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Boards, regardless of whether they are a board or board of advisors, are often associated with large companies. Boards are generally for established, large companies. How did they become established and big?
While entrepreneurs may have high aspirations for their business, every entrepreneur will face challenges along the way. Statistics show that many businesses fail to survive for more than five years. One reason is that they don't get enough advice.
Although entrepreneurs are constantly receiving advice, most business leaders find the advice to be unfavorable and not sought after. This can lead to isolation, poor decision-making and even business failure. Your business will become a statistic if you don't seek out advice about how to grow it. You can act like a large company and have a team of advisors.
A board of advisors is an advisory group that consists of experts who offer advice to business owners on how they can manage their business better. Advisory boards are informal and can be set up to suit the needs of entrepreneurs. There is a sweet spot when it comes to size. Too many members can reduce perspective and too few can lead to a loss of expertise. I have found that 4-6 members is the ideal number.
What to look out for in a board member
It's crucial to find experts when assembling your board.
Get to know your industry and business well
You have had success in growing your business
You can have a valuable perspective
Willing to put in the effort and time
Consider entrepreneurs who have succeeded with similar offerings to your ideal customers, who scaled up and sold similar businesses to yours, or who have proven to be more successful at making things better.
Ask each potential expert to give you their opinion on your company. If there is chemistry and good advice, you can ask them to join your advisory board.
Similar: 4 Reasons Why You Should Have A Board of Advisors
How to structure an agreement
This arrangement can be informal or formal as you wish. Advisors don't expect or should not receive cash compensation. If the advisor candidate is an expert in their field, it may make sense to give them cash compensation. Options or stock are common options for incentives. As the business's value increases, advisors receive more compensation. This incentive structure aligns with your goals. Pay them to make your company and you better.
How to structure the engagement
Even if the structure is informal, both sides should consider their commitments seriously. Each party must agree to meet regularly with their respective members and the entire board. It is important to prepare them for the meeting by providing pertinent information at least a week in advance. An advisor's value does not lie in reviewing your company, but rather in listening to their opinions. Talk about the views of your advisors in meetings. This is possible only if you prepare your board well. Each member of the board should attend each regular meeting. If they are unable to commit, find another board member.
Each board member should commit to a minimum of an hour each month. To discuss a particular set of issues or opportunities, it is common to hold quarterly or semi-annual board meetings.
Similar: How to Create an Effective Advisory Board
What should you expect?
You, the entrepreneur are responsible for structuring the arrangement to suit your needs. Your business will benefit from a clear agreement and goals. Expect to feel uncomfortable initially, as it is difficult to be vulnerable and admit that you don't know everything.
There is a reward.
You and your business will have a better future. You will see improved decision-making, better business models and new ideas, as well as less risk and better mental health. The leader of a business is the key to its success. Whos making you better?
Related: Now that you have built your startup, build your Advisory Board