Many times an entrepreneur will need to enlist outside expertise when starting a new venture. This is when an advisory board comes in to play. An advisory board is a group of industry professionals who lend their advice and expert services to a business. Advisory boards are great in that they can provide the experience and knowledge a beginning entrepreneur can lack. Advisory boards also lend legitimacy to your business idea. By being backed by other successful professionals, potential investors will be inclined to believe your business has potential.
In addition, advisory boards are critical to new start-ups as they are essentially a sounding board for your ideas. On top of advice, they can serve as a great networking tool. Advisory board members can introduce a new entrepreneur to sources of capital if they believe strongly in the business idea and the talents of the entrepreneur.
An advisory board can consist of any number of skilled professionals including managers, accountants, and lawyers. When you do not have enough money to hire salaried professionals, an advisory board is a great way to gain that professional skill set without having to afford costly salaries. Typically an advisory board member is compensated only for time spent in organized meetings, and/or they are offered equity in the new company in return for services. Some advisory board members may go on to work for the company later on when it grows, or be appointed to the board of directors (assuming your company becomes a corporation down the road.)
When choosing board members, first look for professionals who currently operate within your targeted industry. Also look for financial professionals who can assist in your financial planning. Another good idea is to include someone from a business you will work in conjunction with, such as your suppliers and distributors. Advisory boards can be as small or as large as the entrepreneur needs.
Also included in this section are “Steps to assembling advisory board members” and “Steps for maintaining an effective advisory board”.
The above is an excerpt from the Certified Entrepreneur program. For more information click here.