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Advisory boards are typically made up of independent members but can also include family members, who contribute their professional expertise and offer informed guidance.

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All happy families are alike, according to Tolstoy. And while the same can’t be said of all family enterprises, these businesses do share similar challenges. When it comes to two of the most common – the need for governance oversight and impartial third-party perspectives – experts agree that having an advisory board in place can increase peace of mind for family members and make for a more successful business.

Krista Han and David Florio work with family-owned businesses of all sizes – from small startups to third-generation enterprises – and say that advisory boards can provide value at each stage of an organization’s life cycle.

“Adding more structure to a company’s governance model through an advisory board is very useful for managing risk to an acceptable level,” says Mr. Florio, a partner at Grant Thornton in Toronto. He helps organizations identify potential risks, and he often encourages family-owned businesses to establish an advisory board to bring a more formal structure to their governance practices.

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Advisory boards are typically made up of independent members who contribute their professional expertise and offer informed and impartial third-party guidance. In her work with privately owned companies as a partner with Grant Thornton in Fredericton, Ms. Han helps owners identify potential board members by reviewing an enterprise’s goals analyzing its strengths, weaknesses, opportunities and threats.

“Advisory board members can fill in the gaps, helping family business owners identify where they need to supplement the company’s expertise and make considered – rather than reactive – decisions,” she says.

However, Ms. Han notes that advisory boards don’t need to be entirely made up of independent members. There may be advantages to including family members, such as by having younger generations of the family join the board to deepen their understanding of the business as they transition into roles with greater levels of responsibility.

The close and long-term relationships that family members bring to their work are both a source of strength and a potential challenge for family enterprises.

“Advisory boards are able to offer an independent point of view,” says Ms. Han. “Emotions can run high in a family business, and advisory boards provide a non-threatening environment in which to talk about issues and make decisions. Many family enterprises find it much easier to make progress on the hurdles in front of them when an independent advisory board is in place.”

Some of those hurdles may involve periods of growth when a company is seeking additional investment or transition periods when the enterprise is considering leadership succession. “Investors and lenders look favourably on privately owned companies that have the formalized structure of an advisory board in place,” says Mr. Florio. “That can open opportunities for businesses seeking financing or external investment.”

Advisory boards are also a source of strength when the family enterprise is considering succession options, whether that’s the outright sale of the business, bringing in professional management or passing the leadership reins to the next generation.

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“In my work with family businesses over the years, I’ve seen that those that are interested in best governance practices have an advisory board,” says Ms. Han. “Those are the companies with a laser-sharp focus on the future.”

This content produced by Randall Anthony Communications. The Globe’s editorial department was not involved in its creation.

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