When Rebeca Mojica launched her business eight years ago, she was already on the lookout for ways to advance her startup to the next level (or at least move it out of its base of operations—her one-bedroom apartment). At the suggestion of friends, Mojica attended a Chicago-based conference geared for female entrepreneurs. There she learned about the ATHENA PowerLink program, which pairs women business owners with specialists in their field to both grow their business and overcome challenges.
Impressed, the Windy City native jumped into the one-year initiative. With its help, she soon assembled a team of seven advisors for her jewelry-supply company, Blue Buddha Boutique. Among them were experts in manufacturing, Internet retail, and finance. The relationships Mojica forged with her board, coupled with the counsel they gave her, paid off handsomely: Sales increased 83 percent the year she worked with them.
“It was one of the best things I did for my business,” says Mojica. “I was able to look at my business through new eyes and gain insights that probably would’ve taken me years to see on my own.” Mojica has continued to touch base with her former advisors and soon will be putting together a new board of directors on her own. According to her, Blue Buddha Boutique, which has a staff of more than a dozen, is on track to surpass $1 million in revenue this year.
Not just for Big Business anymore
For any company—be it large or small—that looks to be taken seriously, having a board of advisors has increasingly become a business best practice. Whether it’s to offer counsel to a company’s top execs or lend credibility and prestige via name association, an advisory board can wield immeasurable effectiveness behind the scenes, translating to higher revenue figures and increased longevity.
“I’ve worked with hundreds of venture-capital backed companies,” says Mike Scanlin, a former investment banker at Garage Technology Ventures (founded by renowned venture capitalist Guy Kawasaki, who helped AOL in its early stages). “I would say 90 percent of them have an advisory board of two to 10 people.”
However, having a board of advisors is not enough on its own: It’s important for entrepreneurs to have the right members on their board and to genuinely listen to them when making tough decisions. These two steps can be the ultimate make or break factor for startups.
A recipe for success also needs the proper ingredients
Raj Sheth, the CEO and co-founder of Recruiterbox, a three and a half-year-old recruitment software firm serving 500 small companies worldwide, echoes Mojica’s sentiments about why startups should consider having advisory boards.
“Whether you are a startup raising funding or a growing company trying to increase its footprint in a certain industry, you probably are going to be doing a lot of things for the first time,” explains Sheth, whose company has offices in both San Francisco and Bangalore. “Since it’s crucial that you not make any critical mistakes, it helps to have folks that have done some of these things before, [such as] a domain expert on your product or market, or an investor who knows how the capital structure and growth for your company should progress.
However, he does issue a cautionary note. “If you don’t have a well-rounded set of advisors, or if you have folks that are biased by one set of experiences, you probably are in danger of being influenced by a limited point of view,” warns Sheth.
Still, he argues that the pros greatly outweigh the cons.
Other intangible benefits—credibility and contacts
“Every startup needs a board of advisors,” insists Scanlin, CEO of Born to Sell, a Silicon Valley-based software development firm. “In the early stages, when a company has very little other than enthusiasm and ideas, an advisory board can add some credibility. Investors and others will think, ‘Well, geez, if these busy execs are taking some of their time to help these guys out, there must be something worth looking into.'"
Advisors can also be instrumental to introducing business owners to well-connected individuals who can offer them potentially lucrative sales opportunities, adds Scanlin, who helped 120 startups raise $400 million from angel investors and venture capitalists
So now that you know an advisory board can be a boon to your startup, how do you pick the right team? Here are seven tips to get you started:
- Find experts in your field.
- Have a clear agenda of what you want to achieve and how your advisors will help you meet your objectives.
- More is not better. Having a team of three to five advisors who are enthusiastic about your brand and eager to give you advice trumps 10 to 15 indifferent players who are there for name value only.
- Take a risk and approach people who may be out of your league or network of associates. “If you ask everyone whom you know will say yes,” explains Mojica, “they might not be the best people for you because they might be too close to you. They might not push you to look at your business with different eyes.”
- Make sure everyone on your board has some time to commit to help you with your business.
- Find people who understand startups. “[This is] very important,” says Sheth. “You can’t get a big corporate guy who has always had a job. You need a past entrepreneur.”
- And lastly, make sure you really want to hear what your advisors will say and are prepared to follow through on their advice. Don’t just use them as talking heads.