Having access to sound guidance and insight about your company from outside of your organization is a key ingredient to business success.
An impartial, yet informed, stance can offer a fresh perspective that can add great value to a business that’s different and more objective than the insight you’ll gain from within. That’s why each business needs its own council of outside advisors.
For some businesses, like nonprofit organizations, having this advisory council is built into the structure of the organization in the form of a Board of Directors. But, businesses that don’t have a Board of Directors built into their structure are tasked with creating their own advisory board themselves to guide and direct the company.
For those businesses that are building a board of advisors from scratch, it can be hard to identify who to recruit, what to look for and what spots to fill to build a strong council. That’s why we’ve outlined a simple guide for building the right advisory team for your business.
Who to Recruit for Your Business’s Advisory Board
At a minimum, each business needs four advisors: a banker, a lawyer, an insurance and risk management advisor and an accountant. Having the perspective of these four professionals can help your business be the most strategic in the most areas with the greatest results.
In addition to these four advisors that all businesses should have, you’ll also want to consider your specific business and needs. Depending on your industry and operations, you may also want to consider recruiting an IT or technology advisor, an HR and talent advisor or any other specific consultant who can help your business concerning any specific goals you have.
How to Select the Right Advisors
Once you’ve identified the specific spots that you’d like to fill, it’s important to thoroughly vet any advisor who you are welcoming onto your advisory council. Be careful not to settle for the convenience of who you might already know without considering if he or she is truly the right fit for your business.
Finding and vetting the right fit with an entire slate of advisors will be different for every business, but to identify a good match, and to build a strong advisory team, we recommend starting with five simple questions to vet your new team:
- Are we like minded?
- Do you understand my business’s operations and my industry?
- How much time do you spend serving business like mine?
- Is the result of your service worth my investment?
- Who else do you know?
What to Ask: Are we like minded?
Why to ask: When you select an advisor for your business, it’s important to confirm that you have similar outlooks and to ensure that their philosophies and values align with the ones that guide your business. Risk thresholds are a particularly important topic of discussion when determining if you and your advisor are like minded.
Additionally, you’ll want to be sure that you connect personally with your advisors, that they are easy to communicate with and that you are able to build rapport. This can build a foundation for solid communication for the long term.
What to Ask: Do you understand my business’s operations and my industry?
Why to ask: Selecting an advisor who is familiar with your business’s operations and industry trends is a crucial element in building a strong advisory team that offers real value to your organization.
While finding a jack-of-all-trades may sound beneficial, your organization can likely benefit more from finding someone who specializes in serving businesses like yours.
- Lawyers who understand your business will be able to speak to help your business stay in compliance with relevant regulations that may be specific to your industry.
- Having a banker who is familiar with businesses like your own can help in the underwriting and lending processes because they can structure agreements in a way that is compatible to your industry’s terminology, trends and the life cycle of your cash flows and operations.
- Insurance agents or brokers can offer specific insight concerning bonding and working capital.
- Having an accountant who understands your industry can help you prepare for the future—as opposed to having someone who can only help you respond to something that’s already happened. Accountants who understand your operations are also more likely to be able to identify possible efficiencies or tax savings for your company.
What to Ask: How much time do you spend with businesses like mine?
Why to ask: Instead of asking potential advisors if they serve businesses like yours, ask them how much time they spend serving organizations like yours with the services you’re interested in.
This can help you distinguish those advisors who may have one client that is similar to you from those advisors who have dedicated their careers to serving a particular kind of business.
What to Ask: Is the result of your service worth my investment?
Why to ask: Advisory services come at an expense to businesses, and it’s important to know that this expense is an investment—not just a cost.
An advisor’s contribution to your business should add back the value of what you spend to receive those services. This may not look exactly like money returning into your company’s account, but you should be able to clearly pinpoint how the value you are receiving from these services benefits your company.
Advisory services aren’t a disposable commodity. You should be able see the effects from your advisors’ influence long after they leave your office building.
What to Ask: Who else do you know?
Why to ask: Once you’ve found at least one advisor who is a good match for your business, ask him or her for recommendations in other areas in which you’re looking for guidance.
If you’ve connected with an advisor who is truly committed to serving businesses like yours with similar needs, he or she is likely already connected to some of the professionals who can benefit your company most.
Moving Forward with Building Your Business’s Advisory Board
Finding the right advisors for your business is no small task, but if done well, building your advisory board can offer a great return of value for years to come.