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Why your startup needs an advisory board

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Never be the smartest person in the room. If so, you’re in the wrong room. That is advice I would give to all entrepreneurs.

As a founder, the talent you hire at your startup is crucial. While it is difficult to attract and retain employees, ideally the individuals you bring on board should be more knowledgeable than you in their respective fields. After all, startups are built by generalists and scaled up by specialists.

It’s no secret that entrepreneurs are expected to be versed in many areas. Nevertheless, with so many aspects to building a business, founders often hire employees to fill gaps in their knowledge or experience. However, top talent does not come cheap and that 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 get the most value from these relationships.

Related: Why Every londonbusinessblog.com Needs an Advisory Board

What is an advisory board?

An advisory board is a group of individuals you trust as a startup leader to provide valuable business advice. The role of a consultant is essentially to serve as a mentor to both you and your company.

For the most part, advisors typically offer suggestions or guidance in the following areas:

  • Finding investors
  • Building corporate culture
  • Implement growth tactics
  • Recruiting and retaining employees
  • Planning or executing an exit strategy

Your board should be diverse. Whether it’s a CMO who can coach you in marketing or an attorney to assist with legal challenges, advisors are meant to complement you as a founder. Relationships with these individuals are often personal and sometimes informal, allowing both parties to communicate via text, email, or video chat.

Related: 8 Steps to Creating an Effective Advisory Board

Benefits of advisors

The most frequently asked question is: does the return of an advisory board justify the cost?

In general, I advise all entrepreneurs to hire consultants, as the foresight of these individuals is often invaluable. Many founders initially hesitate at the idea of ​​giving up equity, but rarely regret this decision as they progress.

With previous experience to offer, advisors enable entrepreneurs to eliminate countless mistakes that could very well prove fatal to any startup. It only takes a few times to tenfold an investment return from an advisory board, so let’s take a look at some of the benefits of having advisors.

  • Ability to fill knowledge gaps and improve your performance as founder and CEO
  • Serve as a testimonial for your business to foster trust among investors and customers
  • Provide advice on critical business functions to help accelerate your startup’s growth
  • Create credibility when it is lacking in the eyes of both internal and external stakeholders

Once you decide an advisory board is appropriate, it’s time to begin your search.

Related: 10 Reasons Why Leading Entrepreneurs Join a Peer Advisory Board

Select members for your board

Finding people is easy, but finding the right people is hard. Here are some tips to keep in mind when filling spots on your advisory board.

  1. Evaluate your needs: What areas do you miss most in terms of knowledge? For example, if it is your first time raising capital, you may want to seek an advisor who has experience dealing with investors. Once you’ve established your needs, you can refine your search.
  2. Make use of personal relationships: Ideally, an adviser acts as a close confidant and, if necessary, gives advice at short notice. Consider whether you have personal connections in your network that can add value to you and your business.
  3. Screen candidates thoroughly: Always do your due diligence. Be sure to research a candidate’s previous roles and get testimonials if possible. In addition, determine whether a candidate has potential conflicts of interest that could cloud their judgment.
  4. Go to entrepreneurial hotspots: Sometimes geographic hotspots where other startups are located are the best place to find advisors. Many of these cities have conferences, conventions and shared workspaces where entrepreneurs and peers gather to network.

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

Terms offered to startup advisors

Once you have advisors in mind, both parties should align with expectations before entering into a working relationship. This is usually set out in a written agreement that explicitly describes a consultant’s duties, responsibilities, and fees. Here are a few items to include:

  • Meetings: Are advisors expected to meet regularly or ad hoc as needed?
  • Confidentiality: Prevents leakage of information that could be detrimental to success.
  • Equity: The fee often ranges from 0.25 to 1.50% of your total shares per person.
  • Fortress: Contracts range in length from two to four years and equity is divided accordingly.
  • Cliff: For example, advisors can be terminated within six months and you retain all equity.
  • Non-compete: Restricts consultants from offering similar services to businesses in your area.
  • Property: Any ideas or developments put forward by either party are the property of the Company.
  • Revelation: Do you want advisors to disclose their relationship with your startup?

Tips for Managing an Advisory Board

  1. Connect regularly: It is often best to schedule meetings consistently and in advance. Not only does it allow advisors to prepare for discussions in advance, but it also gives you the ability to pinpoint areas where you need help.
  2. Create a calendar: Before each discussion, outline the topics and share them in advance with your advisors. Be sure to follow up on issues you don’t get around to discussing and save certain 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 they are part of your team and support your success. Share not only the highs, but also the lows.
  4. Promote any relationship: Chances are, whatever you’re working on won’t come true. Startups fail every day for a million different reasons. Building a strong relationship with each advisor can lead to future collaborations.

As any successful londonbusinessblog.com can attest, the people you surround yourself with determine your success. Assembling an advisory board can accelerate your company’s growth in more ways than one and help navigate that oh-so-treacherous early start-up phase when most businesses are doomed to fail.

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