Unless they’re on an advisory board or directly involved with one, many people do not understand the difference between it and a board of directors. Even many business professionals running their own companies may be a bit foggy on the differences and why an advisory board can be incredibly beneficial to their business no matter what size it is. Read on to learn about the integral differences between the two and why an advisory board could be beneficial to your company.
What is an advisory board?
An advisory board is a group of people who work together to offer quality advice to a company. They have no fiduciary responsibility despite being paid to sit on the board. As you choose an advisory board, you should look for individuals that have succeeded facing challenges similar to those you are facing, who are respected in their industries and have knowledge and skills that could be beneficial to your company. They can help guide you through tricky periods and even offer beneficial advice if you consider going public with the company. Your advisory board isn’t there to tell you what to do, they are there to help you reach your targets in a better and faster way. They act as a group of mentors to help guide you in the challenging world of business.
How is it different from a board of directors?
With a board of directors, you’ll have a group of people who have a financial interest in the company if they’re investors or you have independent board members work. A board of directors is helpful if you’re looking for a large investment or are planning for an acquisition, but they also have some amount of control over those decisions. While members of an advisory board usually receive compensation, those on a board of directors often are costlier than an advisory board. An advisory board also provides the CEO with continued freedom in choices for the business whereas a board of directors can actively work against or disagree with the business owner and affect business choices made through their decisions.
What are the benefits of an advisory board?
An advisory board has a variety of benefits, though the highlight may be the mentorship it can provide to a business owner. Instead of becoming highly involved in the decisions of the business, an advisory board offers advice they think is best without the bias of being personally invested in company decisions. A CEO can retain autonomy and has the freedom to make their own decisions while receiving quality advice from skilled professionals.