How to Build an Advisory Board

You build an advisory board by starting from the two or three decisions your management team cannot currently make well, and sourcing against those. Size, cadence, agenda, and terms all follow from that choice.

This assumes you have already settled which instrument you need. What follows covers advisors serving in an advisory capacity, without separate authority to act for the company, which an advisor may still hold where they are also an officer, a shareholder, or a director. The distinction between an advisory board and a board of directors, and when a founder needs the second one, is covered in advisory board vs board of directors.

This is operating practice. Ask your attorney and your CPA which legal, tax, securities, confidentiality, insurance, and governance questions apply to your company and your structure.

Start with the decisions

A search for experienced people produces a board that looks good on an announcement and leaves you facing the same decisions alone. The biographies are the wrong starting input.

Write down the two or three decisions your management team cannot currently make well. Ours tend to look like this:

• Whether to enter a new market, and on what evidence
• How to build a leadership team for the stage after this one
• Which customer segment deserves concentrated investment
• How to change pricing without damaging the accounts you depend on
• Whether the company is ready to take outside capital
• Which operating constraint is holding back profitable growth

Write each one as a question. "We need help with sales" is too broad to source against. "Should we build an enterprise sales team or keep selling through channel partners?" gives whoever is making introductions for you something concrete to work with.

Then say why the decision is hard. You may have no direct experience of it, no reliable data, nobody willing to test management's assumptions, or nobody who has seen how each option turns out. Those four gaps are different, and they call for different advisors.

I spent 30 years in investment banking before building my own companies here, and I watched a lot of boards from the outside of them. The ones that struggled were usually composed for reputation rather than for the decisions in front of the company. I see the same thing now from the other side, chairing CEO peer boards in Miami. What determines the quality of a discussion is settled before anyone sits down, in the questions used to pick the people.

Where advisors come from

The best candidates usually sit one or two connections past your immediate network. Your close contacts are still worth asking, though a board drawn entirely from one circle arrives with one set of assumptions and gives you less to push against.

• Founders who have taken a company through the stage you are entering
• Former operators from your industry or one next to it
• Customers and former customers who understand how buying decisions get made
• Investors, lenders, attorneys, accountants, and recruiters, as sources of introductions
• Industry associations and local founder communities
• CEO peer groups
• Executives between operating roles
• Retired executives who have stayed current

Ask for introductions using the decision rather than the title. "I am looking for someone who has built a channel strategy for a founder-led services business" gets you a better shortlist than "I am looking for advisors."

Appoint in stages. Filling every seat at once locks in a composition you have not tested, and your first strong advisor will often tell you what the board still needs and who might fill it.

The credential trap

A large corporate logo tells you someone was exposed to a large corporation. Your company may have fewer management layers, less data, tighter cash, and a founder involved in every consequential decision. Advice formed under the other set of conditions can fail under yours.

Ask candidates what they personally decided, what resources they controlled, and how close they sat to the consequences. Give weight to the candidate who owned the decision and lived with what it produced. The advisor worth appointing can separate the principle from the practices that depended on a large budget, a known brand, and a bench of specialists.

What to look for, and what to discount

Take references from people who worked with the candidate under pressure. Ask what changed because the person was involved, and how they handled disagreement, preparation, and follow-through. A reference who can only tell you the candidate is well regarded has told you nothing you can use.

Test before you appoint

Run a working session before you offer a seat. Send a short briefing under suitable confidentiality terms, put one live decision in front of the candidate, and watch what they do with it.

A strong candidate asks before prescribing, and the questions expose assumptions you had not written down, evidence you are missing, and consequences one step past the decision itself. They can disagree without turning the session into a contest. You should come out with a clearer way to make the decision, even if you have not made it yet.

A defined short project is the other way to get evidence. Agree what it covers and what it pays before it starts. A test that turns into months of free consulting has told the candidate what working with you is like, and they will be right to decline.

How many, and who

Three to five advisors is where I would start a founder-led company. It gives you range while keeping the discussion serious. Start at the low end and add a seat when a specific decision justifies one.

Resist one advisor per department. It builds a committee and splits the conversation, and the decisions that matter cross functions anyway. Pricing moves through sales, delivery, cash flow, positioning, and retention at the same time, and one former operator with broad judgment can hold all of that at once.

A composition that tends to work:

• An operator who has led a company through the growth stage you are entering
• Someone close to your market or your customers who sees changes before you do
• A specialist tied to a decision that is central right now, such as capital, talent, distribution, or technology

Look for difference in operating background, in how people think, and in what they have been exposed to. Chemistry matters, because candor needs trust to travel on. Too much familiarity costs you the challenge you appointed them for, so weigh independence as carefully as rapport.

Give every member a one-sentence reason for being there. If you cannot write that sentence, the seat needs more thought before you fill it.

The meeting

Quarterly is a sound default. Advisors need to see decisions and their consequences over time, which is what separates a board from a series of consultations. A company going through financing, succession, or a major expansion may run a shorter interval for a defined period, then return to the normal cadence.

Set the dates for the full year. Two to three hours is usually enough, depending on how many decisions you are bringing and how complex they are.

What goes out before it

Send the pack about five business days ahead. Keep it concise, and make sure it carries the evidence the decisions on the agenda need:

• A one-page summary of how the company is performing
• The financial and operating measures the board follows
• Progress against the commitments made last time
• The two or three decisions you want examined
• Management's current view on each, and the assumptions underneath it
• The customer, market, hiring, or operational evidence that bears on them
• The specific questions you want each advisor to answer

Give them the numbers management works from. Where the reporting gets cleaned up first, the advice you get back will not fit the company as it is. Confidentiality obligations belong in the written agreement, and sensitive material should go out through whatever secure process you already use.

Materials that arrive in the session turn it into a first reading. The advisors spend the time you paid for understanding the facts, and there is nothing left for testing the decision.

The agenda

1. Confirm what the meeting is for and what you want out of it.
2. Performance, exceptions, and the commitments from last time.
3. The first decision.
4. The second decision.
5. Conclusions, open questions, owners, deadlines.
6. Conflicts, follow-up, and the next date.

Someone has to hold the time, keep the discussion tied to the questions, and pull in whoever has not spoken. That is the founder or an independent chair, and either works as long as the job is assigned.

Your job in the session is to give context, ask, listen, and test. A meeting you spend presenting becomes a status update, and the value shows up when the advisors have enough time and enough evidence to take a consequential choice apart.

Record what was decided. The question, the main considerations, your decision, who owns the next step, and when it gets reviewed. The board advises; you and your authorized executives decide.

Between meetings

Send short updates on anything material and on the measures you agreed to track. Individual advisors may make an introduction, review a document, or take a focused call inside their expertise.

Define that in advance. Unlimited access frustrates both sides. Treat advisor time as a scarce company resource: prepare for the interaction, and close the loop afterwards so they find out what their advice or their introduction produced.

The written terms

Have counsel document the arrangement before an advisor receives sensitive information or starts regular service. Templates are useful for working out what to discuss; the document itself should come from your attorney. The topics worth settling:

• The advisory role and its scope
• The term, and how renewal works
• Expected attendance and preparation
• Reasonable availability between meetings
• Confidentiality and how information is handled
• Ownership of any relevant intellectual property
• Disclosing and managing conflicts
• Compensation and expense reimbursement
• Termination rights on both sides
• That the advisor cannot bind the company

Compensation can take the form of a stipend, a per-meeting fee, expense reimbursement, equity, or some combination. What the figure should be depends on the contribution, the preparation and availability you are asking for, your stage, and current market practice, so take it from current market guidance and from your attorney and CPA rather than from a rule of thumb someone repeated to you. Equity grants bring securities, tax, vesting, and jurisdiction questions with them and need professional review before you offer one.

A defined term with a scheduled renewal gives both sides a natural point to look at contribution, attendance, what the company needs now, and any conflicts that have appeared since, and it is worth having a route out that does not wait for the anniversary. Settle the term length, the renewal process, and the early-termination rights with counsel, against the role and your jurisdiction.

Reviewing the board, and closing a seat

The test is whether decisions changed. Where that is happening, you are bringing questions you have not resolved, the advisors have read the pack, disagreement surfaces while it is still cheap, and management leaves with named actions and owners. The next session revisits how it turned out.

Where preparation and attendance start slipping, look first at what you have been sending. Nobody prepares for a session where their contribution has no consequence.

Once a year, hold the board against a short set of questions:

• Which decisions improved because of this board?
• What advice changed an action, or headed off a mistake?
• Who prepares and contributes consistently?
• Which expertise has become less relevant to where we are now?
• What decisions will dominate the next twelve months?
• Does this board challenge me, with care and without deference?

Where an appointment no longer fits what the company needs, end it directly. Go back to the role you appointed the person for, explain what has changed, and name the specific things they contributed. Ask counsel how the agreement handles termination and any confidentiality duties that continue afterwards.

A defined term and a scheduled review are what make that conversation an ordinary one. They establish at the start that a seat reflects what the company needs now, and not a permanent honor.

Where to start this quarter

• Write the three most consequential decisions coming in the next twelve months.
• Say why the management team struggles with each one.
• Describe the experience, judgment, and independence an advisor would need to help.
• List ten possible sources of candidates, across more than one network.
• Ask for targeted introductions using the decision brief.
• Hold first conversations, then check references with people who saw them under pressure.
• Run a working session with the strongest two or three candidates.
• Appoint the first advisor and write their one-sentence reason for being there.
• Ask that advisor to help you assess what the rest of the board should be.
• Have counsel prepare the advisory agreement.
• Set the annual calendar and the renewal date.
• Build the pack, agenda, minutes, and follow-up process before the first meeting.

The founders I work with who get the most out of a board begin with a live decision. That decision defines what the board is for, and gives you a standard to measure each advisor against. The related work, reducing how much of the company still runs through you, is covered in the delegation system, and if the eventual destination is a step back from the operating seat, founder to chairman takes that on.