I am on the advisory boards of several startups, and I also have advisory boards for my own companies.
There are two models that I have seen work:
Mentor Advisory Board
A mentor advisory board is a group of advisors that are more experienced than you are in some area of your business.
You would do better to think about this as a list of advisors rather than a board of advisors, because in my experience, they don't act like a board at all. Only one of the companies I advise has ever convened a meeting of all their advisors. Most companies bring in a specific advisor for conversations whenever the advice is needed. For example, one of the companies I advise has an SEO expert on their advisory board. This person knows nothing about business, he's just an SEO bad-ass, so they ask him for SEO advice. They ask me for more general business advice since I've been running businesses for many years. There's almost no reason for me and the SEO guy to be in the same meeting.
Mentor Advisors each have their own reasons for being an advisor. Some are ego driven and like to pontificate to show how smart they are. Some are retired and need an excuse to get out of the house. I like to do it to "stay young", because most of the companies I advise are run by people in their twenties, and where else is a 42 year old going to get to hang out with twenty somethings and it not be creepy? :)
Of the 6 companies that I regularly advise, I have a teeny-tiny amount of stock options in 2 of them. I don't do it for the stock. I do it because I enjoy it.
All of the companies I advise got to "try me out" as an advisor before they asked me to join their advisory board. Some of them had known me through Capital Factory or because I was already a friend of one of the founders. One of the companies met me at an Austin startup event and asked if they coule meet with me to talk more in depth. We met a few more times, and then they asked me if I would join their advisory board. The chemistry between us was good, so I said yes. We had some extra space in my office, so they even moved in.
I prefer to do my advising in face-to-face meetings, but I also do phone calls and emails. Different advisors have different communication styles, and there is no one size fits all.
Peer Advisory Board
A peer advisory board is a group of business owners that get together as a group and help each other with their businesses. These groups are sometimes called Mastermind Groups or CEO Boards. They can be part of a formal organization like Entrepreneurs' Organization or Young Presidents' Organization or Vistage, or they can be assembled from other entrepreneurs you know or meet around town.
Over the years, I have been a member of a half dozen of these groups. Right now, I belong to two groups like this.
- Grow Your Own - I'm a member of a group of 7 Austin entrepreneurs that has been meeting monthly for 5+ years. It's a mix of industries (pet product manufacturing, software, consulting, real estate, etc.), and all of us have bootstrapped our companies. Each meeting lasts 3 hours, and we bring topics for the group to discuss. Topics can range from mundane (can you recommend a new accountant) to strategic (help me evaluate this business I'm thinking of buying). This group is highly confidential, and we all know each others' numbers (revenue/profit/etc.), but we don't comb over each others' financial statements. This group is free - we all met at an event for bootstrapped business owners and decided to form the group to learn from each other. We started with 8 or 9 members and lost a couple over the years.
- Pay to Play - I'm also a member of group of 8 entrepreneurs from around the U.S. that meet once a quarter. We operate more like a traditional board of directors for each other. This group is organized and run by Keith Cunningham, a bad-ass Jedi serial entrepreneur, and it has been one of the most impactful things I've ever done to improve my business. We share our complete financial statements with one another. We hold each other accountable and send monthly reports to keep each other updated on our progress toward our goals. It's hard core, awesome, expensive, and worth every penny. I think this kind of approach could work with a "grow your own" group, but it would need a strong leader to make it work.
The nice thing about peer advisory boards is that you get to understand someone else's business up close, and you can borrow/steal whatever is working for them. In one of my groups, my buddy cherry picked the best processess from the other members of the group (recruiting, finance, project management, sales, etc.) and was able to grow his business from $1MM to over $5MM in just a couple of years.