Start-ups run a high risk of failure. For this reason, it makes the most sense for start-ups to have a board of advisors.
Your board can be fomalised or it can be a group of informal advisors. Many entrepreneurs make the mistake of thinking that their company needs to be more established before setting up a board, but in truth it’s during the foundation laying that you could use their advice the most.
Entrepreneurs can become so involved in their business that they can’t see the forest for the trees and this is where inviting someone to brainstorm or counsel you can really help you avoid making costly mistakes.
Since a board of advisors offers advice, there is very little downside to having one. Advisors are not typically given cash compensation for their services, instead gaining equity in the form of stocks. So it’s in their best interest as well as yours they give good advice.
Here are some other benefits to having a board of advisors in the early stages of a business’s life:
- Refining a business plan, product design or service offering. Advisors usually have a lot of industry expertise and will have a better sense of what will work and what won’t.
- Access to capital. It’s not really a planned thing, but chances are an advisor will be an advocate for your company and get people interested and excited about it.
- Competitive insight gained from your board of advisors can give your business the edge by asking you the really hard questions first and giving you a better view of the marketplace.
- Collaboration advice. For a business looking for service providers or for partners to make it a joint venture, a well-connected advisor can be the best thing that happened to your business.
- Credibility boost. Part of the pains in growing a young business is gaining credibility and a good reputation. The fastest way to prove you’re worth your mettle is to have strong names on your board of advisors. Be careful to strike a good balance: It won’t necessarily work to your advantage to have a super helpful but unknown advisor, but at the same time a high flying advisor who is never there for advice will only get you so far.