07 Oct How Do I Form an Advisory Board for My Business?
You’re interested in creating an advisory board committee, but you aren’t sure where to start. The process is easier than you might think. Follow some steps and you can start your advisory board in no time at all. Then, you can begin enjoying all the benefits that these boards provide.
Choose Your Advisors Wisely
First, you must decide who you want to have on your advisory board. It’s good to go with a balanced approach when creating an advisory board committee. You want your advisors to have a wide range of perspectives and skills. For instance, you can get budget professional, a technology expert, and a startup guru for your board. Each person should bring something unique to the table, and his or her skills should complement yours. You want to end up with a board full of experts who can each help you in a unique way.
It’s a good idea to get a big name or two, if possible, as that will add some credibility to your board, but not everyone must be a major player in the business world. Each advisor should have the necessary experience, though. When looking for advisors, seek out people who are at the place you want to be. If you choose advisors who are at the same level that you are, you won’t be able to grow as a business.
Once you know the type of advisors you want, you must find them. This is actually pretty easy. Start with your inner circle, and then look at the small business development center, local chamber of commerce, and more. Tap into the business community to find advisors in your area. You will find a wealth of people who will make excellent board members.
Don’t pick too many advisors during this process. If you have around 20 employees, stick with three advisors.
Even if you have a large company, you probably don’t want more than five advisors. You don’t want your board to get so big that it has trouble making decisions. Instead, you want each person to represent a specific skill set that your company needs to thrive. A small board will be able to work together to help you solve problems and grow your business.
Decide on Compensation
Next, you must decide how you are going to compensate your advisors. Cash and stock options are both popular choices. You want to compensate our advisors fairly, but don’t overpay. Companies that make $50 million to $100 million pay advisors an average of $4,800 a year. Use that as a starting point when deciding on compensation. Then, throw in some stock to sweeten the deal if you like. Just don’t overdo it or you’ll bankrupt your business in an effort to compensate your advisors.
What if you’re a startup and you cannot afford to compensate your advisory board? You can always promise them part of the profits once your business starts earning money. This will motivate them to help you succeed, and it will free up your money during the beginning phases of the business.
Create an Agreement
You need to put everything in writing when you select your advisors. Begin with the advisor’s role. You should have certain expectations for your advisors. Spell it all out in the offer letter so each advisor has a clear understanding of what he or she needs to accomplish when serving on the board.
You also need to go over the advisor’s terms. Many business owners make the mistake of hiring advisors indefinitely. That makes things very uncomfortable if you have to dismiss an advisor for any reason. You should set limits from 1-2 years. Then, at the end of the term, you can get fresh advisors. They can bring new skills to the table and offer you a fresh perspective.
You also need to include a non-disclosure agreement. Your advisors will be privy to lots of private information, and you need to make sure they don’t share it with the outside world. Your agreement will protect your interests and keep your company safe.
Send the Offer
Send the offer out to your advisors and wait for a response. Don’t get discouraged if some of them turn you down. Some people are wary to take on additional responsibilities, and it is best that they are upfront about it. You would rather them turn you down than have them quit a few months after joining the board.
Forming an advisory board isn’t difficult. Just follow these steps and you will have a board in place in no time at all. At that point, you can begin holding meetings and solicit advice. The experts you choose will help you with various aspects of your business, from financing to coming-up with new ideas. They can even help you tap into the latest industry trends.