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Board of Advisors Guidelines How to help smaller companies determine why a Board of Advisors (BOA) is appropriate, how to construct a BOA, and how to manage it. Over 80 percent of all private companies are operating without a board of advisors or board of directors. Odds are your competitors do not have one. Thus, developing a board of advisors can give your company a distinct advantage over your competition; particularly for start-ups and family run businesses. There is tremendous value in receiving objective, knowledgeable advice from a board of advisors who share in the financial and equity growth of your business. What is a Board of Advisors? A BOA is a group of outsiders (to the company) that is formally organized to provide business owners and corporate leaders with support, advice and assistance. While Boards of Directors have legally defined responsibilities, control and fiduciary duties; advisory boards have no formal power or binding legal authority, other than what you give them. They serve at the pleasure of the business owner or CEO. There are several reasons for creating an advisory board: Unbiased outside perspectives on many issues. Increased corporate accountability and discipline. Enhanced CEO and management team effectiveness. Greater credibility with investors, vendors and customers. Help in avoiding costly mistakes. A sounding board for evaluating new business ideas and opportunities. Enhanced community and public relations. Improved marketing results and effectiveness. Strategic planning assistance and input. Centers of influence for networking introductions, ex. potential customers, investors, vendors. Help anticipating market changes and trends. Crisis and transition leadership in the event of the death or resignation of the CEO. …. and … Gives the Owner / CEO trusted businessmen / women he / she can in! (Helps prevent the ‘lonely-at-the-top-syndrome’!) Here are a few additional objectives and nuances: - Access to industry or technical competence to augment your management team. (Using "technical" in a broad sense to include not only technology but also functions such as HR, finance, marketing, etc., where it may not make sense to have expertise on staff or retainer but you want access to people with knowledge and ability.) - To create excitement and interest in your activities for purposes of recruiting, marketing or fundraising. - Creating a structure designed to supplement your management team, create credibility or assist in dealing with regulatory matters (ex. medical, bio-med and medical device fields). - In rare cases advisory boards are used to repay favors; take care of friends, family or early supporters (ALL wrong unless this member is truly an asset to the company); or find a way to provide consideration to someone who is providing a service to the company where one or both parties prefer not to formalize the relationship. (The person must possess the characteristics above.) - Use them as ambassadors of your firm. This can result in lead-referral, free PR, and added credibility of the firm when widely respected BOA members are recruited. The critical issue with a BOA is to figure out what you want to accomplish with them and how best to develop one! Steps to Creating an Effective Board of Advisors Analyze the strength and weaknesses of your current management team CEO and a few key senior managers should sit down and ask some of the following questions in advance of configuring the BOA: What are the main areas we need advice and guidance in? What specifically do we need the board members to do for us? How will these BOA objectives change over time? Who are a few potential candidates for board membership? How do we avoid giving away too much control to outsiders? What will be the powers and limitations of the board? What will setting-up the board cost initially? Annually? Will it be worth the cost? How will we structure the invitation so that BOA members may resign and/or be replaced? Look for critical areas of expertise and knowledge that your company could use help with such as marketing, legal, finance, eCommerce, R&D, or information technology. A big example: if your company is planning on going public within the next few years, seek out advisors who have successfully taken companies public. Set clear,

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