Is it time for your private company to have a board of advisors?

By Anthony P. Smeriglio, CPA
President and Managing Director

You founded your company and you’ve grown it to its current level of success. So why would you want to turn to a board of independent advisors for guidance - especially when they might recommend a course of action that you aren’t comfortable with?

If your answer is “I wouldn’t - I know my business better than anyone,” you have a lot of company. Only about 5% of private companies have boards comprised of independent advisors or directors. The term “independent” means someone who is neither related to the owner nor has a vested interest in the company. In other words, someone who is objective but knowledgeable about the company’s capabilities and marketplace.

For many private companies, forming a board of advisors is a first step toward establishing the more formalized board of directors. As an interim step, it enables owner-founders to become accustomed to an added layer of accountability. However, a board of advisors usually does not have the formal authority that a legally-constituted board of directors has -- so the ability to say “no” to the board remains intact.

Is it time for a board of advisors?

As the economic and competitive landscape gets increasingly challenging, forming a board of advisors -- or the more formal board of directors -- is a move many company owners should consider.

Some of the benefits of having outside advisors include:

• Objective advice from people who know your business
• Varied expertise (i.e. legal, financial, operational) that can help you with trouble spots
• The ability to recognize problems early that are not apparent to management
• A layer of accountability for the owner and management, even if the board has no formal authority
• Potential for greater borrowing capacity when bankers know that you’re seeking and taking advice from outside advisors

How do you decide who should be on your board?

Think of people who care about your business and have expertise that would give them a valuable perspective, in areas such as technology, sales and marketing, and operations.

Board members should be willing to speak up and be the conscience of your business.

See our full report “Is It Time for Your Private Company to Have a Board of Advisors?” And please email or call us at 617-696-8900 if you would like to discuss the prospect of creating a board of advisors for your company.