Four essential tips for building an advisory board
Eva-Maria Dimitriadis, Chief Operating Officer, C5 Accelerate
Building a company is an exciting time, especially as you gather the people that will help you make your idea a reality. As well as employees and internal staff, there’s great value in having a trusted team of external advisors to guide you on your journey. This blog post will look at putting together an external advisory board and how you can get the most value from them.
1. Match your advisors to your values and objectives
Firstly, it’s important to have a clear idea of what you want to achieve with your advisors and how you’ll measure success. Each person should have a clear responsibility and purpose. Think about what skills and relationships would add value to the founding team. You might want to build your reputation through someone who is well respected in your field, or you may want someone who can make introductions to new clients. Your advisors also act as a sounding board for bouncing around new ideas and strategies. Make a list of people that you respect and trust to provide advice that you would be confident to act upon. If your company operates across multiple geographies or has ambitious expansion plans, then you will want to reflect this.
2. Compensating your advisors
Once you understand what you want from your advisors, you need to think about how you will compensate them for their time and knowledge. Incentivising advisors can get expensive if you’re paying market-rate board fees. It is advisable to steer clear of annual retainers. For a start-up, this could be an unsustainable drain on much needed cashflow. Some companies offer an attendance fee per board meeting of around $1,000 to $2,000. If you hold quarterly meetings and have five advisors, this can soon mount up to $40,000 a year. Some advisors will expect travel and expenses to be covered on top of that. Another route is to offer equity. The market rate for advisory board members is around 1.5 to 2.5%. This is a more cost-effective way to bring in people that are passionate about your business and that will be committed to your success. There may even be a way to offer perks and access to the product in order to compensate your advisors in kind.
3. Practise good governance
You need to consider such details as how often you’ll meet and where. For example, a call or meeting once a month to touch base is a good idea, but it’s also important to meet formally on a quarterly or semi-annual basis to review and set out goals and milestones. Once these, and other operational matters are clear, they should be set down in a legal contract. Generally, a one-year term is acceptable. As the company evolves you may need to let go of some advisors and appoint new ones. It’s important not to skimp on legals so that you avoid awkward conversations.
4. Maximise your ROI
Finally, make the most of your advisors. They’re credible people in your industry and provide good third-party validation, not just of your product, but also of your founding team, your company and its philosophy. Feature them on your website and in your pitch decks, use them in media outreach and take them to meetings when you can. This visibility will add extra value to your relationship and help you get the most out of your advisory board.
For more information on C5 Accelerate’s curriculum for mentoring and advising start-ups, please visit https://www.c5accelerate.com/