Setting up an advisory board offers numerous benefits that can add value to your business. You can save time and money by implementing this strategy. This article will provide you with the necessary information to establish an advisory board for your company and accelerate your business growth.
It is crucial for any company to have access to expert advice, and one effective way to achieve this is by establishing an Advisory Board. It is worth noting that an Advisory Board is distinct from the Board of Directors, which holds a vested interest in the company and has the right to vote and make decisions during the Annual General Meeting. Conversely, an Advisory Board is an informal group that typically does not hold board seats or shares in the company.
As a fledgling entrepreneur, you may not possess the necessary expertise in key areas such as legal, marketing, finance, operations, or human resources. However, by enlisting the help of experienced professionals for your Advisory Board, you can steer clear of costly mistakes and instead focus on adding value to your business. One of the main benefits of an Advisory Board is that you have the flexibility to run it in a manner that suits your specific requirements.
Let's say you decide to appoint five members to your Advisory Board, each with an average of 15 years of relevant experience. In this scenario, you would have access to a wealth of knowledge and expertise totalling 75 years, all for a reasonable investment. Once you know how to create an Advisory Board, you can establish one at a minimal cost, enabling you to leverage the expertise of seasoned professionals without incurring prohibitive expenses.
Establishing an Advisory Board can yield numerous benefits.
As a business owner, it is essential to recognise that it is impossible to possess expertise in all areas of your business. When it comes to areas such as legal, marketing, finance, operations, and HR, it is crucial to have a team of experts to guide and direct your business decisions. You can either hire Heads of Departments for each area or create an Advisory Board of Members comprising six individuals with specialisation in Legal, Finance, Marketing, Human Resources, Accounts, and Product.
An Advisory Board is a group of experienced professionals who invest their time and knowledge in your company. Their primary role is to provide clear direction and advice to help you avoid costly mistakes and save time. With an Advisory Board, you can learn from others' mistakes while benefiting from their in-depth knowledge and expertise. By assembling an Advisory Board, you will not only improve your decision-making process but also enhance your business's overall performance. It is a smart investment that will pay dividends in the long run.
The framework for the advisory board.
Below are the steps outlined in the Advisory Board Framework.
Establishing an effective and efficient advisory board entails a thorough comprehension of your company's overarching vision and mission. To do so, it is crucial to identify your priorities, such as whether you aim to rapidly increase sales, recruit top-notch talent, enhance marketing strategies, secure funding, go public, or reinforce your legal position. Your mandates for the advisory board will depend on these factors, and it is possible to have multiple mandates as per your company's requirements. Once you have identified your mandates, it is essential to carefully select board members who possess the expertise and knowledge necessary to meet your company's specific needs. It is important to note that you may not require all six priorities mentioned earlier, but rather only a select few that align with your company's objectives.
It is highly recommended that once you have established your mandate, you should form a team of six advisors to assist you. However, it's important to note that the focus of the advisory board should ultimately be determined by the CEO or Managing Director. It is their responsibility to ensure that there is a clear focus for the board, as without it, even the most competent advisory board will not be able to produce results effectively. To establish this focus, it is important to set achievable goals every month for the next year, with the help of clear mandates and by selecting the right advisors who can help you achieve your goals. By doing so, your advisory board can be an invaluable asset to your organization, providing valuable insights and guidance to help you navigate any challenges that may arise.
Determining the ideal size for an advisory board can be a challenging task. As discussed previously, there are six critical roles that need to be filled, but the number of members can vary depending on your specific business requirements. It's important to note that the size of the board can have a significant impact on its effectiveness.
Having too many industry experts with strong opinions can lead to ego clashes and conflicting advice. To avoid this, it's essential to establish a clear mandate and focus for the board. This will ensure that everyone is working towards the same goals and objectives.
Even with a smaller board of six members, it's important to ensure that each member brings complementary skills and perspectives. For example, a legal advisor may have a strong opinion on legal matters, while an HR advisor may have a more subtle approach. It's important to avoid overlapping roles and establish a balance of nature within the group.
When it comes to determining the size and focus of your advisory board, there are several factors to consider. These include your business needs, goals, and the industry you operate in. It's also important to consider the level of engagement you expect from the members and how often the board will meet. By taking these factors into account, you can create an advisory board that is both effective and efficient in helping your business grow and succeed.
How often do we need to meet?
After forming an advisory board and setting goals, it's important to decide on the frequency of meetings. In the post-corona or lockdown era, it might not always be possible for advisors to meet physically, so video meetings may be necessary. As the moderator, it's important to ensure that everyone attends the video meetings.
However, it's essential for the entire advisory board to meet at least once a month for a minimum of two hours. This helps to build a strong bond amongst the experienced and senior members. During these meetings, it's important to have clear objectives and to assess whether they have been achieved. Avoid conducting meetings without a clear purpose in mind. Set goals and milestones, and evaluate progress before the next meeting.
Remember that your advisory board is also your team, so hold at least one meeting per month that lasts for a minimum of two hours.
When hiring advisors, it is important to establish the terms and conditions of your agreement with them. While there is no standard template for the contract, it is crucial to include certain provisions. These include:
- Every advisor will report directly to the founder of the company.
- Each advisor must allocate at least 2 hours per month to work with your company.
- Advisors must open their networks to the company and cannot refuse to do so.
- A Non-Disclosure Agreement (NDA) must be signed by each advisor to ensure that confidential information about the company is not shared with competitors or third parties.
- Advisors cannot work with any direct or indirect competitors for three years after their service to the company has ended.
- A legal amendment must be included to outline the consequences if an advisor knowingly or unknowingly shares confidential information.
It is essential to take great care in outlining these terms because as the company grows and matures, the business secrets become more critical. Advisors have access to sensitive information and may meet with customers, increasing the risk of confidential information being revealed. By establishing clear and comprehensive terms, you can protect your company's confidential information and ensure a successful relationship with your advisors.
Oftentimes, advisors may find themselves questioning the worth of their time and what they stand to gain from sharing their experience. While some companies may choose to offer monthly cash payments, others may opt for stock options instead. However, it is widely agreed upon among advisors that the best compensation package would entail a combination of both.
The true value for advisors lies in the potential rewards they can reap from receiving stock options or ESOPS, which are different from the employee pool of ESOPS. When brought on board, advisors not only provide valuable insights and expertise, but also open doors to their vast networks to help the company grow.
To truly maximize the potential of an advisory board, it is important to establish clear goals and focus for the team, track progress from meeting to meeting, and review previous milestones and objectives in preparation for the next meeting. A strong advisory board can be the key to rapid growth for startups, and it is crucial to take care of them whether they are compensated in cash or stock options. After all, clarity is essential to fully extract the value of an advisory board.