There is a certain comfort in keeping strategic decisions within the family. It feels safer to assign relatives to positions of authority and keep the circle of trust tight. While this approach is common, "common" doesn't always translate to "best for business."
When everyone in the room shares the same last name and history, you risk creating an echo chamber. This can lead to blind spots regarding accountability, fraud risks, and long-term financial health. If you are looking to scale, optimize, or simply secure your legacy, you might need a fresh set of eyes. This is where an advisory board comes in.
A consulting body, not a controlling one
Many business owners hesitate to bring in outsiders because they fear losing control. That is a valid concern, but an advisory board is different from a formal board of directors.
An advisory board serves strictly in a consulting capacity. They do not carry the fiduciary responsibilities or legal authority of a formal board. This distinction gives you the best of both worlds: you get high-level expertise and guidance without handing over the keys to the company. Because they are less formal, these boards often enjoy greater freedom to brainstorm creative solutions and identify new opportunities that you might have missed while focusing on day-to-day operations.
The value of a neutral mediator
Family dynamics are complex. Personal history often bleeds into professional decisions, making it difficult to separate business strategy from family emotion. An advisory board acts as a neutral third party.
Board members can provide an impartial perspective and potential solutions for disagreements over critical issues, such as:
- Strategic direction: Deciding where the company should go next.
- Growth and expansion: Evaluating mergers, acquisitions, or new markets.
- Financing: navigating loans and capital investment.
- HR decisions: Handling compensation and promotion (especially for family members).
- Succession planning: Mapping out the future leadership of the business.
By having trusted advisors who aren't involved in the next family reunion, you can navigate these interpersonal conflicts with a focus on data and strategy rather than emotion.
Building your base of experts
Who should be on your board? You want a mix of professionals who bring different skills to the table. We recommend networking with business, academic, and community organizations to find people with diverse backgrounds.
Ideally, you want to involve professional advisors who already understand your operational landscape. This could include your CPA, banker, insurance agent, or legal counsel.
When recruiting, look for specific traits that fill the gaps in your current leadership team. Do you need more financial acumen? Marketing expertise? Operational efficiency? Most importantly, ensure these individuals are willing to be candid. You don't need "yes men"; you need people who will offer constructive advice while maintaining strict confidentiality regarding sensitive family matters.
Nailing down the details
Once you have your team, you need to structure the engagement. We suggest meeting monthly at the start to build rapport and get everyone up to speed on your business goals. Once the board is established, quarterly meetings usually suffice, though you should keep the option open for emergency sessions if a crisis arises.
You should also treat this as a professional engagement. Cover your members' travel costs and compensate them for their time. For closely held family businesses, cash compensation usually makes the most sense. If you are planning to go public down the road, you might explore stock or equity-based compensation, though that comes with its own set of legal and tax considerations.
Get the support you need to thrive
Running a family business is about making smart decisions that protect your legacy and ensure future profitability. If you don't already have an independent advisory board, now is the time to consider creating one. It’s about more than just balancing the books; it’s about getting the strategic partnership you need to stay ahead of the curve.
We are here to help you navigate this process. Whether you need assistance designing an effective advisory board or are looking for an independent financial advisor to support your governance, let's connect. We can help you build a strategy that works for your business and your family.
SECURITIES AND ADVISORY DISCLOSURE:
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Fee based planning offered through SDM Advisors, LLC. Third party money management offered through Valmark Advisers, Inc a SEC registered investment advisor. 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431. 1-800-765-5201. SDM Advisors, LLC is a separate entity from Valmark Securities Inc. and Valmark Advisers, Inc. Form CRS Link
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
