This week, two UpStart coaching clients told me the same thing: “It’s great having someone to help me think through tough issues.” One is based in the middle of Manhattan; the other on a remote Pacific island. But they both effectively said “it’s lonely at the top.” Even the greatest athletes need coaches. The same is true for founders. That’s why I recommend that founders build advisory boards.
1. What an advisory board is, and isn’t. Don’t confuse advisors / a board of advisors with directors / a board of directors. As a CEO, the board of directors is your boss. Directors take a formal role in overseeing the business, often representing shareholders, approving budgets, and deciding who should act as CEO. In contrast, advisors work for the CEO. Advisors provide feedback, advice and introductions to investors, customers, and business partners – as needed.
2. Who to put on your advisory board. To establish an advisory board, start by picking three to five areas where you really need help. Maybe you want a person who has a “golden Rolodex” of industry contacts, another person who is great at sales, and/or a person with expertise in an area where you are weak, like finance or marketing. Then come up with a list of dream advisors in each group, and network your way to them. Make sure each advisor is the kind of person who will enjoy sharing her expertise and helping you build the business from the sidelines as a mentor or coach.
3. How to structure advisory board deals. Be specific about the role you want each advisor to play, and the amount of time and type of assistance you will want from then. I typically tell advisors I’ll need them to put in about one hour per week on average. In exchange for their help, I grant advisors equity options in the range of one percent of the company, vesting over three to four years. As always, run advisory board deals by your lawyer and accountant.
4. How to work with advisors. Advisors can function both as specialists and generalists. Give individual advisors specific requests for assistance (e.g. please see if you can help me get to the CEO of customer X). Then schedule a meeting or call at regular intervals (e.g. once per month or quarter), and use it as an opportunity to get feedback on general issues, like opportunities, threats, and major decisions. Keep in mind, you don’t have to follow their advice (but if you don’t, explain why).