I’ve been working with a company that was knowledgeable enough from the start to assemble an outstanding board of advisers, but it was not easy.
Management first had to prove the company’s viability to each prospective board member, then make a compelling case about why it wanted that person on the board.
The management team, which was experienced and successful, landed a group of outstanding people in various disciplines for the advisory board. They clearly recognized they could benefit from the advice of others who were not so close to day-to-day operations.
This is not a trophy board. The management team is not simply using their names to assist with financing efforts, but using the group as a working board. The two groups meet frequently on an as-need basis, because the board members’ skills are of great value.
It’s easier to assemble of board of advisers than a board of directors. Advisers have no personal liability, as long as their role is only to advise, unlike directors, who do have personal liability. And if your sole reason for seeking a member’s participation is for advice, advisers don’t have to put money into your company. If they later have an interest in investing, let them, but don’t make it a precondition to their participation.
To attract advisers, you need to tell a compelling story about your company and its potential, so you must have substance when approaching potential members. And don’t wait until your business plan is complete to seek their advice because at that point, their impact will be limited. Have your preliminary business plan and seek your advisers’ advice as you firm it up.
Treat your board of advisers with great respect. They aren’t required to be involved, and only are because they believe in your and your company. You will normally compensate the board with a modest amount of post-funding equity, but they are not advising for the immediate buck.
The company in my example had a spaghetti party at the home of one of the founders, with managers, professional support people and the board of advisers as guests. This wasn’t a costly dot-com era champagne bash, but it was fun. And the board of advisors was recognized.
After expending the effort to assemble a top-notch board, don’t forget to listen to their advice. You might not always agree, but that’s why you picked them.
Erwin Bruder ([email protected]) is president of The Gordian Organization. Reach him at (216) 292-2271.
