8 Steps to Creating an Effective Advisory Board While the key responsibility rests with the entrepreneur, this panel of subject-matter experts can fill key knowledge gaps.

Entrepreneurs learn quickly how lonely it is at the top. In many cases, the business owner is the sole employee when the venture is created. Then as the business grows, the entrepreneur hires staff. Regardless of the number of employees, size, structure or complexity of the organization, however, accountability for the company's success rests mainly on the shoulders of the entrepreneur.

The best entrepreneurs use advisory boards with subject matter experts to fill gaps of knowledge. Advisory board members are not directors in the traditional sense: They do not serve a governance function or represent shareholders or other stakeholders. They simply provide advice to the entrepreneur about achieving current business goals.

Related: 4 Steps to Securing a Rock-Star Advisory Board

At its most basic level, the advisory board is a sounding board for an entrepreneur. At its best, the board can provide expertise, guidance and business-development insight. In all cases, the advisory board furnishes the entrepreneur with a group of experts who can discuss opportunities, challenges and next steps.

The following are eight tips for creating an effective advisory board:

Management by objective works -- if you know the objectives. Ninety percent of the time you don't.
-- management theorist Peter Drucker

1. Have a purpose. An entrepreneur can use an advisory board to weather current challenges and opportunities. For example, a chef entrepreneur about to open a new restaurant may decide to form an advisory board to gain expertise in marketing, human resources and construction and design -- skills that a culinary type would not necessarily possess. In forming the advisory board, the entrepreneur should carefully consider his or her critical knowledge gaps so as to identify appropriate advisors.

The path of sound credence is through the thick forest of skepticism.
-- drama critic George Jean Nathan

2. Recruit doubters. No entrepreneur needs yes men disguised as advisory board members. The most ideal advisors have the entrepreneur's best interests at heart. And so they are not afraid to give advice -- even if it contradicts the thinking of the entrepreneur. Because the feedback can be brutally honest, entrepreneurs may wish to avoid picking advisors who are close friends or family members.

Yet a business owner possessing strong, honest relationships with friends and family members may find such individuals can be valued advisors since they already have his or her best interest at heart and desire nothing but the venture's success -- even if this means having a disagreement.

The purpose of human life is to serve, and to show compassion and the will to help others.
-- Nobel Peace Prize winner Albert Schweitzer

3. Leverage the network. Initially, identifying potential advisors can seem like a daunting task. The entrepreneur's best approach is to identify people within his (or her) personal or professional network with the requisite skills and experience. These individuals are familiar with the owner and likely would be willing to serve as advisors. To the extent a particular need cannot be met by someone in the entrepreneur's network, referrals can sought. The final option is making old-fashioned cold calls.

After identifying potential advisory board candidates, the entrepreneur should carefully vet them to ensure that they would be a good fit. Advisors should not only have the technical knowledge but also a desire to help the entrepreneur. Plus there should be good chemistry between a potential advisor and the entrepreneur.

A verbal contract isn't worth the paper it's written on.
-- movie producer Samuel Goldwyn

Related: Advisory Board 101: How to Get Advisors to Say Yes

4. Write it down. While advisory boards are generally less formal than governing boards, the entrepreneur should protect his or business. Advisors will be privy to highly confidential information about business plans, intellectual property and trade secrets. Each advisor should initially complete nondisclosure and conflict of interest agreements. Also the entrepreneur would be wise to spell out in writing the advisor's role, responsibilities and other expectations.

Price is what you pay. Value is what you get.
-- Berkshire Hathaway CEO Warren Buffett

5. Time is money. Advisory board members are not contributing their valuable time for money. They become involved as a result of their desire to help the entrepreneur -- and perhaps feel good about mentoring someone in need of their expertise. It is good form to provide some form of compensation. Depending on the venture's financial ability, compensation could include meals, travel expenses or a small stipend. Advisors who feel appreciated will put forth their best effort.

Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has.
-- anthropologist Margaret Mead

6. Keep it intimate. The value of an advisory board is determined by its members -- not its size. Entrepreneurs should seek out three to five advisors with the necessary skills to meet the current challenges. Over time the venture's critical business issues may change. Then the entrepreneur can seek new advisors with the needed skills.

Advisors who are no longer relevant or contributing as needed should be retired. Asking advisors to step down is not easy. So setting term limits for advisors is a good approach. This will result in less drama and stress and allow the entrepreneur to easily rotate advisors as needs change.

Success depends upon previous preparation, and without such preparation there is sure to be failure.
-- philosopher Confucius

7. Maximize value. Entrepreneurs should treat advisory board meetings as a vital company asset. Advisors can provide valuable feedback and recommendations -- if they are prepared before meetings. All relevant information such as business plans, financial statements and other reports should go to advisors well in advance of board meetings. All details should be planned out ahead of time, including the agenda, meeting location and time, the meal and any audiovisual needs.

Number one, cash is king. ... Number two, communicate. ... Number three, buy or bury the competition.
-- former GE CEO Jack Welch

8. Maintain ongoing communication. Advisory boards tend to meet infrequently, perhaps once per quarter. Periodic or infrequent meetings can result in business matters slipping from top of mind. If the entrepreneur provides advisors interim information such as monthly financial and other reports, however, board members can remain informed.

Related: Need Guidance at Your Startup? Create an Advisory Board Keeping These 3 Things in Mind.