Family Business Advisory Board
A family business Advisory Board is made up of individuals who are not affiliated with the family business, but who have extensive business experience. Utilizing an Advisory Board can be invaluable for a family because it promotes the notion of governance within the business.
An Advisory Board works collaboratively with the owners of a family business, as well as with third parties, to consider possibilities for the future of the business, to formulate business strategy suggestions, to provide direction and to give advice on how to handle difficult situations that often arise within a family business. Because an Advisory Board typically consists of non-employees, its members often have outside knowledge and understanding of situations that may not have been experienced by the family business. Therefore, the board can provide advice based on first-hand knowledge and previous experience.
“An advisory board, made up of outsiders who are not “cronies,” is a good way to push the governance envelope. The board creates an environment where owners, in conjunction with third parties, can examine possibilities, suggestions and directions that they might not otherwise consider. Advisory Boards can add real value, especially when dealing with succession!”
The Little Red Book of Family Business: Page 13
An Advisory Board Has Outside Experience
A family business can benefit greatly from an Advisory Board because the board makes it possible for outside experts to provide the family business with guidance on important business decisions. A family business Advisory Board brings a fresh perspective to the table. The board can encourage business leaders to deliberate and discuss ideas that might not otherwise have been considered. Without an Advisory Board, family business leaders can easily overlook possibilities and opportunities. An Advisory Board serves an important purpose that ultimately can create a stronger and more profitable business.
What Information is Provided to an Advisory Board?
A business must provide ample information to an Advisory Board so that the Advisory Board is well informed. Based on the information provided, the Advisory Board can offer recommendations and advice. For example, an Advisory Board should be provided with the following:
- Financial Statements
- Bank Covenants
- Shareholder Agreements
- Special arrangements or contracts with the owner group
- Existing Strategic Plans
- Other information that will allow the Advisory Board to provide sound advice
Does Your Family Business Need an Advisory Board?
Diversity of experience can help a family business grow and succeed. Oftentimes, a family business retains the same employees year after year, and decade after decade. When this happens, the business becomes trapped in an insular and static environment and can be at risk of becoming an irrelevant player in the marketplace. Utilizing an Advisory Board is a means of minimizing this risk because the Advisory Board comes to the table with fresh perspectives, varied professional experience, and outside-of-the-box ideas. The function of an Advisory Board is not to tell the business what to do. Rather, the Advisory Board is there to benefit the business by allowing outsiders to provide a neutral review of current business operations and pose questions that insiders might be reluctant to ask. This is often necessary to open a family business to new ideas and to push the family business to the next level.
Does Your Family Business Need Help?
Family Business Matters has extensive experience assisting family businesses in the selection of a Family Business Advisory Board. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Family Business Matters has assisted more than 450 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.
For more information on how Family Business Matters can help your family business survive and thrive, please contact us today at (970) 948-5077.