By Jeremy P. Feakins
“One of the greatest values of mentors is the ability to see ahead what others cannot see and to help them navigate a course to their destination.” ~ John C Maxwell
Entrepreneurs with early stage companies often ignore the very real usefulness of an Advisory Board.
Advisory boards can be built and organized to help with the direction of your company, provide advice, and help with strategy, marketing, business, legal, and financial issues that may affect you and your business.
I believe there is a lot of value in assembling handpicked individuals who complement the existing skills of management and the Board of Directors. Recruiting influencers and well-connected people with relevant experience can help accelerate the growth and ultimate success of a young business.
I’ve usually assembled an advisory board with both the public and private companies that I’ve started and managed. I’ve learned that if you have a good idea, an extra set of eyes on your plans is very important. It’s very likely you’ll be able to find local people willing to provide guidance and support.
I once asked a now-retired NFL Football Player if he knew any “celebrity” people with the hope of getting one to serve on our Advisory Board. His surprising reply was that we would very likely be wasting our time. In his view, young companies should look for individuals who offer expertise in very specific areas, rather than someone who is famous but simply doesn’t have any business experience.
Like mentors, advisory board members must want to help the entrepreneur and his/her company. When seeking out people for your advisory board, look for those who are likely to be loyal and supportive. You don’t need “yes” people who agree with everything you say. But, you do need to find those who are experienced, seem genuinely interested, and are committed to helping you and the company succeed. Ask yourself several questions: What knowledge or experience does the person have that would help you and your business? How active will they be? How much time do they really have to spend with you? Can you get access to their networks? Will they be ready to offer their frank and candid advice and constructive support? All of these questions need to be answered before you extend an invitation to serve on your advisory board.
While most advisory board members may be prepared to donate their time and expertise, I like to provide some form of compensation. In the early stages of growing a company, I usually offer shares in lieu of cash, geared to the level of the advisory board member’s participation and the ultimate success of the business. Consider offering shares or stock options in your company of between 0.1% and 1.0%. If and when your business can manage it, offer a nominal monthly cash stipend, too. And, of course, always offer to pay travel and other expenses. The compensation does not need to be excessive, but it should be meaningful.
It’s important for an entrepreneur to understand what the advisory board’s function is. Thinking carefully about an advisory board’s purpose will help you organize it. Some years ago, the Ivey Business Journal published an interesting article on this subject. If you are considering assembling an advisory board, I recommend you read this article.
Advisory board members can add tremendous value, but remember they are likely to have busy lives of their own. Entrepreneurs need to make sure they communicate clear expectations of what is expected from them in terms of advice and support. Once the advisory board is established, creating and formulating very clear requests for help will get better results.
Based on my experience with advisory board members, here are 10 things to remember:
- Always be honest and upfront with prospective Advisory Board members. Tell them the good but also be sure to raise any challenges you are facing.
- Clearly state what you need from each advisor and set your expectations in writing.
- Provide a welcome letter when the Advisory Member joins the Board. If you are offering shares as a form of compensation, be sure to explain what’s being offered and stipulate what you expect in return for those shares.
- An advisory board is not a Board of Directors, so don’t treat them like one.
- The important decisions of your company are yours to make and your responsibility. Take advice, but you need to be the final decision maker.
- Set meetings on a regular basis, either by telephone or in person. Consider one annual retreat every year. You’ll be surprised how useful this is.
- Ask questions and be specific when asking for help. Communicate frequently.
- Leverage your advisory board member’s network for introductions, learning, and opportunities.
- Is the advisory board member truly adding value to your company? If not, sit down with the individual and politely but firmly re-state your expectations.
- When an advisory board member provides real value, show some gratitude!