Building a Board of Advisors

DSV Consulting works with companies moving into high growth. That might be a new company starting its first capital raise, or a company that’s been around for 100 years. Either way, a growing company needs people who know what’s ahead in its industry, its financial position and its market. Few companies can fit all of that expertise on their management team or board of directors. A board of advisors closes that gap. It gives a growing company the knowledge it needs at a cost it can afford.

Why a Board of Advisors

A company starting a growth phase is risky. That makes it very hard to recruit experienced people into management, onto the board of directors or onto the payroll. An advisory board is a lower-risk way for experienced people to get involved. It also helps individuals: I’ve kept my own informal board of advisors for years, and I recommend it.

An advisory board works because both sides benefit:

• Less legal exposure. Advisors aren’t corporate officers or directors, so they don’t carry the legal responsibilities that come with those roles.
• Resume value. Advisors gain entrepreneurial experience they may not have had before.
• Shared exposure. The company can tell clients, employees and investors it has the right “tribal knowledge” to succeed, and the advisors get public visibility.
• Career growth. Advisors can turn the experience into paid roles with clients or employers who need the same expertise.

Advisors also strengthen the tools that tell your story. In our article Communicating Your Business: The Essential Toolkit, the Team slide of your pitch deck lists officers, directors and key advisors. A credible advisory board makes that slide much stronger when investors have only a few seconds to look.

What to Ask of Advisors, and What to Offer

Set clear terms from the start when you build a new business or a new business line. The company offers a small ownership stake. In return, the advisor commits time and lends their name to your credibility.

Recruit advisors who will:

• Accept a small equity stake, less than 1%, for a three-year term
• Commit at least 100 hours a year
• Attend at least one board meeting each quarter
• Let you feature their photo and biography on the “About Us” page of your website
• List the company as a position or project on their LinkedIn profile
• Let you announce their appointment in a press release

Many of these terms connect to the foundation in our earlier articles. The website and LinkedIn presence from Communicating Your Business give your advisors’ names somewhere to show up. The corporate structure from Funding - Business instead of Personal Borrowihttps://dsvconsult.com/articles/https-dsvconsult-com-funding-structuresng gives you a properly formed entity, which you need before you can grant equity to anyone.

Further Reading

• Inc. Magazine: How to Assemble a Board of Advisers
• Entrepreneur Magazine: 3 Ways to Find Your Perfect Board of Advisors
• BoardEffect: Advisory Board Best Practices

Summary

A growing company needs expertise it usually can’t afford to hire, and a board of advisors gives it that expertise in exchange for a small equity stake and public visibility. With clear terms, advisors fill knowledge gaps, strengthen your pitch deck and website, and lend credibility to clients, employees and investors.

• Fill knowledge gaps. Advisors bring industry, financial and market insight that your management team and board may not have.
• Make it a win for both sides. Advisors carry less legal exposure, gain experience and visibility, and can turn the role into paid work.
• Set clear terms. Offer under 1% equity for three years in exchange for 100+ hours a year, quarterly meetings and public endorsement.
• Put advisors to work in your story. Feature them on your website, on LinkedIn, in press releases and on your pitch deck’s Team slide.