Why create an advisory board?

• Author: Rapattoni, Steve
• Position: Private companies

If you're a small private company that doesn't have a typical board of directors and is seeking growth, why not get help by creating an advisory board? In creating such a board, your small company could gain the advantage of having a board without the usual legal and other steps involved in forming one. It could especially be a boon to your business in the current challenging economy.

Building a vibrant business through the use of an advisory board offers a huge competitive advantage. Such a board will challenge you to think strategically about growth and provide a framework for sound decision-making. Your board should hold you accountable for following through on plans.

Think it might be a good idea? Consider the following for getting started.

Creating an advisory board. Think of the advisory board as your personal mentoring group. Don't operate in a vacuum, as many business owners do. Populate your board with people in a variety of fields who have demonstrated success. Look for experts in banking, marketing, accounting, insurance, management and law. Select leading-edge thinkers with practical experience from within and outside of your industry.

Known industry leaders can be a bonus and give you credibility. Even more important is to populate your board with proven problem-solvers who can absorb information quickly, have excellent communications skills and will give their own opinion or offer new ideas.

Finding experts and leading-edge thinkers. Consult with mentors and proven business leaders you respect--colleagues, financiers, vendors, friends and relatives--to see if they have contacts with the kinds of people you seek. As possible, get personal introductions or seek these people out at conferences, seminars, bookstores and panels. Google can be helpful for researching prospective members on the Internet; query them through company websites or by telephone.

How many should be on your board? The number of members will vary depending upon the size and complexity of your business. A small business might have a board of three or four people; a medium-sized business may do well with five to seven; a large firm can have 10 or more members.

Compensating your board. Advisory board compensation varies widely. Many small and medium-sized firms pay each board member $300 to $500 per meeting, though some advisory board members don't receive payments.

Compensation to board members at large companies can climb into the thousands of dollars per...