Reading time: 3 minutes

This is the 1st article in our 5 part series about advisory boards. The 2nd explains why you may have an advisory board, the 3rd discusses how to select the board, the 4th explains the difference from a Board of Directors, and the 5th explains the legal documents required.

Perspective, judgment and vision are three skills that will set a business leader apart.  As a busy owner of a new business, you are required to focus on the day-to-day operations. How can you get big-picture advice?

Smart new businesses are appointing advisory boards, to benefit from the wisdom of a panel of independent experts, without the formality or the risk of appointing directors.

What is an advisory board? 

An advisory board is an informal panel of people who give non-binding strategic advice to the owners and founders of a business.

Who can be on the advisory board?

Advisory board members can be from any industry and any level of experience. It is up to the founders(s) who you choose.

It is wise to choose people who can assist you to grow your business.  This may be because they have built their own successful business, or because they can introduce you to companies and people that you can do business with to grow your business.

It is sensible to choose people with different skills and different perspectives to you and your co-founders.

How many members?

You want sufficient members to get a suite of advice, but not so many members that the advisory board becomes unwieldy, with too many differing opinions, or because it is administratively difficult to find a time to meet.  Having 2 to 4 advisors may suit a smaller business, and this can expand if needed.

What are the costs?

The members of the advisory board are generally not paid in cash. If you have a good relationship with the advisors, they may be willing to act for free.  Other advisors maybe willing to be on the advisory board if they see a strategic relationship between your and their business, for example cross-referrals. If there are particular advisers that you want on the advisory board, you may offer them a small amount of equity.  If you do this, it is wise to have a contract in place that sets out the rights and obligations of the advisory board member, and what shares they will receive.

The key legal cost is a well-drafted Advisory Board Agreement to set out the roles, expectations, and legal protections for the advisory board members.  This benefits both the company and the advisors.

How often will the advisory board meet?

It is important to meet regularly to keep your focus and the advisor’s interest.  Quarterly meetings are common.

How long will the advisors be involved?

You need your advisory board members to commit to a period to be able to get to know your business and add value. A 2 to 3 year period is common.

Conclusion

In conclusion, an advisory board is relatively easy and inexpensive to set-up, and could provide significant benefits in keeping you and your co-founders accountable and inspired. If you would like one of LegalVision’s experienced commercial solicitors to help you draft an Advisory Board Agreement

Webinars

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer