Every company – from high-growth startups to slow-growth enterprises – can benefit from an advisory board if it is well-structured and well-managed.
Some of the obvious benefits of an advisory board include credibility for you and the company, domain expertise, and/or a well-established professional network.
This blog post will provide guidance for assembling a well-structured advisory board as well as management tips for extracting the most value from your advisors.
Assembling Your Advisory Board
Step 1: Determine Your Needs
Start by looking at the most important functions of your particular business, it may be technology, sales, marketing, financial management, daily operations, etc. Next, look at your and your current team’s expertise and core competencies to identify weaknesses and gaps.
These gaps and weak areas are a good place to start in terms of identifying the types of advisors that would be able to add the most value. Be honest with potential advisors about your strengths and weaknesses and how you are hoping they can help.
Next, get very clear on your short term and long term goals. Do you need investor introductions? Or perhaps you are looking to partner with a major player in your industry? Understanding your goals can help you better understand the type of advisor needed for your board.
Step 2: Determine Compensation and Level of Involvement
Most good advisors, depending on your relationship with them, will likely expect something in return for their time, network, and knowledge. While you can certainly compensate your advisors monetarily, the most common method of compensation is providing a minor percentage of equity (anywhere from less than 1% up to 2% or more).
Some advisors will be willing to commit more of their time, connections, and expertise than others. Before approaching potential advisors, determine levels of involvement with distinct compensation packages for each and present them with options.
Step 3: Passion Is a Must
In order for any advisor relationship to be successful it is important that they are not only capable of providing expertise but they are passionate about you and your company. Without passion their expertise will more than likely fall flat.
Extracting Value from Your Advisory Board
Step 1: Information is King
Your advisors are likely very busy people and you want to respect their time. However, in order for them to be effective advisors they need to be informed on the topics that you are seeking to cover.
Provide them with regular, scheduled newsletter style updates that are uniform, easy to digest, and highly informative. Be sure to set agendas for each meeting with a clear list of action items that you’d like to cover.
Submit the agenda a few weeks prior to the meeting with relevant information so that your advisors have time to prepare. During your meeting be sure to stick to the agenda and keep the conversations on task.
Step 2: Keep Your Ears and Mind Open
Your advisory board was not setup so that you could have a room full of heads nodding up and
down in agreement. The purpose of the advisory board is to offer alternative ways of thinking that you may have yet to consider. Set aside any presumptions you may have and sincerely consider everything thrown on the table.
While you should certainly ask questions and challenge ideas, you don’t want to waste everyone’s time (including your own) by not considering alternative viewpoints.
Step 3: Stay In Touch and Follow Up
Be sure to follow through on any action items that you and your advisors come up with during your meetings. This is not only a sign of respect but seeing that you are taking their insight seriously will encourage your advisors to remain engaged.
Lastly, be sure to follow up with your execution of action items along with any key findings or results. This information can be included as a part of your regular, scheduled newsletter updates discussed above.