A company’s success depends on people—and not just those who work for it. In a typical corporate situation, the shareholders elect a Board of Directors who hire the officers who actually run the company. But if you are a small closely held company, should you also have an Advisory Board?

After working with many companies, and talking with business owners about the challenges they face in running their business, I firmly believe that no business is too small to benefit from having an Advisory Board. Basically, an Advisory Board is composed of individuals chosen to help grow and develop the business. Unlike a formal Board of Directors, Advisory Board members serve at the pleasure of the business owner and offer advice; they do not dictate instructions or directions. Boards of Directors have certain fiduciary obligations to the company and its owner/investors. In contrast, members of an Advisory Board have no such legal obligations or responsibilities. This allows members to focus on their service to the executive regardless of the politics of management’s relationship with the company’s owners.

To set up your Advisory Board, look for individuals whose business acumen you admire. Include members with a variety of areas of expertise, both in general business and specific to your industry. Establish a term of office and make your expectations clear—when and for how much time do you want them available, and what are you offering in return? A position on your Advisory Board shouldn’t necessarily mean a lifetime commitment; stagger two- and three-year terms to keep the board fresh.

Limit the number of Advisory Board members to five or fewer. This ensures efficiency and limits the cost of establishing and maintaining an Advisory Board. Members should be compensated for their attendance at each meeting, and while the fee need not be excessive, it should be fair. They will be expected to meet with you (usually on a quarterly basis) to discuss and advise.

You will also need to prepare for each meeting of your Advisory Board by preparing an agenda which you’ll need to distribute ahead of time. Perhaps more difficult, you need to be prepared to be completely open and frank with your Advisory Board, sharing both your hopes and your fears. They won’t be able to advise you properly or well if you hold back.

Finally, keep your Advisory Board informed of your company’s activities between meetings. The fact that they’ve agreed to be on your board means they care about your company, and keeping up-to-date will help them be of greater value to you.

Putting together a strong Advisory Board, and using it well, can mean the difference between success and failure. Companies seeking an opportunity to build on growth and success, or trying to negotiate tricky times should be able turn to a special group of individuals to benefit from their insights and talents. Your Advisory Board should be composed of people with a genuine interest in your business and a desire to see it do well. They will be on your side; people with no axe to grind who want to listen to you and advise you. Above all, they will want to contribute to your company’s well-being, dealing with issues of operation, growth, financing, conflicts of interest, investment strategy options and human resources.