Could Your Business Benefit From a Board?

Originally Written: 11 Jul, 2022 | Last Updated: 11 Aug, 2023

When we start our businesses, we have a skill, passion and a desire to “have a go” and make a solid future for ourselves and our family by leveraging that skill and commercialising it.  Some businesses are more fortunate than others and, through experience gained over time, business owners will develop a range of skills needed to run their businesses. However, very rarely will a business owner be able to rely on their skills alone to successfully operate and grow their business.

At the very least, most people are going to need some professional advice from others, at the start, on how to operate and grow their business – whether it be legal, financial, taxation, marketing, property, employment legislation, workplace health and safety etc; the list goes on.

If you own a small business, it might seem like boards are part of a different, corporate world, set up and hidden away in big businesses’ conference rooms. This is a misconception. In fact, there are many ways that your small business can benefit from a board.

Before we address the options available for your business, let’s draw a distinction between the two main types of Boards – Formal and Advisory Boards.

Many early boards always consisted of a lawyer and an accountant; however, this is not always the case now. The structure of a formal board must be such that it adds to and complements the existing skill base around the board table. Board members should specifically be selected for the skills needed by the business at that time; as the business needs to evolve and change, so too might the people sitting at the board table.

Imagine a company that is growing successfully in its chosen markets in Australia, and decides that international expansion is the next big step. This is a brave new frontier, and no one in the business or at the board table has ever operated internationally before. This is when decisions have to be made to add or alternate board positions to ensure you have the required skills and oversight.

While the business founders may have the technical skills needed and good market knowledge, the board is there to provide, through regular meetings, review of board papers etc, consistent strategic advice, insights and oversight from their skills and experience.

A formal board structure must include a broad range of skills and experience that are complementary and address the needs of the company at its current stage of development. Board members must be good communicators, positive, and assertive. “Yes, men/women” have no place on a board.

The range of skills should encourage collaboration which leads to innovation and supports business growth by working with the executive team. Formal board members are directors of the company, making decisions on behalf of the company, and carrying all the responsibility and risk. As such, they deserve to be paid for their skills, and experience and for taking on that risk.

A Board of Directors is actually a legislative requirement for many corporate business structures. This requirement is created in the Corporations Act 2001, and the behaviour of Board members is extensively governed by regulations and the company’s internal procedures. A Board of Directors has power and influence within the company and is liable should misconduct occur.

Formal boards generally consist of an odd number of members (3 or more) or have a chairman with a casting vote to ensure decisions are passed with stalemate blockages. Most formal boards meet monthly. Boards need to be conscious of personal conflicts and board members are generally not professional advisors such as lawyers acting for the business.

Advisory style boards on the other hand offer a lower-cost alternative in the early stage of a business, when there is not such a large scale and complex business to manage, is to outsource advice as required. There are several different types of advisory boards that all differ in cost, but are more affordable than a formal board.

An Advisory Board has neither power nor influence within a company. They provide specialist information and guidance on issues that the owner has no personal experience or knowledge in. Advisory Boards can be relatively informal and, while it is best practice to create protocols and develop a charter, these aren’t strictly necessary.

Advisory board members are not directors of the company and, as such, do not carry that directorship risk and responsibility. They are selected in much the same way – for their skills and experience – but, rather than making decisions on behalf of the company, they simply give advice to the company director/s.

Advisory boards complement the existing directors’ skills and knowledge. Advisory Board Members are paid but usually less than a comparable formal board member as they are not taking on the same risk. Most advisory boards meet monthly or every second month. Advisory boards tend to suit earlier-stage, growing companies with changing needs and hence have more changes in participants.

Growing in popularity are networking/peer advisory groups, where a set group of business owners regularly meet, usually over breakfast. The meeting is facilitated by an experienced business owner who offers their own advice, as well as the collective advice that comes from other business owners.

These meetings generally have a structured format of goal setting and problem-solving, with each group member sharing their objective, progress made and hurdles encountered and offering advice to other members. This form of the advisory board uses the collective’s brain trust and the facilitator’s experience.

This is a more structured and regular (usually monthly) meeting, with an engaged professional service firm, most commonly accounting and/or business advisory. There tends to be more focus on business goals strategy, and the underlying financial performance and budget performance.

Advivo’s Monthly Service Program offers a great way for small business owners to get a thorough review of the business financials by one of our experienced accounting team members, as well as an in-depth discussion to ensure you truly understand what these figures mean. With this knowledge, you’ll be well-equipped to make the right decisions for your business to progress towards your goals and stay on track for success.

Our MSPs give you the chance to get independent third-party input into your performance as well as an opportunity to seek advice on strategies to progress towards the goals you have for your business. Sometimes, it just takes someone with a bit more distance from the day-to-day to spot challenges and to identify solutions, and that is exactly what Advivo’s MSP can offer your business.

Business coaches act as an individual as opposed to the collective of a board and can therefore only bring a more specific skill set. Business coaches will coach and advise the director of the company, mentoring them whilst giving business advice. You need to ensure, however, that the business coach you choose has a good track record of making a difference in businesses like yours.

Like most elements of Advisory Boards, the pricing is generally up to the business owner. Who they choose to serve as advisors, whether they use a neutral chairperson, how long and often the Board meets, will all impact on the pricing. The size of the Board and the qualifications of the advisors are typically the biggest price points and can get very expensive very quickly if businesses aren’t careful.

If there is a Formal Board or Board of Directors rather than an Advisory Board, the pricing will be significantly higher as the directors need to be compensated for the risk that they are taking on, should they be held liable for the faults of the company.

Boards are an excellent way to provide peace of mind to responsible business owners. It is an opportunity to get feedback from a neutral and knowledgeable source. For an affordable and friendly alternative, contact Advivo today.