Overview

The inherent flexibility of advisory boards means the structure can be adapted to support a variety of business priorities.  The most effective advisory boards are built upon a robust and well considered best practice foundation, then tailored to fit the particular needs or use case of the organisation.  In this series, we explore the various use cases of advisory boards and key considerations for implementation and facilitation.

Each situation is unique and the information provided is general in nature.  If you are looking to implement an advisory board for the first time, or are searching for support to enhance the effectiveness of your existing advisory structure or governance system, we strongly recommend engaging the support of a Certified Chair™️ .  Our tailored Advisory+ service can help connect you with the right advice for your organisation.

WHAT IS AN ADVISORY BOARD?

Advisory boards are a structured collaborative method for organisations to engage external advisors. The structure, role and operation of an advisory board is influenced by the organisation’s:

• Operating environment
• Legal requirements
• Strategic direction
• Leadership system
• Available resources
• Capacity and capability
• Regulatory environment

How can advisory boards support a business to be investment ready?

As a business moves throughout its lifecycle from startup, to scale-up, to mid-sized or enterprise level the business owners may seek to engaged various forms of investment to support their growth aspirations.  The ability to access funding will generally rely on three factors:

1. the owner’s awareness of their various funding options
2. the owner’s ability to prepare a robust business case, forecasts, pitch deck or related documentation
3. the owner’s ability to match their funding need to the various funders

Where there are many “supply” options for funds, access can be hindered by the quality of prepared “demand”. According to the OECD¹, most businesses are not investment ready.

Establishing an advisory board to support investment readiness is a growing trend for businesses.  In 2021, the State of the Market Report revealed that 75% of businesses who form an advisory board were motivated to support growth strategies². Accessing and leveraging growth capital is an important enabler to the realisation of growth potential.

Tailoring the focus of an advisory board specifically to support investment readiness can build the capacity and capability of the owner and management team through access to independent insight and knowledge that is seperate from any particular event or transaction.  Business owners can explore their various funding options, what is required to strengthen the business to be investable and bring an appropriate level of discipline and governance to support the quality of their decision making.

Business Considerations

When considering investment, business owners can look to their advisory structure to support the preparation process including (but not limited to) the development of strategies for:

• Market potential
• Current and future strategy development
• Capability and capacity internally beyond the Owner
• Fund allocation for investment
• Appropriate navigation of investment sources including debt and equity models
• Development of governance and risk management frameworks
• Managing and gaining clarity of expectations
• Owner and investor return

Advisory Structure – Best Practice COnsiderations

The ABF101 Advisory Board Best Practice Framework highlights key organisational considerations aligned to the best practice principles.  While all options need to be carefully considered for a particular use case and operating environment, the following list provides a starting point for your discussions:

1. Advisory board structure options
2. Purpose and intended impact
3. Investment and return
4. Roles and selection
5. Impact measurement

References

¹ Investment Readiness Programmes and access to finance: a critical review of design issues.
² State of the Market Report 2021, Advisory Board Centre, Global Research Council.

Case Story

An engineering firm has been a leader in their field. With a $50m revenue turnover, the Owner had built a strong core business, with two spin out businesses with significant global market opportunities.

An advisory board was established for an 18 month period for investment readiness. An independent Chair and 2 external advisors were selected to advise on strategies to reduce operational risk and increase investment readiness by:

• Transitioning operations from the owner to the executive team
• Building the capacity and reliability of business systems and teams
• Building the business case for scalability