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An internet infrastructure company couldn’t crack the Fortune 1000. So they brought a former CIO of Cisco onto their advisory board. Within 6 months their software was in trial at 5 Fortune 1000 companies. 18 months later the company was sold for 5x gross revenue.
A lighting company needed to quickly infiltrate the hospitality and retail sectors. They put executives from Marriott, Wal-Mart, Target, and Southern California Edison on their customer council (an advisory board without compensation). 3 years later the company’s revenue has increased by 10x.
Advisory Boards used to be the darling of startups and small companies. Now we’re seeing a new trend: mid-sized and large companies adding advisory boards. These Advisors have no fiduciary responsibility or mandatory meetings. They help with strategy, connections and company growth in their specific area of expertise. They’re a perfect way to “try then buy” new talent for the team or Board of Directors or to simply expand your brain trust. The ideal size for an advisory board is 8-10 people. With a group of this size you’ve got plenty of room for diverse skills and contacts.
When designing your advisory board, pick advisors who are:
- Executives from the trenches who’ve been on the business battlefield longer than you
- Experts from a different industry or field who provide unique skills and perspective
- High profile executives who will lend you credibility and will help secure customers, financing, leverage
Advisors are terrific to bounce ideas off of, provide a reality check, tell you when you’re about to mess up, to confide in when you’re alone at the top of the organization or department. It’s often safer to discuss a risky move or sticky challenge with an advisor versus a Board Director. An advisor can’t fire you.
Here’s my proven process for getting, and keeping, advisors on your team.
1. Define your advisory board member profiles. List the skills and connections you want advisors to have. Be specific. A hip, high-end fashion company was careening out of control. The two founders, Karen and Kim, needed help managing their massive growth. They had two strategic goals: scale up the business operations and get a deal with a mass retailer like Target or Wal-Mart. They needed more hands-on expertise, yet they didn’t have the capital to recruit rainmakers and their Board of Directors was already big enough.
They wanted advisors to help their team:
- Cut favorable and binding deals with mass-market retailers
- Select, manage, assure quality of outsourced manufacturers, shipping, lines of credit, all aspects of back-end retail infrastructure and operations
- Secure celebrity endorsements in the music, film, TV
- Build and incent a field sales force to ensure hot boutiques carried their wares and merchandised it with high-profile displays
- Build buzz as an exclusive brand, and craft a mass-market entry-level brand that would cause consumers to crave the high-end product
2. Determine your expectations of each advisor. Start out by asking an advisor for 1 hour per quarter or month. This is easy to agree to, and you’ll get more time once they fall in love with your business. Be willing to communicate via the method most convenient for them. Don’t immediately ask for favors—ask their opinion, ask for advice. Don’t be greedy. Do be grateful. Over time they’ll build trust and will introduce you to their contacts. For more time, offer more compensation.
3. Create your pitch and comp package. Why should someone become an advisor? What’s in it for them? Getting involved in a developing company in a super cool field? Access to interesting/thought-provoking people–your executive team, Board, other advisors? Focus on the “soft” benefits especially if don’t have a lot of cash or stock for compensation. Your concise, compelling advisor pitch should explain the opportunity in 5 minutes or less. Standard advisory board comp is $10,000-15,000 per year plus stock. If stock is all you have, most companies offer .25+% of a startup/small company’s common stock (vested in equal increments over 24 months). My favorite comp is stock + cash compensation tied to performance. If your advisor wants more, it may be worth it—just make sure the expectations are set in advance.
4. Brainstorm your target list. Ask your friends, colleagues, mentors, vendors, financiers if they know people who meet the profile you seek. Practice your pitch on them to see if they find it compelling. Ask for personal intros to your target advisors. For “cold” pitches, gather all necessary contact info via LinkedIn and research the interests of each targeted advisor. What causes do they care about? What are their hobbies? What are their interests? How can you establish rapport?
5. Recruit your advisors. Seek out your targeted advisors. Perhaps they’re scheduled to speak on panels, at bookstores, at a conference. Once you give your pitch, they’ll likely want to know more. A pitch must only be concise and compelling in order for the prospect to request more info. That’s the time to then be complete—once they request more info.
6. Incorporate and communicate. Incorporate advisors into your company’s communication flow. Add their bios to your web site, set up an e-mail list for monthly or quarterly high-level advisory board communication (10 bullet points max, the top 5% good news, bottom 5% where you need help, and any timely topics) and consider two advisory board conference calls twice per year. Keep your requests to a given advisor within the scope of their expertise.
Some advisors will contribute more than others. If you committed a high compensation package, and after repeated requests your advisor still won’t give you any time, have a respectful conversation with them and suggest changing their package. It’s better to reduce comp than to “fire” them. This is why I prefer a common package for everyone, with greater comp for senior advisors (after they demonstrate their value or if they commit to a quota or results in advance).
Karen and Kim’s business is thriving… their advisors helped them scale the business by many, many millions. How are you getting powerful people to help you boost your business?
Christine Comaford is a five-time CEO with 700% ROI on her company exits. She has sat on over two dozen private and public company Boards. She coaches CEOs to achieve remarkable results in performance and operational efficiency by combining neuroscience and business strategy.