What does a professional board of directors or advisory board cost?
This makes good sense; as a business owner, you cannot master everything and should ally with a trusted adviser who covers your blind spots - also at a strategic level. But what exactly should you expect to pay to get this valuable advice from external trusted advisers? Here we try to give an overview of the fee culture in the Danish boards of directors and advisory boards in collaboration with the director of the national recruitment platform in this area; www.nboard.dk.
A well-defined strategy is the foundation of a healthy business in the long run and should be coordinated across all business areas. What is the overall goal of the company? How do you plan to get there and what exactly does it require?
It is obvious to discuss such issues with your close networks such as friends, family, or colleagues. However, this method has its limitations, as your network is too emotionally involved in you as a person and thus puts the person above the business. A board of directors or advisory board does the opposite. They say what they think is best for the business, even though this may conflict with what you as an owner-manager hope to hear.
The point is that as an owner-manager you should get external advice from people with the right competencies e.g., in the form of a board of directors or an advisory board. Your next question will probably be:
At nBoard, they have made hundreds of recruitments to both boards of directors and advisory boards. Regarding the fee culture, CEO Joakim Bruchmann says:
An average owner-managed SME with 20-40 employees can expect to pay around 50,000 DKK per year per board member for 4-6 meetings per year as well as ongoing ad hoc consultancy. Part of this fee is compensation for the legal co-responsibility a board member assumes. Therefore, we see that you can get away with 30-40% cheaper by hiring the same people to an advisory board instead”.
The fee depends partly on the workload and partly on how experienced profiles are requested, and how these are recruited:
Generally, the market can be divided into two segments. The first segment has made a living from being professional board members and is highly experienced. For the second segment, it is a sideline occupation as they typically have an active management career. The first segment will have higher demands for compensation, while the second segment will do it for the learning and to establish networks”.
Joakim tells further.
A board of directors or an advisory board must not only be settled according to what it costs, but also what it creates of value like any other investment.
An external advisory board member is often an attractive alternative to hiring a management or strategy consultant. A management consultant costs around 1,500 DKK per hour. You can get an advisory board member for 10-20,000 DKK a year if they are passionate about your mission and can see the potential. If the choice is between these two options, it is a no-brainer",
Joakim Bruchmann thinks.