Key takeaways
- An advisory board has no legal authority and no liability. It exists to make the owner's decisions better, and that is why it works for private companies.
- Three to five people with experience you lack, meeting quarterly on a prepared pack, is the whole structure.
- Pay something, in cash or in a modest arrangement your lawyer and accountant approve, because free advice is treated as free.
- The board's value is measured by the decisions it changed, and the owner should keep a list.
A private company does not need an advisory board to operate, which is exactly why most never set one up. The owners who do tend to describe the same benefit. Once a quarter, they have to explain the business to people who are not paid to agree with them, and the explanation changes what they do. Ali takes advisory and board roles for companies in British Columbia and this guide describes how to build one that earns its place.
Advisory board, not board of directors
A board of directors has legal duties, authority over the company and personal liability, and its structure is set by the corporate statute and your articles. An advisory board has none of that. It advises, the owner decides, and the advisers carry no liability for the decisions. That makes it light to set up and easy to change. If you want a legal board, that is a different project and it starts with your corporate lawyer.
The advisory board is usually documented with a simple letter for each adviser that sets out the role, the time commitment, the confidentiality terms and any compensation. Your lawyer reviews it, which takes little time and avoids misunderstandings later.
Who to invite
Three to five people, each chosen for experience you do not have. The common gaps for an owner-led company are finance and capital, sales at scale, operations in a larger company, your industry at a level above where you are, and an exit, meaning someone who has sold or bought a company. Avoid friends, suppliers who depend on you, and anyone who will not disagree with you in the room.
Look for people who have done the thing, not studied it, and who have the time to read a pack before each meeting. One owner who is a few years ahead of you in the same kind of business is often the most valuable seat at the table.
- Someone who has run finance or raised capital for a company larger than yours.
- Someone who has built a sales organisation beyond the founder.
- Someone from your industry at the next size up.
- Someone who has been through a sale, a purchase or a succession.
How to run the meetings
Quarterly, two to three hours, with a pack sent a week in advance. The pack has the quarter's numbers against plan, the three priorities and their progress, the org chart with changes, and two or three decisions the owner wants advice on. The meeting spends most of its time on those decisions, not on reviewing the numbers, which the advisers have already read.
The owner presents, listens and takes notes. The owner does not defend. After the meeting, the owner writes one page on what was advised and what they decided, and sends it to the advisers. That page, kept quarter after quarter, is the record of what the board is worth.
Between meetings, use the advisers sparingly. A call when a real decision comes up is welcome. A weekly stream of questions turns advisers into unpaid staff and they will quietly stop answering.
What to pay
Pay something. Free advisers skip meetings, skim the pack and soften their advice. The amount is modest for a private company and takes one of a few shapes. A fixed fee per meeting, an annual retainer, or in some cases a small arrangement tied to the company's growth or value. Any arrangement beyond cash is structured by your lawyer and accountant, because it may have tax and shareholder consequences. Our own board and advisory roles sit inside our advisory retainer band of $8K to $25K per month when combined with operating support, and are set individually for a quarterly advisory seat alone.
Common mistakes and how to judge it
Inviting people for their names rather than their experience. Sending the pack the night before. Using the meeting to report rather than to decide. Keeping advisers for years after the company has outgrown what they know. And never writing down what the board changed, so that after a year nobody can say whether it mattered.
Judge the board by the decisions it changed. Keep the list. If, after four meetings, the list is empty, change the people or the format. If the list has three good decisions on it that you would not have made alone, the board has already paid for itself.