What Does An Advisory Board Member Do?

Business structures often include advisory boards made up of independent individuals who provide advice and guidance. 

Usually, that includes things like: 

●  sharing opinions about business-critical decisions

●  advising on potential solutions for problems

●  studying reports and analyzing results

●  making recommendations about ongoing strategies 

That's by no means an exhaustive list! Still, it should give you enough of an idea of the kinds of things that an advisory board member does. 

Typically, they're not owners, directors, or shareholders. An advisory panel can't force the business to follow their suggestions—they're there purely to offer advice.

How Valuable Is An Advisory Board To A Start-Up Business?

We all appreciate that coaching is important to leadership. Even the most dynamic entrepreneur won't have years of experience in every aspect of business.

It's also rare for a small, growing business to have comprehensive, in-house knowledge across areas such as governance, compliance, and finance. 

Advisory boards act like mentors, steering the leadership team through crises or significant decisions. The cumulative skills, experience, and knowledge available can profoundly benefit new ventures looking to carve their way through a competitive market.

Do Advisory Panel Members Get Paid For Business Support Services?

If you're interested in establishing an advisory board, balancing costs with the anticipated returns is essential. 

Specific share structures designed for advisory panels can be a great opportunity. By its very definition, an advisory share means you agree on a deferred ownership transfer, securing investor expertise with a longer-term return strategy.

There are also a few other payment options, but one of the popular routes is to offer equity. If you’re not sure what that means, click here for information on equity in a company explained. 

Advisory panels can be paid per meeting, which might be preferable for companies with problems forecasting cash flow income. However, ad hoc advice is less practical than ongoing oversight and regular consultations. 

Business moves fast, so convening a board every few months may well be far too late to make quick-fire decisions. 

Equity can replace a meeting fee. You recompense advisors with equity shares equivalent to the amount of input you need and the added value they bring. That means your advisory board is vested in the business's performance and will often be available on a more flexible basis. 

As a business owner, you have a choice to make about what proportion of shares you offer. Still, any advisor with an equity stake will move heaven and earth to make sound recommendations since their financial returns depend on it! 

What Roles Are There On An Advisory Board?

The advantages of an advisory panel hinge on the current knowledge and market expertise of the members. If you think of it as a sounding board, you're on the right track. 

Some of the typical roles and functions might include:

• chairperson: an independent person who convenes and chairs meetings

• internal directors: business representatives responsible for maintaining a dialogue with the panel

• external advisors: specialists in their fields who offer advice and implementation suggestions 

Internal roles are usually covered by the owner, CEO, director of the business, or another senior manager with authority to make decisions.

The Benefits Of Using An Advisory Board

Many small businesses don't have the cash to employ world-class talent. Advisory boards cost substantially less, and, as we've seen, they might be paid in share equity. 

There are also many ways to structure that share ownership. For example: 

●  Share options with a five to ten-year tie-in period are a way to link with exceptional advisors for the long term.

●  The equity you offer depends very much on your expectations and the quality of your advisory panel. The standard in the tech world is to offer up to 1% shares. Elsewhere you're looking at about 0.10% to 0.25% for a two-year position. 

Start-up businesses may offer a higher share stake, depending on the stage of the company formation and whether they need advice in certain areas. 

However it's set up and whichever way you choose to compensate your advisors, they can bring a tremendous amount of perspective and provide access to hard-earned knowledge that can make a considerable difference to your trading future.