Small and Medium-Sized Family Businesses: The Transformative Role of an Advisory Board

Small and medium-sized family businesses face unique challenges, from people management to leadership succession. One of the key resources that I see as underutilized—or perhaps still not well-known by these companies—is the advisory board.

Over my 20 years working with family businesses, I've observed that implementing a well-structured advisory board can be a game changer. What many business owners still don’t realize is that these boards aren’t exclusive to large corporations. On the contrary, they can offer practical benefits to smaller businesses, helping them to overcome some of their biggest operational and strategic challenges.

The truth is that, regardless of size, all companies eventually face recurring issues such as:

• People Management: Difficulty in leading and retaining an effective team.

• Bureaucracy and Tax Burden: Excessive processes that complicate daily operations.

• Limited Access to Credit: Difficulty in securing financing.

• Financial Management: Lack of adequate planning or control.

• Use of Technology: Limited innovation due to a lack of guidance.

• Lack of Professionalization: Teams that are not equipped to grow alongside the business.

• Fraud: Insufficient control mechanisms in place.

These issues often have a greater impact on small and medium-sized businesses, frequently affecting their growth and sustainability. This is precisely where an advisory board can make a significant difference.

When an Advisory Board Makes a Difference

An advisory board can be crucial during critical moments, such as:

• Conflicts between partners;

• Profit recovery;

• Market repositioning;

• Business growth;

• Seeking new financing or investment lines.

Through an impartial perspective and strategic vision, the board helps the business navigate challenging phases with greater stability and planning.

The Strategic Benefits of an Advisory Board

The tangible benefits of an advisory board go far beyond guidance. Throughout my career, I’ve seen family businesses that have implemented advisory boards undergo important transformations, such as:

• Greater maturity in decision-making;

• Increased company value through improved governance practices;

• Enhanced stability and clear direction for business continuity.

In addition, an advisory board can offer:

• Conflict resolution through impartial governance;

• Structured succession planning, supporting leadership transition;

• Networking and access to other institutions and professionals that add value.

Setting Up an Advisory Board

If you are considering creating an advisory board, a few essential steps include:

• Clear Objectives: Identify the areas where you need support and seek advisors with expertise in those fields.

• Diverse Knowledge: Look for advisors with complementary experiences and familiarity with your sector.

• Transparency: Advisors need to know the company’s current situation and have clarity regarding your expectations. They do not assume risks or make decisions for the company, but they guide best practices.

• Independence: Allow advisors the space to express opinions freely. Ideally, choose individuals without family or direct ties to the company.

For small and medium-sized companies, the board can be less formal but should still have clear regulations establishing term duration, meeting frequency, and evaluation criteria. Choosing independent advisors is also crucial to avoid conflicts of interest and ensure that the board maintains an objective perspective.

Why This Matters for Family Businesses

Family businesses need to align the company’s competitive strategy with their continuity strategy. Family businesses that create advisory boards have a better chance of preserving internal harmony, ensuring effective succession, and safeguarding the company’s longevity. In many cases, the presence of family advisors is important, but there needs to be a balance with external advisors to create real value.

Challenges and How to Overcome Them

Family businesses integrating an advisory board into their routine also face challenges, such as difficulty forming the board and hiring qualified professionals, poor time management, and resistance to implementing suggested changes. To prevent the board from becoming merely a formality, selecting experienced, trustworthy members committed to upholding the business legacy is essential.

Conclusion: An Advisory Board Can Transform Your Business

Advisory boards are a valuable tool for family businesses of all sizes. They bring impartiality, experience, and strategic insight, which can be the necessary difference to overcome challenges and ensure the company’s growth and continuity.

With 20 years of experience alongside family businesses, I can affirm that when implemented correctly, an advisory board can be a game changer. It provides a clear path to professionalization, governance, and, above all, to the longevity of your business.