If you have a small business, practice, or start-up company, you should have an advisory board. Here's what to consider.
If you have a small business, practice, or start-up company, you should have an advisory board. Advisory boards have been decribed as a "gaggle of experts" who can help you grow your business. They are different from a fiduciary board of directors, that have different duties, responsibilities, roles, and liabilities compared to advisory boards. Here are some things to consider when you are creating your advisory board or are invited to serve on one:
1. Define your next business-critical success factor and appoint advisors who can help you attain it.
2. Advisors serve for a short term. Structure your relationship expecting them to move on.
3. Clarify expections, deliverables, and timelines and keep the process on track.
4. Compensate fairly for the opportunity cost of an advisor's time. Most suggest avoiding compensating in equity, although there are many examples of how properly structured equity compensation creates incentives to drive value.
5. Look for advisors who have passion for your idea, connections, domain expertise, experience, no conflict of interest, and with whom you can work.
6. Don't sign up for an advisory board unless you truly believe you can deliver what's expected. In most instances, that will be management (strategic) advice, marketing or business development help, finding investors, or assisting with new product design, devlopment and deployment.
7. Advisory relationships can be informal (small "a") or formal (big "A"). Some may need a sounding board every now and then. Some need a more formal structure and process to drive things forward. Some need an eminence grise.
8. Consider the tax and financial implications of granting and receiving stock or options. Some suggest awarding restrictive stock and an appropriate vesting schecule to create incentives for advisory board members.
9. Date before you go home together. Keep the advisory relationship somewhat informal for a few months until you both feel you have good comfort level with each other.
10. Have Plan B. If things don't work out, then anticipate and plan for a civil separation. The world is a small, round place so try not to burn many bridges since you might need them on the way down.
Advisory boards are a great way to get the help you need to make your business successful. However, there are pitfalls and landmines that can create ill-will or saboutage even the best of intentions. Do it right and thrive.
This blog first appeared at www.sopenet.org.