Many small and medium-sized businesses are built around the judgement, experience, and personal relationships of the owner. This can work well during the growth stage, but it can create problems when the owner decides to sell.
Buyers may become concerned if all important decisions depend on one person. They may question whether the business can continue making sound decisions after the owner leaves, particularly if the seller has traditionally controlled strategy, finance, hiring, legal matters, customer relationships, and major investments.
Developing advisory and governance structures can help address this concern. By establishing an advisory board or engaging experienced external advisors, a seller can demonstrate that important decisions are supported by structured planning, expert input, documented processes, and independent oversight. This is one of the important components of documenting your business process before selling.
Even a relatively small business can appear significantly more professional and sophisticated when it has clear governance practices in place.
Governance refers to the way a business makes decisions, manages risk, assigns responsibility, and monitors performance. It is not limited to large listed companies. Every business has some form of governance, even if it is informal.
In many owner-operated businesses, governance consists of the owner making most decisions personally. While this may be fast and practical, it can create buyer risk because the business may rely too heavily on the owner's judgement.
Formal governance helps show buyers that the business is capable of evaluating opportunities, responding to risks, reviewing performance, and making strategic decisions without depending entirely on one person.
An advisory board provides guidance and expertise but does not normally have the same legal responsibilities or decision-making authority as a formal board of directors.
An advisory board may include experienced professionals who meet regularly with the owner and management team to discuss strategy, financial performance, risk, staffing, technology, growth, and succession planning.
A formal board of directors has legal duties under Australian corporate law. Directors are responsible for governing the company and must act in accordance with their legal and fiduciary obligations.
For many privately owned businesses, an advisory board is a practical first step. It provides many of the benefits of structured governance without immediately creating the same level of formality and legal responsibility associated with appointing company directors.
Before inviting people to participate, define what the business needs from an advisory board or external advisor.
Common objectives may include:
A clear purpose helps ensure the advisory structure is practical rather than symbolic. Buyers will gain more confidence from a governance process that produces real decisions, reports, and improvements.
The strongest advisory groups are built around the needs of the business. Avoid selecting advisors purely because they are friends, long-term contacts, or well-known personalities.
Look for people whose skills complement those already present within the management team.
For example, a technically strong engineering business may benefit from an advisor with experience in finance, acquisitions, governance, or international expansion. A family-owned wholesaling business may benefit from an advisor with experience in supply chain risk, technology, or succession planning.
The goal is to bring together people who can challenge assumptions, identify risks, and contribute expertise that is not readily available inside the business.
An experienced accountant can provide far more than tax compliance. They can help improve financial visibility, budgeting, cash flow forecasting, profitability analysis, and management reporting.
Before a sale, an accountant can also help:
Buyers gain confidence when financial information is accurate, current, and supported by a credible external advisor.
An accountant can also challenge the owner to move beyond simple tax reporting and adopt regular management reporting that supports better strategic decisions.
A business lawyer can help identify legal risks before they become buyer concerns.
This may include reviewing:
Many business sales are delayed because legal issues are discovered late in due diligence. Addressing these matters early can improve buyer confidence and reduce the risk of price reductions or failed transactions.
A lawyer may also advise the business on governance documents, conflicts of interest, decision-making authority, and the legal implications of appointing formal directors.
Industry experts can provide insight that general advisors may not possess.
They may understand:
An industry expert can help the owner identify which parts of the business are most valuable to buyers and which weaknesses should be addressed before sale.
This is particularly useful in specialised industries such as engineering, manufacturing, software, healthcare, mining services, import, distribution, and professional services.
A non-executive director is a formal board member who is not involved in the day-to-day management of the business.
A well-chosen non-executive director can provide independent judgement, challenge management, review strategy, and improve accountability.
They may also bring experience in:
Appointing a non-executive director can significantly strengthen the appearance of corporate maturity. However, it also introduces formal legal obligations and should be considered carefully with legal advice.
Every advisor should understand why they have been engaged and what is expected of them.
Document:
Clear responsibilities prevent confusion and help the advisory group operate efficiently.
Buyers are more likely to value a governance structure that is documented and active rather than informal and occasional.
Advisory meetings should occur regularly enough to influence the business meaningfully.
Depending on the size and complexity of the business, meetings may be held monthly, every two months, or quarterly.
A regular schedule creates discipline. It encourages management to prepare reports, review results, explain variances, and consider future decisions in a structured way.
In the lead-up to a sale, more frequent meetings may be appropriate to review business preparation, financial performance, buyer risks, and due diligence readiness.
Each meeting should follow a clear agenda. This helps keep discussions focused and demonstrates professional governance.
A typical advisory meeting agenda may include:
Using a consistent agenda helps management track progress over time and gives buyers evidence that strategic matters are reviewed systematically.
Good governance depends on reliable information.
Management should prepare regular reports covering:
These reports help advisors make informed recommendations and create a record of how the business monitors performance.
For a buyer, this reporting history can be highly valuable. It shows that the business is managed using accurate information rather than instinct alone.
Take minutes or written notes for each meeting.
Record:
Documented actions create accountability and demonstrate that advisory discussions lead to practical outcomes.
Meeting records may also help during due diligence by showing buyers how important issues were identified and managed.
A risk register is a structured document that identifies significant risks, their potential impact, and the controls used to manage them.
Risks may include:
Review the risk register regularly with advisors and management.
Buyers do not expect a business to have no risks. They do, however, gain confidence when risks are understood, monitored, and managed.
Advisors and directors may have relationships or interests that could influence their recommendations.
Establish a process requiring advisors to disclose potential conflicts of interest.
This may be relevant where an advisor:
Clear conflict procedures demonstrate professional governance and protect the integrity of decision-making.
One of the greatest benefits of an advisory structure is independent challenge.
Owners may become accustomed to particular ways of operating. They may avoid difficult decisions, underestimate risks, or overestimate the value of certain opportunities.
External advisors can ask questions such as:
Constructive challenge can help the owner address weaknesses before buyers identify them.
The purpose of governance is not to remove the owner from all decisions immediately. It is to ensure that the business has access to sound judgement, reliable information, and structured decision-making beyond one person.
Over time, management should become more involved in presenting reports, recommending actions, and implementing decisions.
This helps reduce owner dependency and prepares the management team for life under new ownership.
Buyers gain confidence when they can see that leadership responsibilities are shared and that the business has already developed a disciplined management culture.
An advisory board can play a direct role in preparing the business for sale.
Advisors may help:
This creates a more disciplined sale process and reduces the risk of the owner making major decisions in isolation.
Buyers may ask how the business makes decisions and how management performance is monitored.
Prepare a governance folder containing:
This information demonstrates that the governance structure is active and meaningful.
Governance structures can lose credibility if they exist only for appearance.
Common mistakes include:
Buyers can usually distinguish between genuine governance and a structure created only for marketing purposes.
Governance does not automatically increase valuation. However, it can strengthen several factors that influence value.
Sound governance may help improve:
These improvements can make the business more attractive, reduce perceived risk, and support a stronger sale outcome.
Developing advisory and governance structures is one of the most effective ways to build systems and document your business before sale.
An advisory board, experienced accountant, business lawyer, industry expert, or non-executive director can provide independent judgement and strengthen the quality of strategic decisions.
Formal governance shows buyers that the business is not managed solely through the owner's instincts. It demonstrates that performance is reviewed, risks are monitored, responsibilities are assigned, and important decisions are made through a structured process.
Even a relatively small business can appear significantly more mature, resilient, and transferable when it demonstrates sound governance practices and leadership beyond the owner.
