Everyday around the world, another entrepreneur starts a company that has ambitions to address a need in the market that they have identified. They work diligently on their plan of action and months or years later, they find success or they hit major road blocks forcing them to scale down the size of their operation. For those that are forced to shut down, imagine if they knew how to build an advisory board and knew the unmeasurable value that would have been added to their team.
Why I Created a Group of Mentors
About 6 years ago, I was one of those individuals starting their own company from my dorm room in Hamden, Connecticut at Quinnipiac University with two of my good friends. Throughout the growth of the business, I have experienced the highest of the highs and the lowest of the lows ranging from signing a lease for our first office to laying off over 50 people in a matter of 4 months.
I fought through the massive obstacles and kept the ship moving forward, but it was extremely difficult without outside guidance and advice. Most of what I learned while building and structuring the business was achieved through experiential learning and reading the leading books on business and entrepreneurship.
It wasn’t until the summer of 2014 that I began researching the importance of advisory boards. I had been networking with entrepreneurs, business individuals, and investors in the Orlando area for the better part of the year. I was learning a tremendous amount just from our short, 1 hour chats over coffee or lunch. I diligently prepared notes for the meeting and attempted to glean as much valuable information that I could out of the individuals’ stories and answers to my questions.
As I performed more research into the formation of an advisory board, I identified 8 key reasons why it would be worthwhile for my business partners and me to build one for our company. Below, I offer my list as well as explanations for how an advisory board can add true value to your executive team.
8 Reasons Why You Should Build an Advisory Board
Reason #1: Add invaluable expertise to your team
As an entrepreneur and the owner of your own business, you will know a tremendous amount about your given product or service, but there will undoubtedly be areas where your intelligence or education lacks placing you in situations where making decisions is much more difficult and less informed.
When you build an advisory board, you can target your areas of weakness and complement them with seasoned veterans who have been making the difficult decisions for years.
Do you lack the know-how for effectively marketing your product in the digital age? Find an advisory board member who has built a dominant personal and company brand. Reach out to them to grab coffee and allow a relationship to develop.
Reason #2: Gain valuable insights for little to no cost
From my experience, individuals that decide to become a mentor or an advisor for a company do it because they see true promise in the entrepreneur and want an opportunity to contribute. As the entrepreneur, it is polite to pay for lunches, coffee, and an occasional dinner. Take the advisory board out once a month for dinner to show appreciation for the time they spent with you instead of pursuing other projects. It is all well worth the advice that you are receiving on a weekly basis.
There are official advisory board agreements that transfer a small percentage of equity to the advisor in exchange for a cash payment, but they are more rare. Sharing a small percentage of your company’s equity with the advisor can make the individual more committed to the long term success of your company, but it also takes away a piece of the company that was yours. I highly encourage entrepreneurs that take this route to get to know the advisor well before offering a percentage of your company.
If you are interested in these types of agreements, I encourage you to check out the Founder Advisor Standard Agreement (FAST). It’s a great resource from The Founder Institute that sheds light on the expectations and agreements between founders and their potential advisory board.
Reason #3: Expand your network
When you build an advisory board, you have a tremendous opportunity to expand your network and meet more great people who can potentially help you as you build your company. As your advisor, they are going to be happy to connect you with most of their colleagues as long as you have a valid reason for wanting to speak or meet with them.
As with all networking opportunities, make sure that you have a stated purpose for wanting to meet and bring a slue of questions relevant to the individual’s experience. Building a group of mentors has opened doors for me to connect with amazing talents who I can now reach out to for further advice and guidance.
Reason #4: Validate the reputation of you and your company
Forming and marketing your advisory board to the public further validates your reputation as an entrepreneur and the future for your company. When customers, investors, and other businesses see your advisory board, they begin to associate your reputation with that of the individuals on your advisory board.
It displays your recognition that you are not perfect and that you are constantly striving to learn more. It also demonstrates that you have the charisma to speak with talented individuals about your business.
Reason #5: A guiding voice in the hardest times
Think of one of the most trying times in your life, either as an entrepreneur or a professional. Imagine that you had a group of talented and experienced individuals that you trusted and that had more likely gone through the same situation at some point in their careers on speed dial. Advisors are there for you when the times get tough and are able to offer a breath of fresh air when you feel the world crumbling down upon you.
Reason #6: Create a pseudo boss for you
Entrepreneurs aren’t used to being pushed by anyone except themselves when they first start a company unless they immediately raise funding and have a board of directors. For those that bootstrap and are their own boss, forming an advisory board provides you with someone else to be constantly pushed by.
While the advisory board does not have the rights to force you to do anything, you will most likely look up to them and want to further impress them. An advisory board serves as a great pseudo parent to ensure that all of your ducks are in a row and you are executing according to your plan.
Reason #7: Have a group of people to always bounce ideas off of
Being able to share and validate your ideas as an entrepreneur is key to your growth and the success of your company. Having an advisory board provides you with an outlet where you can share new ideas and receive candid, critical feedback.
Your advisory board has the best interest in you so they are going to tell you what they truly think. Having an outlet for this type of feedback can help you to throw away bad ideas and focus on ones that add the most value.
Reason #8: Create lifelong business partners, friends, and advocates
Outside of the tremendous value that the advisory board adds to your management of the company, they also become a trusted colleague that you can work with throughout your life. I have had the pleasure of regularly meeting with a number of individuals over the past year that I now feel are people that I can trust. They are a special group of mentors that will continue to influence my decisions as I grow as an entrepreneur and tackle new challenges.
As you grow as an entrepreneur, it is imperative to find people of this caliber who will support you when the times get tough and when you are striving to create a new business.
Would you create an advisory board?
Share your thoughts on the pros and cons of an advisory board below in the comments section.
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