Should Your Small Business Create a Board of Directors (or an Advisory Board)?

As a small to medium-sized business owner, you wear a lot of hats, strategist, operator, marketer, HR, and sometimes even bookkeeper. But as your business grows, so does the complexity. At some point, relying only on your own perspective (or your management team’s) may limit growth.

That’s where a board, either a Board of Directors or an Advisory Board, can provide tremendous value. Most privately held businesses can benefit from having the right people at the table.

Let’s explore why.

Why Consider a Board at All?

Here are some of the most common benefits:

• Strategic Guidance – Outside perspectives help you see opportunities and risks you might overlook.

• Accountability – A board encourages discipline in setting and achieving measurable goals.

• Credibility – Lenders, investors, and partners take you more seriously with formal governance in place.

• Access to Networks – Board members often bring industry connections, capital, and talent pipelines.

• Succession Planning – Boards help prepare for leadership transitions and protect the company’s continuity.

• Owner Support – Running a business can be isolating. A board gives you a trusted sounding board.

  
  

But not all boards are the same. The two most common structures for private companies are Boards of Directors and Advisory Boards.

Board of Directors vs. Advisory Board

Aspect	Board of Directors	Advisory Board
Legal Status	Formal governing body with fiduciary duties.	Informal, advisory only.
Decision-Making Power	Can make binding decisions (budgets, CEO hiring/firing, major strategy).	Offers recommendations, but management decides.
Risk & Liability	Members have legal duties (often covered by D&O insurance).	No legal liability.
Structure	Required meetings, minutes, bylaws, shareholder alignment.	Flexible, less formal, easier to adjust.
Best Use Case	When raising outside capital, managing multiple shareholders, or planning succession/exit.

Adding a board isn’t about giving up control, it’s about gaining support, insight, and credibility. For many small and medium-sized businesses, the right board can be the difference between plateauing and unlocking the next stage of growth.

At Oak Rock, we help business owners design and implement the right governance structure for their unique situation, from informal advisory boards to formal boards of directors.

If this resonates with you, connect with us to discuss how to build the right governance structure for your business and take the next step toward sustainable, scalable growth.