The document provides information on establishing an advisory board for a company. Some key points covered include: - An advisory board consists of outside advisors who lend insight and counsel to supplement management's knowledge. They have no legal obligations. - Advisory boards are typically 3-4 members and are formed to help determine strategies, generate contacts, assist with succession planning, and hold management accountable. - The right time to form one is when management expertise is maxed out, revenue growth plateaus, or significant issues are anticipated. - When selecting advisors, choose those with complementary expertise to management and who are compatible, willing to work closely, and maintain confidentiality.

1. Advisory Board Basics © 2009 Avalon Consulting Group

2. What is an Advisory Board Special group of advisors lending insight and counsel Independent and objective Offer advice and mentorship Provide knowledge or experience not present among management

3. What is an Advisory Board (cont.) Typically three to four members (smaller the better) No legal obligations or responsibilities of a statutory board Does not replace the company’s statutory board

4. Why Create an Advisory Board Supplement management’s knowledge and experience Lend insight and perspective to business strategies, leaving implementation to paid management or consultants Help determine benefits and risks Generate contacts and potential resources Assist with succession Help hold management accountable

5. When is the right time to form an Advisory Board If you company has gone as far as management’s expertise/skills can take it If your company’s revenue growth has reached a plateau If your company anticipates having to deal with a significant issue within the next year NOW!

6. When Not to Consider an Advisory Board Not ready, willing or able to: Confide in others about yourself and your business Present key strategic issues for consideration of others Accept criticism Take time to prepare for meetings and communicate

7. Whom Should you Select as an Advisor Someone who: Has knowledge and experience not currently possessed by management (“complementary competencies”) Has familiarity with or willing to learn about your company’s industry Is compatible with existing management Is willing to “roll up sleeves” and work Can be trusted to maintain confidentiality

8. How Do You Begin Process of Selecting Advisor Identify knowledge and experience needed to achieve goals over the next three years, but not present, among current management Interview several candidates for each role that is represented on the advisory board Involve several members of ownership and management in the process

9. How Should Owners Interview an Advisor Follow a similar process that you would for any high level employee, including: Obtain a resume in advance Determine whether resume reflects needed knowledge and experience Interview to confirm knowledge and experience and judge other factors

10. How Should Owners Interview an Advisor (cont.) Give tour of your facility or site, describe your business and communicate honestly your company Communicate your expectations Assess your comfort with taking counsel from this person as an advisor

11. How to Invite Someone to Become an Advisor Letter of invitation setting forth proposed expectations and compensation Confidentiality agreement Indemnification agreement

12. Compensation Why pay members of the Advisory Board?

13. Compensation (cont.) Suggested compensation: Retainer – One year (based on size of the company by annual revenue): $0-$3 million……………………………$1,000 $3-$5 million…………………………….$2,000 $5-$10 million…………………………...$3,000 Greater than $10 million…………..$4,000 Meetings – Pay Advisor for each suggested quarterly meeting

14. How to Structure Advisory Board Meetings Establish specific regular schedule well in advance (quarterly recommended) Prepare detailed agenda for key issues Educate advisors on prior year performance and current operating plans Forward relevant materials well in advance of meeting

15. Best Practices: How to Get the Most Out of Your Advisory Board Do not confuse it with your statutory board of directors or a board of managers Statutory board authorizes or gives authority Advisory board advises or gives advice

16. Best Practices: How to Get the Most Out of Your Advisory Board (cont.) 2. Select Advisors on the basis of complementary competencies. Do not select on the basis of friendships Determine where you want to be in 3 years Select advisors based on knowledge and skills needed to meet your goals

17. Best Practices: How to Get the Most Out of Your Advisory Board (cont.) 3. Do not clutter your agenda Focus on key topics that you need/want input Focus on strategic issues 4. Show Advisors your business Walk them through Let them touch, feel, see and smell

18. Best Practices: How to Get the Most Out of Your Advisory Board (cont.) 5. Expose your skeletons Share the company story – who are you, where you have been, where you want to go Seek advice of what they WOULD do if they were YOU 6. Communicate, Communicate, Communicate

19. How Can An Advisory Board Help You?