Business owners and organizations have a lot on their plates. Decisions need to be made, strategies need to be devised, planning and implementation are ongoing, and growth is always top of mind for a business’ management team. While owners and business leaders are focused on day-to-day operations, an external advisory board can help them see the big picture with greater clarity. Through strategic guidance, advice, support, and industry experience, advisory boards can be an integral part of an organization’s business.

Dissimilar from a fiduciary board that has oversight and responsibility for the success of a company, an external advisory board offers the best part of a fiduciary board without the actual fiduciary responsibilities. Providing guidance and expertise that can help a business grow, external advisory boards are beneficial for for-profit companies for several reasons:

• Access to expertise. Advisory boards are more strategic rather than operational and many businesses rely on their advisors for their specific expertise. An advisory board brings together a group of experienced, knowledgeable individuals who can offer valuable advice and insight into various aspects of a business, including finance, marketing, sales, strategy, and operations.
• Strategic planning. Organizations need to engage in some level of strategic planning to consider their strengths and weaknesses as well as future opportunities and potential business threats. Not having a strategic plan is risky, as it can lead to getting stale in the services provided, not addressing market fluctuations, or making poor investments. An advisory board can help a middle market business develop and execute a strategic plan that aligns with its long-term goals and objectives, as well as provide guidance on how to navigate industry challenges and advancements.
• Improved decision-making. Advisory board members provide objective viewpoints on strategic business decisions. The bigger the decision, the larger the impact it will have on the organization, which is why it is best to have multiple points of view. With the help of an advisory board, middle market businesses can make better assessments based on a wider range of perspectives and diverse expertise.
• Increased accountability. Some organizations utilize their external advisory board like they would a fiduciary board, holding formal periodic meetings and delivering regular reports that help them stay on course. To this end, an advisory board can hold the business leadership team accountable for achieving their goals and keep them focused on the big picture.
• Access to networks. External advisory boards are comprised of of individuals with varied skill sets from different industries and backgrounds. By casting a wid net of prospective advisors, organizations have access to a diverse business network Advisory board members should be charged to leverage their own networks and connections to link a business with potential new customers, partners, investors, suppliers, and other stakeholders.
• Objectivity. An advisory board can provide objective feedback and challenge a leadership team’s assumptions, ensuring that the business stays on track and doesn’t become overly focused on short-term results. External advisory board members have the best interest of the company in mind. And, because they are not mired in the day-to-day operations, they are often free of bias.

Keep in mind that most external advisory boards are compensated in some way, whether it is financially, through a charitable contribution, or some other renumeration. When establishing an external advisory board for a business, it is recommended that leaders either pull existing advisors into a more formalized structure or board or seek out individuals that will be a good fit based on the business’s short- and long-term goals. For example, if your goal is to sell the business in five years, align yourself with people who have been through an M&A process. And, it goes without saying that communication, engagement, and transparency are key to a successful advisory board relationship.

Developing an external advisory board can be a smart move for any business looking to improve its performance, increase accountability, and enhance long-term success. By leveraging the expertise and experience of advisory board members, and accessing their vast and diverse networks, companies can better position themselves for the future.

Jeffrey Rosen, CPA, CGMA, MBA, is the managing partner at RS&F. He performs business advisory and consulting engagements and has particular industry expertise in real estate, construction, finance, business services, distribution, technology, and not-for-profit.