4. Advisory Boards: A Hidden Weapon for CEOs

By Corey Ferengul

When you’re leading a company, especially at an early stage, you quickly realize that no matter how much experience you have, you’re going to encounter challenges you haven’t faced before. That’s where an advisory board comes in. While they don’t have the fiduciary responsibilities of a board of directors, advisory boards can provide guidance and subject matter expertise to help your company grow and succeed.

In this article, I’ll break down what an advisory board is, how it differs from a board of directors, and when it makes sense to have one. I’ll also share a few insights from my co-host, Mike Shannon, as we discuss the benefits and potential drawbacks of having an advisory board.

What Exactly is an Advisory Board?

An advisory board is a group of people with specific expertise who help guide your company on strategic decisions. Unlike a board of directors, advisory board members don’t have fiscal responsibility for the company, which means they aren’t liable for its financial performance. Their role is strictly advisory, offering insights on areas like product development, go-to-market strategies, or industry trends.

As Mike pointed out during our conversation, "There’s a lot of contrasting opinions on when and why to have an advisory board"​. And he’s right—there’s no one-size-fits-all answer. Advisory boards come in many forms, and they’re usually structured based on the specific needs of the company.

When to Use an Advisory Board

I’ve seen companies benefit from advisory boards at various stages, but they tend to be particularly useful in two scenarios:

1. Early-stage credibility: In the early days of a startup, having high-profile advisors can help signal credibility to investors, partners, or customers. As I said in the episode, “Early on, you may need an advisory board to draw credibility”​. When you’re a young company, having well-known experts backing your vision can make others take you more seriously.

2. Subject matter expertise: As your company grows, you’ll encounter areas where your internal team doesn’t have the expertise to tackle new challenges. For example, right now, many companies are grappling with how to integrate AI into their businesses. If you can bring on someone who has a deep understanding of AI, they can help you make smarter decisions about where to invest time and resources.

As I mentioned in the episode, if you can get a couple of advisors that understand AI, that could really help because it’s going to be a journey to figure out how to integrate AI into your company.

Structuring Your Advisory Board

In my experience, advisory boards tend to be less formal than boards of directors. For some companies, an advisory board might meet regularly as a group, while for others, it’s a looser collection of individual advisors who you call on as needed. Personally, I’ve found the latter approach to be more effective in most cases.

Here’s a common structure I recommend:

• Identify specific expertise: Don’t just bring on advisors for their name recognition. They need to add value by offering insights in areas where you truly need help. Whether it’s marketing, product development, or scaling operations, their expertise should fill gaps in your team.

• Keep it small: I’ve seen companies try to create large advisory boards, but I’ve found that keeping it small and targeted usually works best. You want quality over quantity.

• Engage 1-on-1: While you can have formal meetings with your entire advisory board, more often than not, it’s more efficient to engage them 1-on-1 when you need specific advice. As I mentioned, "More times than not, it’s called a board, but it’s really a collection of advisors you reach out to individually"​.

Compensating Your Advisors

One of the most common questions I get is how to compensate advisory board members. Should they be paid in cash, equity, or a combination of both? Mike shared a story about his early days as a founder, when an advisor presented him with an agreement offering equity in exchange for their guidance. Another advisor quickly stepped in to warn him against giving away equity too early​.

My rule of thumb is this: start small and time-boxed. Give your advisors a small amount of equity that vests over a year, and reassess after that year. This way, you’re not locked into a long-term commitment, and you can adjust based on the value the advisor is providing.

Final Thoughts

Advisory boards can be incredibly valuable, but they need to be used strategically. Whether you’re looking to boost your company’s credibility or need expertise in a new area, an advisory board can help you grow smarter and faster. Just remember to focus on quality over quantity, and always ensure your advisors are adding real value to your business.

-Corey Ferengul
Co-Host of Opening the C-Suite