Advisory board primer: Why you should have one and what they can do
This article was published as part of the Denver Business Journal Leadership Trust, an invitation-only network of influential business leaders, experts, executives and entrepreneurs.
I have been spending more time recently working with small business CEOs on the how, when and why of advisory board formation. There are a number of paid advisory board groups — Vistage, EO, TAB to name a few. While there is merit to these organizations because they are facilitated advisory boards, this format doesn’t work for everyone. Another option is engaging fractional executives. These are experienced professionals who work for you part-time to help fill some of these gaps.
An advisory board is different from both these options. Advisory board members don’t get paid, but are typically awarded some stock options so that they are invested in your success. Board members may be active in your business or may operate at a strategic level. An advisory board should range from three to five members — any more than this and you’ll spend more time managing your board than growing your business.
Why have an advisory board?
So, as an entrepreneur, why should you have an advisory board?
1. To fill gaps in your leadership team.
When I’m reviewing a company’s leadership team, I look at the skills and experience each individual brings to the organization. Then, I look at the competencies that are missing.
Perhaps you have an inventor/founder and a strong business operations leader as CFO or COO, but you are missing talent development and sales experience on your leadership team. These skills can be filled with advisory board members — someone with deep experience to bring products to market in your sector, as well as a human capital expert who can help you navigate benefits, hiring and retention.
2. To help prepare fundraising.
Investor pitches should never be done without a good amount of education. Having an advisor on your board with deep experience raising capital using different vehicles is critical. Raising venture capital money is different than private equity or debt capital, so being able to leverage experience from someone who’s walked in your shoes — successfully and not — will help you avoid some common mistakes.
3. To navigate growth.
How to move from $5 million in revenue to $10 million, or $10 million to $25 million, is not something you learned in college or in your early career. Growing your company without breaking your people, your infrastructure or your budget takes a special set of skills.
Having someone on your advisory board who has navigated this level of growth is essential. Additionally, are you growing by acquisition? International expansion? New products? Look for these unique skills when recruiting advisors.
4. To open doors with strategic partners.
One of the best ways to engage with an advisor is for them to help you grow your top line revenue and open doors with strategic partners. Big logo customers and close relationships with corporations that might be interested in acquiring your company are paramount to your success. You want an advisor who has those deep relationships and wants to help you succeed.
5. To watch out for your blind spots.
It’s lonely at the top. As an entrepreneur, what keeps me up at night is the stuff I don’t know. Having a team of experienced professionals to bounce ideas off of, or sync up with on strategy, can help you guide your organization with confidence and competence. Your team will follow you if they believe in you. That advisory board experience will help you perform at your best — and your team will level up as well.
Conclusion
Finally, as you recruit members for your advisory board, remember that these are high-trust positions. In fact, some of these individuals may become formal board members as you grow. You must trust each of them implicitly and be more transparent with them than you are with your leadership team. Otherwise, this exercise will hinder, not help, your growth.
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