How To Effectively Use Your Advisory Board
As a new entrepreneur, it’s always a good idea to assemble a group of advisors who have travelled down that road before. If you are raising venture capital or are considering merger and acquisition finance you could engage a corporate finance consulting firm to support you on your board. Advisors can help guide you and your business as you get started, helping you avoid some of the typical pitfalls that happen to first-time entrepreneurs.
It’s important to have a small group of advisors before you need funding, and if you select these people incorrectly, there is no amount of money that will help save your startup. And it’s important to keep in mind that this group of people, unlike your directors, have no formal power or fiduciary duties to your startup – they are purely serving at the pleasure of you, the business owner. They need to tell you the truth about you, and your business – both good and bad.
Using them effectively requires real effort on your part. If you give and ask for nothing, you will get nothing. But used correctly, they will be your best advocates to investors, and can save you from making major mistakes. Here’s how:
Select People Who Complement Your Experience
If your business is too small for a CFO, get an advisor with heavy financial experience. If the business area is new to you, find someone who has live it. If your experience is primarily technical, get someone who has built a business.
Be Specific On Help Needed
If you’ve chosen your advisory board members carefully, you’re asking busy, successful people to carve even more time out of their schedule to help you. Let each one know how you see his/her expertise – it may be insight on trends, organisational advice, or funding connections. Set a fixed term, like one year.
Formalise The Compensation
Most advisory board members sign up because they want to help you, not because of the compensation. Yet, you should offer a reasonable monthly fee and/or some stock options to show you are serious about the position.
You Need To Drive The Process
It’s smart to schedule a monthly Advisory Board meeting, with a formal agenda, as well as informal communication to keep everyone on the same page. Advisors can’t help you if they only hear from you once every six months.
Respect Their Time
For a business executive, nothing is more annoying than a poorly run meeting where the presenter is unprepared, rambles, and wastes time. Make sure every meeting is facilitated well so that concrete action steps, deadlines and assignments result.
Overall, if you use your advisory board to feed your ego, or correct your mistakes, you will likely be disappointed. If you find your Advisory Board is a burden on you, or you find yourself hiding things from them, then you have the wrong people – or you are letting your ego get in the way. Additionally, keep in mind if you are looking for someone to fill an operational gap, it’s usually better to look for a partner, employee or consultant, rather than an advisor.