Right now the #1 topic startups are asking me about is Advisory Boards. Not a new subject I started writing on this earlier in 2014 with an overview blog “Does your business need external advisors? or board members?” since writing that blog I have been lucky enough to participate in, and made a point of observing and asking loads of people about the good and bad aspects of their Advisory Boards.
What an Advisory board is and what it is not
It’s easier to start with the not list. An advisory board is not a governance board, it doesn’t make decisions on behalf of the company, it doesn’t need to consider risk and compliance by law, it isn’t focused on the detail – financial structures, or contracts, or staff, all things professional advisors provide.
With this freedom from governance an Advisory board has the opportunity to provide more creative, insightful experienced based advice on all aspects of a business, it’s operating model, strategy, roadmap and can act in a mentoring capacity for the owners of a business in their role / personal growth.
The value of an Advisory board
A good advisory board can provide insight, experience, perspective, advice (obviously), can play devil’s advocate and challenge your thinking – honestly the direct value of engaging other business and subject matter expertise into your business is invaluable. Other value you might not have considered:
- Extended network – one thing your advisory board can provide is access to their own networks, introductions you might not have made otherwise
- Support network and mentors – whether you are a sole founder or have a partner, advisory board members understand your perspective and your challenges so become a natural support network or mentors
- Cheerleaders and supporters – as this team invests their time into understanding your business they will become your biggest advocates
- Credibility – customers, potential investors, even prospective staff will see your advisory board as a strength and statement of your intentions to seek external advice on major decisions and challenges
Who should sit on your Advisory board
The biggest challenge is who – a complex topic I have very strong views on (will try not to rant). Do employ and pay professionals for professional services – lawyer, accountant, PR, HR etc but think very hard before inviting those same people onto your advisory board as their perspective will be through a specific lense. Invite people who are passionate and who would do it for nothing (but I strongly believe you should compensate them for their time).
Be wary of people who approach you to be an advisor and have a financial package to go with their offer – sadly it seems there are many people who prey on startups and small businesses, while they might be great practitioners in their field they will have other motives which comes into my top questions to ask potential advisory board members:
- what their motives for this are – then validate their answer, there is for instance a person I know who is on many advisory boards while his primary revenue stream is as a broker who sells companies which he doesn’t disclose openly. Validate their motives.
- what they are bringing to the table – interview potential advisory board members and align your selections with strengths in areas you are weak or need your own experience augmented
- how long they think they should be on your Advisory Board – this should give you a perspective of whether they will step aside once you have outgrown them or taken a new direction.
How to find the right Advisors
This is the hardest part. Ask other business owners, go to meetups and speaking events to gain exposure to a range of different potential advisors, read their blogs and other social media updates. Research people in your town and once you have stalked them online approach them directly – they will likely be flattered and take an initial meeting, or find someone you have in common to get an introduction.
Like a governance board consider diversity – diversity of role, experience, industry as well as gender diversity. A board who have complimentary skills and experience will provide you with the greatest value for your time. Find people who will challenge your thinking this is really important, you don’t know what-you-don’t-know after all.
Before you start – prepare, prepare, prepare
Like doing anything in business preparation is one of the keys to success, having a business plan (even a vague one), identifying your Big Hairy Audacious Goals (BHAGs) for the future, understanding your strengths and weaknesses are just a few of the things you should have sight of before constructing an advisory board. Tackling operational challenges can be a aspect of their remit but growth, change, strategy and your roadmap are the key things you should consult with them on to ensure your advisory board provides you with the best support and insight:
- Prepare to be open minded and honest – it might take a while to get to the level of trust you need so prepare for a few casual meetings and lunches during the forming faze. You need to be open to their feedback / scrutiny / critical insight which might not always sit comfortably.
- Prepare to pay your advisory board members – even just for their meeting time, there is something in paying for advice and taking it seriously. Don’t offer equity for an Advisory board, and don’t put them on a term based contract or retainer basis it will make it hard to disengage if they don’t work out (note you need an agreement including NDA / confidentiality though).
- Think about what you need help with – go into the first meeting with a big list of challenges you can collectively prioritise and work through, what you see as a pain point your advisors might see the root cause so let them be part of setting the agenda you come up with the list
- Be prepared to change board members – as your company pivots and changes the composition of your advisory board should change to provide the experience your next chapter needs.
If you are anything like me you will be scared of opening your business up to the eyes of strangers but believe me getting this varied perspective has benefits you shouldn’t ignore. Happy to provide introductions to great business owners who have lessons learned experiences and are willing and able to share with newer companies or those in differing ages and stages so get in touch if you are in NZ anyway!
Good luck with your advisory board journey. Happy sharing Vic.
Another stunning day in our lovely office! love sitting here in the sunshine.
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