by John Francis

Board Compensation

Nov 20, 2019 1:06:58 PM Advisory Boards, Board of Directors

I just had a call this morning with one of the boards I serve on, and we covered a ton of stuff in 90 minutes. And as we wrapped up the call, I asked...

“How’d you like that?” and the response was “That was great!”, followed by a request to set up another call.

The cost to my client was $1,000, but the value was exponential. It will be worth ten times that amount to them if and when they implement everything we talked about. Just avoiding the possible mistakes they'd likely have made if we not had the conversation, it was well worth the time and expense.

Cost vs. Value

When I’m asked how much does a board cost a business, my answer is always, “It costs enough and it should be well worth it”. I know that may sound vague, but the truth is those people typically serving on boards is a “side gig” for them and nobody's getting rich and nobody's going broke, especially with smaller private companies. There are several factors to consider when it comes to board compensation. Listed below are the differences between a board of directors and a board of advisors, sharing some ideas on the differences in compensation.

The Lows and Highs of a Board of Directors

A board of directors is fiduciary. This means they have a real legal responsibility and liability. There are actually laws around what a board of directors can, can’t and must do. It's much more structured than a board of advisors, and therefore, usually much more formal. As such, they deserve more compensation. A structured board of directors for a small or medium-sized company probably pays $1,000 a meeting, minimum. This level of compensation is usually for a two or three-hour meeting, four times a year. So, if you have three directors and they cost you $4,000 each, that's $12,000 a year or $1,000 a month. That’s typically a minimum for a real board of directors. There are also some legal costs incurred to pay your attorney, for example.That's the low end of compensation for a small, private company board of directors.

On the higher end, the board of directors for a larger private company generating $50 million in corporate revenue, directors are most likely paid on a retainer. I’d estimate around $15,000 a year, and that's just for showing up and participating at all the meetings, which equates to probably seven or eight meetings per year. These are a much more involved board of directors, a more complex organization which again, has formalized fiduciary responsibility, and more importantly, more time involved with higher meeting frequency. So instead of paying a per meeting fee, they pay a retainer and and while that's a significant amount, no one is probably going to live comfortably on that and no one is going to go broke on that either. 

The Cost of an Advisory Board

An advisory board is less formal, as they have no voting or no fiduciary responsibility, but they are there to help advise the ownership and management. At the low end, I estimate advisory board meeting fees could average anywhere from $250 to $500 per two or three hour meetings, held four times a year, adding up to $1,000 to $2,000 per advisor per year. Half the price of a board or directors and you might have just a tiny bit of legal work for documents, such as a non-compete document or some other legal work, but not nearly as much as a board of directors would charge.

Board of advisors, on the high-end, can still cost $1,000 a month per advisor on a retainer, very much like that of a board of directors. That equates to $12,000 year for meetings, likely including phone calls and maybe attending a brand conference too. 

The Bottom Line 

I have people approach me all the time and ask what does a board cost and my response is to first consider what it is they have and need or want to accomplish. Above are just some basic estimates, but I’ve also done meetings that just cover the cost of a meal. It really depends on the situation and the people involved, and the amount of work expected. Time and talent has a cost. You can be as creative as you want with compensation incentives, but if you want people to help you and take it seriously, you have to compensate them properly. If they're just posing as volunteers, don’t anticipate a lot of participation or accountability. Better to compensate someone for their time and their expertise. Be sure to organize yourself properly and take it seriously. Seeing value from a true working board doesn't happen overnight, but if you take the time to plan and budget the needed compensation, you'll receive more value out of that board - I guarantee you it’s worth it!

If you’d like to discuss the benefits of a board of directors or an advisory board further – and what the process looks like – I can help! Complete the form below to schedule a no-obligation chat about your business, as well as how a board can help you take your growth plans to the next level.

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John Francis

Written by John Francis

About the Franchise Expert


John Francis is an enthusiastic, engaging, and entertaining public speaker because he speaks from experience and he speaks from the heart. Franchising is in his blood, and his parents were true pioneers in the industry, turning their family haircutting business into a 1,000-salon franchise empire. He has been a franchisee and a franchisor, and has a deep understanding of the issues both face. Book John to speak at your event, and you and your franchisees will learn how to look at your business in new, positive, and profitable ways.

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