A smart entrepreneur knows what she's good at doing and what she's not good at doing. Almost every small business has some areas in their business where they could use some strategic guidance. Assembling an advisory board is a great way to fill in some of those holes and get some smart direction. Advisors should not only be helpful but passionate about what you are doing. Here are few things to think about when assembling your board.
1. Compensation. You would be so lucky to find someone that wants to help for free, but let's be honest, a good advisor should get something in return for their time, connections and expertise. The most common way to get an advisor on board is to offer a percentage of equity. That percentage can be anywhere from .5% – 2% typically, but it's entirely up to you. If you have an advisor that is extremely involved in your business, consider giving more – it's worth it.
2. Credibility. Bringing on a well-respected advisor can establish credibility much faster and easier than you building it on your own. Getting this instant clout helps you attract key talent, investors, partners and customers. It's basically an endorsement from a seasoned business veteran, and that's hard to beat.
3. Connection. Don't be afraid to invite someone to your advisory board simply for their network. Obviously, you want them to be synergistic to your mission and purpose, but their sole role could be to introduce you to top investors, key clients, new markets and customers. CEOs, celebrities and well-respected founders can help you spread the word, make introductions and share experience. Just ask.
4. Establish Your Needs. Get crystal clear on your short and long term goals and then be honest with a potential advisor about what you need to get there. Do you need an introduction to an investor you want a meeting with? Do you need someone to introduce your company to their social network? Do you need sound, ongoing legal direction? Before you bring on an advisor, be honest with them about where your strengths and weaknesses lie and how they can help. Advisors know that your business isn't perfect, so be as honest as you can so they can be effective.
5. Involvement. Before approaching an advisor, establish levels of involvement and assign an equity percentage. The more they want to be involved, the more equity you exchange. Some advisors are too busy to really dig in, but one connection can be worth thousands even millions to you. Create a tiered involvement schedule and assign an appropriate equity percentage for each tier. Give them some options of how much they can be involved and let them choose which tier they can handle.
An advisor isn't your employee – so if you want someone to do your books or biz dev for you, hire someone. Remember that they are there to simply advise you, so be clear in all requests for advice – their time is just as valuable as yours. In my experience, great people love to share their knowledge, so don't be afraid to ask people you admire and respect to be an advisor. Good luck!!
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