Why your startup needs an advisory board

Opinions expressed by entrepreneur Shareholders are theirs.

Never be the smartest person in the room. If you are, then you are in the wrong room. This is one piece of advice I would give to all entrepreneurs.

As a founder, the talent you bring to your startup is critical. While it is difficult to attract and retain any staff at all, it is best that the individuals you bring on board are more knowledgeable than you in their respective fields. After all, startups are created by professionals and scaled up by professionals.

It is no secret that entrepreneurs are expected to be familiar with many areas. However, with so many aspects to building a business, founders often hire employees to fill in the gaps in their knowledge or experience. However, the best talent isn’t cheap, which brings us to an advisory board.

Below I discuss the importance of having advisors, steps to ensure the right fit, typical terms offered and ways to make the most of these relationships.

Related Topics: Why Every Entrepreneur Needs a Board of Advisors

What is an advisory board?

An advisory board is a group of individuals you trust, as the leader of a startup, to provide valuable business advice. At its core, the advisor’s role is to be a mentor to you and your company.

For the most part, consultants usually provide suggestions or guidance in the following areas:

  • Finding Investors
  • Building a company culture
  • Implement growth tactics
  • Acquisition and retention of employees
  • Planning or implementing an exit strategy

Your forum should be diverse. Whether it’s a marketing manager who can train you in marketing or a lawyer to help overcome legal challenges, advisors are meant to complement you as a founder. Relationships with these individuals are often personal, sometimes informal, leaving both sides to communicate via text message, email or video chat.

Related Topics: 8 Steps to Creating an Effective Advisory Board

Benefits of having advisors

The most common question is: Does the return of an advisory board justify its cost?

I generally recommend that all entrepreneurs hire consultants because the insight of these individuals is often invaluable. Many founders initially reject the idea of ​​giving up equity, however, rarely regretting this decision as they go along.

With previous exposure experience, consultants allow entrepreneurs to eliminate a myriad of mistakes that can be fatal to any startup. It will only take a few occasions to see an advisory board investment return tenfold, and on that note let’s look at some of the benefits of having advisors.

  • Ability to bridge knowledge gaps and improve your performance as founder and CEO
  • Serves as a testimonial for your company to enhance trust between investors and customers
  • Provide advice on critical business functions to help accelerate the growth of your startup
  • Build credibility if it lacks the eyes of internal and external stakeholders

Once you’ve decided that an advisory board is a good fit, it’s time to start your search.

Related Topics: 10 Reasons Why Prominent Entrepreneurs Join a Peer Advisory Board

How to choose your board of directors

Finding people is easy, but finding the right people is difficult. Here are some tips to keep in mind as you search to fill in the points for your advisory board.

  1. Assess your needs: What areas do you lack the most in terms of knowledge? For example, if this is your first time raising capital, you can look for an advisor who has experience dealing with investors. Once you have identified your needs, you can then narrow down your search.
  2. Benefit from personal relationships: Ideally, the counselor will act as a close friend, providing advice at short notice when needed. Consider whether you have any personal relationships in your network that could add value to you and your business.
  3. Screening of candidates carefully: Always do your due diligence. Be sure to research the candidate’s previous roles and obtain certifications, if applicable. In addition, determine if the candidate has a potential conflict of interest that may affect his or her judgment.
  4. Go to Entrepreneurship Hotspots: Sometimes the best place to find consultants is the geographic hotspots where other startups are located. Many of these cities have conferences, conventions, and co-working spaces where entrepreneurs and others come together to network.

Related Topics: What Makes Company Culture Great (and Why It Matters)

Terms offered for startup advisors

Once you have counselors in mind, both parties must come to terms with expectations before beginning a working relationship. Usually, this is specified in a written agreement that expressly defines the duties, responsibilities, and compensation of the advisor. Here are some items to include:

  • Meetings: Are advisors expected to meet regularly or ad hoc when necessary?
  • Secrecy: It prevents information leakage that could compromise success.
  • the financial value: Compensation often ranges from 0.25 to 1.50% of your total equity per individual.
  • merit: Contracts range in duration from two to four years and equity is distributed accordingly.
  • cliff: Consultants can be terminated within six months, for example, and you will retain all equity.
  • lack of competition: It restricts consultants from providing similar services to companies in your space.
  • Property: Any ideas or developments raised by either party belong to the Company.
  • disclosure: Do you want advisors to publicly disclose their relationship with your startup?

Advice for managing an advisory board

  1. Connect regularly: Arranging meetings consistently and in advance is often best. Not only does it allow counselors to prepare for discussions ahead of time but it gives you the opportunity to identify areas where you need help.
  2. Create an agenda: Outline the topics for each discussion and share them with your advisors beforehand. Make sure to keep track of issues you can’t get around to discussing and save specific topics for specific advisors.
  3. Be open and transparent: If you are not completely open and honest with advisors, they will not be able to provide valuable advice. Remember that they are part of your team and work towards your success. Share not only the highs, but the lows as well.
  4. Strengthen every relationship: There is a strong chance that everything you are working on may not work out. Startups fail every day for a million different reasons. Establishing a strong connection with each advisor may lead to future collaborations.

As any successful entrepreneur can attest, the people you surround yourself with are the ones who decide your success. Building an advisory board can speed up your company’s growth in more ways than one and help pass the risky early startup phase, where most businesses are doomed to failure.

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