and on a regular basis? To stay innovative and competitive in their industries, entrepreneurs, business owners, and executives often seek unique perspectives from key voices outside their usual channels. Unfortunately, finding those perspectives is not always a simple matter. The higher one’s position within an organization, the fewer differing opinions he or she is likely to hear. An overall downward trend in off-work socializing has further limited opportunities for executives to network and gain fresh perspectives. At the same time, rapid advancements in technology and social media have created millions of virtual alliances among people who share common interests or goals. For these and myriad other reasons, many business leaders are now assembling customized groups of key advisors to help them guide the futures of their companies.
What is an Advisory Board?
Composed of experts, colleagues, friends, and specialists in and outside of the field, an advisory board provides a safe forum to discuss ideas and get critical feedback. Consider it a think tank, a team of relevant centers of influence, or a group of people committed to the long-term success of your business. An advisory board should be the “dream team” of advisors with whom the company’s top executive(s) can share the most important and private thoughts about the direction of the organization. Unlike a board of directors, an advisory board…
- bears no fiduciary responsibility to the company
- can meet without minutes recorded or binding resolutions made, on a scheduled or ad-hoc basis, in person, by phone, or online
- may include members other than the company’s insiders or shareholders
- has terms of membership and operates as determined by the company executive(s), not by the company’s governing documents
What Are the Benefits of an Advisory Board?
Besides supplying new ideas and opinions, advisory boards also offer access to potential investors, customers, employees, or other business partners. Members may encompass everyone from former industry CEOs and clients to technical consultants, financial experts, and legal professionals. Whatever their pedigree, advisory boards equip executives with an enhanced sense of legitimacy, knowledge, and perspective. The cardinal advantages of an advisory board are its objectivity, flexibility, precision, and efficiency. Objectivity: Unlike a board of directors, members of an advisory board are seldom embroiled in a company’s internal politics or cultural pressures. Flexibility: Advisory Board meetings may be conducted inside or outside the office, as, when and however it is most convenient and helpful for the company executive(s). Precision: The focus of an advisory board can be as broad or narrow as desired by the executive(s) in charge. Specialized, small-sized boards are best suited for particular business purposes such as branding, the launch of a new product or technology, risk assessment, and so on. A newer company, on the other hand, may benefit from a more generalized advisory board which addresses all strategic planning issues. Efficiency: Because of its direct line to the company’s decision-maker(s), an advisory board bypasses bottlenecks caused by organizational hierarchy, office politics and convoluted chains of communication. Additionally, supported by the advisory board’s consensus and armed with its expert opinions, executives may feel more empowered to institute changes quickly and broadly. There are mutual benefits for the advisory board as well. Members…
- might earn compensation (e.g. hourly rates, equity incentives, food and refreshments)
- gain resume-building opportunities and access to other high-level advisors
- get the chance to help friends and causes they care about
- engage in valuable cross-disciplinary problem-solving and team-building
When Should You Consider Starting an Advisory Board?
Starting an advisory board is almost never a bad idea. However, there are several crucial moments in the business lifecycle when an advisory board is especially useful:
1. During a Time of Transition
If you are considering selling, transferring, or restructuring your company, an advisory board can help you weigh your options and gauge potential buyers and successors. Because of their independent, impartial nature, advisory boards are immune from disputes over dividends and management that often accompany these transitions.
2. Before Launching a New Product, Service, or Venture
Need a second—or third, or fourth—opinion about your upcoming business idea? Ask your advisory board. Their input, gleaned from industries and career experiences—either within or outside your own—can help you ground your expectations and formulate detailed strategies and sales projections.
3. When Entering a New Market
Whether you are introducing your brand to a new consumer segment or moving operations to an unfamiliar locale, make sure to check in with your advisory board, particularly if members have experience with the region or audience in question. Want to learn more about this subject? In the next part of this six-part series about advisory boards, I’ll offer some tips on selecting the best members for your board. In the meantime, please feel free to reach out to me with any questions you may have about advisory boards or any related topic. As a Principal in Offit Kurman’s Business Transactions and Governance practice, I regularly advise clients on matters related to business formation and transactions, governance, mergers and acquisitions, IP, and more. I also manage New Paradigm Counsel®, a service offering through which Offit Kurman delivers customized, comprehensive and cost-effective outsourced legal departments. Click here to contact me. To learn more about New Paradigm Counsel, click here.
Interested In Learning More About Advisory Boards?
Click here to download 3 Keys To Making The Most Of Your Advisory Board
Click here to contact me. To learn more about New Paradigm Counsel.
ABOUT JONATHAN WACHS
Jonathan Wachs provides strategic counseling and operational advice to clients in the areas of intellectual property, commercial transactions and outsourced legal departments. As head of the firm’s Intellectual Property Group, Mr. Wachs works closely with clients to develop, register, analyze, enforce, and transfer intellectual property assets in a customized, cost-efficient, and highly effective manner. Additionally, he conducts intellectual property audits through which clients learn the nature and value of their intellectual property assets and the steps needed to protect such assets from misappropriation or dilution. As a business lawyer, he has successfully negotiated and completed several multimillion dollar business transactions and has served as general counsel to several small and midsize businesses and organizations in various industries and professions. He also manages a blog about intellectual property issues, Friday Factoids. Mr. Wachs co-manages New Paradigm Counsel, a service through which Offit Kurman delivers customized, comprehensive and cost-effective outsourced legal departments. Through New Paradigm Counsel, Jon served as outsourced general counsel for a government contractor, a large printing business, a payment processing company and an identity theft restoration business. You can connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.
WASHINGTON | BALTIMORE | FREDERICK | PHILADELPHIA | WILMINGTON | VIRGINIA | NEW YORK