Small Business Advisory Boards - Tips for finding and keeping the best advisors

January 2006

Every company can benefit from the wisdom and experience of seasoned professionals who have "been there, done that." As a relatively new or startup business, you might not have many people on your payroll who can offer a veteran perspective. So how do you tap into this pool of knowledge without tapping out your financial resources? One way is by establishing an advisory board?a group of industry experts who volunteer their time and expertise to help you further your business goals. Here are some tips for making the most of your advisory board.

Focus on the short term. Select advisors who will help you accomplish short-term goals. Your startup business model will evolve and change frequently in the first few years. Recruit advisors who will help you with your current product and market needs. Determine what skills, introductions, and knowledge you will need to accomplish your immediate business goals. Your advisors should be willing and able to help you achieve your goals for the next twelve months.

Recruit credibility. If cash is "King," then credibility is "Queen." Next to cash flow, one of your critical needs as a startup business is to establish credibility. Credibility will help you attract customers, partners, key employees, financiers, and other ingredients essential to getting your business off the ground. Selecting the right advisors will help you establish credibility in your markets. So as you put together your dream team, include a few names that could boost your credibility.  

Buy 'em lunch. Some advisors will ask for equity in your business in exchange for advice and introductions. Others will be satisfied if you pay for lunch now and then. Often times, the advisors who prefer a free lunch are better than the advisors who demand equity. As a gesture of gratitude, you may decide to give a particularly helpful advisor some equity in your company. If you do this, make sure that you structure the compensation over a payment schedule (such as quarterly or annual) rather than upfront.

Run an efficient meeting. Your advisors are volunteering their time. Don't waste it. By being prepared and well organized, you will make the most of the time you have with your advisors and show them the respect they deserve. Set up meeting dates for the year in advance and stick to them. Choose a meeting site that is comfortable and free of distractions. Distribute the meeting agenda, as well as any related materials, documents, and numbers, at least a week prior to the meeting. As you plan your agenda, allot no more than 30% of the meeting for "blue sky" brainstorming. Spend at least half of the time setting and reviewing concrete business issues and action plans.

Don't hold back. Be completely open and honest with your advisory board. Share your hopes and successes, as well as your failures and fears.

Keep the lines of communication open. It is up to you to keep your advisory board involved in your business. Have someone take notes and document action plans at your meetings.  Be sure to follow up with your board members on all agreed-upon items. Keep your board members informed of your company's activities between meetings.

Set term limits.  It is up to you to keep your advisory board fresh. As your company's short-term goals change, the advisors on your board should change as well. Advisory board roles should have term limits?such as 12 or 24 months. You can rotate the positions so that not all limits expire in the same year.   

Besides a free lunch now and then, what's in it for them? You may be worried about getting a commitment from your board members. Keep in mind that it is often easier to persuade industry experts to join your advisory board than it is to persuade operational executives, who are not used to the idea of devoting personal time to serve on boards. Term limits come in handy here, too. It will be easier to get a commitment from people if they don't need to commit indefinitely.

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