HOW TO BUILD AN ADVISORY BOARD TO GROW YOUR BUSINESS AND INCREASE YOUR PROFITS
Copyright 2011 by
The Advisory Board Group LLC
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Published on Smashwords
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SMASHWORDS EDITION
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HOW TO BUILD AN ADVISORY BOARD TO GROW YOUR BUSINESS AND INCREASE YOUR PROFITS
Table of Contents
I. Why Every Entrepreneur and Business Owner Should Read This Book…
1) Our Story
2) What’s In This Book
1) What Is an Advisory Board?
2) Does My Business Need One?
3) But… I’m Just a Startup.
4) But… I Just Have a Small Business
5) Real-Life Advisory Boards at Work
6) The Benefits of an Advisory Board For Your Business
III. THE BUILDING BLOCKS: 10 KEYS to Creating Your Unique Advisory Board
1) The Direction of Your Business
2) Your Boards Purpose
3) Forming Your Board’s Charter
4) Choosing Your Advisory Board Model
5) How Big or How Small?
6) The Brains You Should Bring “On Board”
7) Creating Structure & Expectations
8) Keep’em Coming and Going
9) How to Compensate?
10) The Invitation Letter
IV. My Board Is Set Up! Now What?
1) Agreements & Non-disclosures
a. Writing Effective Agenda
2) Appointing A Chairperson
3) Announcing The Board
a. Press Release
b. About US
4) Board Communication
5) The First Meeting
a. The Agenda
b. The Topics
V. Planning for Long Term Growth
1) Where To Find Advisors for My Business
2) Writing Persuasive Invitation Letters to Prospect Advisors
Chapter I
Why Every Entrepreneur and Business Owner Should Read This Book…
The BoardMyBiz Story
BoardMyBiz began as an idea in January 2009. I was beginning a career transition that would take more than one year to complete as I prepared my exit from my current company where I was a partner and director. I had been part of an entrepreneurs dream, taking an international start up company from three employees with under 500K in revenue, to more than 85 employees worldwide; more than 11 Million in revenue, and with offices in NY, Bermuda, London, Netherlands, Cyprus and Dubai. I accomplished this in less than three years, building the company with the founders from the ground up. Although this may seem like a tremendous achievement on its own, in truth, I was not satisfied with the results. From the beginning, there was friction between the primary founder and me over the strategic growth of the company, how the company should be run, leadership styles, etc. At the core of the friction, I think it was simply a matter of us having different visions for the direction of the company and how to make the company scalable. Regardless, I wanted to move on to the next phase in my life and create something of my own and/or with partners who were more closely aligned with achieving the potential that I knew was possible.
During the course of building the company and the process of exiting the company, I realized the potential benefits of advisors. I was (and still am) part of Vistage International, an organization that brings together CEOs/executives once a month to discuss various matters about their companies, strategy etc. This is where the first concept of advisory board meetings began to have tangible value for me. This was in 2007, and as a result, I began to discuss forming our own company advisory board with my business partners.
We began speaking to various candidates about joining our board and in many cases took advice from these folks directly as we were discussing the potential board seats. As we were selling into the markets of Africa, and the Middle East, in many cases, it was very difficult to penetrate these markets and win deals. We found that by bringing on local advisors from these markets, we were not only able to win more deals, but in many cases, it gave us direct access to key decision-makers in other markets as well. Going further, once we achieved over 2M in revenue, we realized that the strategy that got us from 500K to 2M was not going to be the same strategy that would take us from 2M to 10M+.
The more I thought about the value of advisors, the more I became intrigued with the idea that all small businesses should have a board. The value of an advisory board was essential in my mind and virtually every small business owner I knew in the NYC area did NOT have one!
This is where the original idea for the Advisory Board Group stemmed from. Our concept was to create a team of advisors that we could make available to small businesses who were looking for board members. Of course, this was assuming that small businesses were looking for board members…and the research began.
What we found was that most small businesses:
? Do not have a board
? Do not realize the benefits of a board
? Do not know how to form a board
? Do not know where to find advisors for their board
? Do not know how to run a board, extract maximum value from that board
This presents a serious problem for our business concept. In order to sell such a service, the customer must have a need. The issue with Advisory Boards is that most “customers” do not know they have a need. Therefore, without some educational element, there would be no defined need and certainly no sales for our company.
There is quite a bit of content out there about the value of advisory boards, especially for medium to large businesses. But in the small business realm, such practices were scarce.
I had heard of SCORE and in fact, I visited them back in 2003 to discuss a business concept I had at the time. SCORE is a division of the Small Business Association (SBA) and exists to help small businesses by providing a volunteer service using veteran business professionals as mentors to small business. In theory, this makes sense, but in practice, what I found was a bit demoralizing. Although they were helpful and gave solid advice, these were not necessarily qualified for specific business advice; they were more general in their guidance. Again, I am not putting down their efforts, the service has a place, but not as a substitute to a proper advisory board.
What a small business needs is a group of seasoned advisors; each specialized in their own way, who is dedicated to helping the business owner or CEO achieve the goals of the business. They typically come with lots of relevant contacts, experience, specializations and in many cases, cash to invest if the company gets to a point worthwhile of investment. They are typically awarded some form of equity piece or profit share as this aligns them with the long term success of the company. The power of many minds, especially at the strategic level of a company is invaluable. To not have such a structure in place is doing the company, its shareholders and its employees a disservice.
What’s In This Book:
This book is a compilation of information about advisory boards and how to make the most effective use out of them. This book was written as a guide for entrepreneurs and small business owners throughout the world. The principles can be applied universally. The concept is simple, however, putting a board into practice is more difficult. This is the reason for writing this book. We see an opportunity to fill a void for business owners and entrepreneurs who are interested in building advisory boards but aren’t clear on how to do it and how to make the most use out of it.
We intend to update this book on a regular basis based on real results generated from the experience of our customers and affiliates. In the mean time, we hope you find this book valuable as a guide to increasing the value of your business by using this invaluable resource in the most effective way possible.
Good luck!
The Advisory Board Group
Founder: BoardMyBiz.com
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CHAPTER II
THE POWER OF MANY MINDS
What It Is and How It Will Work For You
What is an Advisory Board?
There are a few ways to define an advisory board.
According to Entrepreneur.com, an advisory board is:
A group of individuals who've been selected to help advise a business owner regarding any number of business issues, including marketing, sales, financing, expansion and so on; a body that advises the board of directors and management of a corporation but does not have authority to vote on corporate matters (http://www.entrepreneur.com/encyclopedia/term/82088.html, 2010).
Our definition: An Advisory Board is a strategically selected group of individuals whose experience, expertise and ideas serve to collectively advise the business owner or business manager on the strategic direction and planning of the firm.
The primary elements include;
- Strategic Advice
- Specialized Advisors (in a function)
- Serving the owner/manager or board of the business
- Minimal liability as compared to a board of directors
In other words:
- A board of advisors is to a business owner as a mentor is to a mentee
A board of advisors is your personal sounding board, dedicated to making your business a success
All businesses, large and small must have some form of strategic direction, a plan and execution of the plan to achieve any form of success in their business. The board of advisors serves the owner or head of the company and advises on the most fundamental aspects of the business. Your board is like your foundation and effects of an effective board will be evident throughout the organization.
The primary importance of an advisory board is for the entrepreneur, owner or manager to receive the input and advice of an experienced and accomplished support team who is dedicated to making your business grow and succeed in its goals. An additional benefit is that an advisory board does not carry the liabilities, and expenses that they may experience with a more formal board of directors.
As a powerful management tool employed for and by the business, an advisory board is as unique in its nature and scope as the needs of the enterprise for which it is created.
Advisory Board vs. Board of Directors
An advisory board is an independent and external body and has no formal authority or fiduciary responsibility to your business. Because of this it offers a multitude of benefits not found in a standard management setup or from your corporate directors. Below are some comparisons to help you gain a better understanding of the benefits of an advisory board vs. a board of directors.
1. Brainstorm! An advisory team is a terrific platform to fearlessly test ideas, brainstorm and innovation. Advisors are a great sounding board for entrepreneurs and chief executives who want to explore tentative plans and see how their ideas resonate before pitching them to co-managers or a more formidable board of directors who evaluate their performance or compensation or may have an ax to grind. Your advisors can truly ‘hear you out’ and express views without being subjective.
2. Objective “Outside” Perspective: Benefit from experts with an outside perspective. Managers and entrepreneurs can get trapped in the day-to-day affairs of their business that they may not ‘see the forest from the trees’. When you are constantly in the thick of it, it is difficult to maintain a macro perspective on your business. As you are aware, the rate of change in the business environment is faster than ever and maintaining a clear perspective is important to your strategy and success. Advisors can be your business’s mirror and offer a neutral, accurate and perhaps a longer ranged perspective to help you make accurate decisions.