I was driving in the English countryside over the weekend listening to a 70s flashback playlist when the song ‘lean on me’ came on.
There’s a line in the song that says “I just might have a problem that you’ll understand” which reminded me of the importance of having an advisory board.
I like to think there are five types of people you will meet in business; collaborators, competitors, opportunists, helpers, and challengers.
What’s funny, is that all five types of people you come across will see your potential but it’s only your competitors that don’t want to see you reach it.
So, what does this have to do with an advisory board? Advisors have the lived experience that you need to fill the gaps in your knowledge and help you navigate the challenges that you will face. Having an advisory board also makes it easier to distinguish between the right and wrong types of people you will come across along the way, despite what you may think, it’s also not always easy to see the difference between the five types of people you will come across. Each one has the capacity to significantly affect your business and in turn yourself in either a positive or negative way.
Let’s first delve into each one:
These are people that are complementary, where you both have value to offer each other and your respective client bases if you team up.
Healthy competition is a good thing to force companies to offer better products and services to their clients but the reality is that these types of people don’t want to see you reach your potential and they will work at their success and at stopping you from reaching yours.
Opportunists may not always be able to provide value to you but they will play the game of inches, doing enough to show they have enough value they can give you to get you into a metaphorical bed so they can ride on your coattails to success.
The most selfless of each type, the helpers want to see you succeed and help you along the way with nothing in return. These people are typically genuine and already successful in their own right.
The final type of person you’ll meet in business are the challengers. As the name suggests, challengers challenge you to be better and in turn, they’re a little inspired in the process. They may even replicate your product or service – to copy is the greatest form of flattery.
Challengers are often confused with competitors, however, challenging each other to be the best is different from competing with one another with the hopes that your competition won’t succeed.
In business and particularly in the start-up world you will come across all five types of people. More often than not you’ll misinterpret the signs, challengers will appear to be competitors, helpers will later show you that they’re really opportunists and collaborators may also be opportunists.
Each of these people will play a vital role in your decision making and sometimes getting involved with the wrong people teaches you the most about the importance of being incredibly selective.
All partnerships need to be mutually beneficial however sometimes a convenient decision makes for an inconvenient ending or problem in the future.
As your idea develops and holds weight coupled with the more successful you become, the more important it will be to have an advisory board to help you vet the partnerships you forge and the employees or advisors you may give equity to in the future.
Establishing an advisory board can be difficult when you haven’t yet established trust and they may be one of the five people trying to gain equity in your venture which can later affect your ability to raise capital.
An initial advisory board can be established using friends and family that don’t require any payment or equity for their time and that will want to give you their honest opinion and be able to help you vet partnerships and develop a soundboard for ideas.
Once you’re further progressed, it’s best to have your friends and family help you vet other advisors. Advisors should be on a contractual basis such as a 1 year contract (this avoids any awkwardness if they’re not the right fit, and if they are, you can always offer another 1 year contract). Advisors don’t need to be paid with equity, they can be paid with cash if you can afford it – be it equity or cash, it’s important you detail your expectations upfront and gain a solid understand of their advice, expertise and connections so you’re getting the right value for the equity or payment they are receiving.
One valuable lesson I’ve learned is to assess the value a prospective equity holder or advisor will bring and quantify this in a monetary way, i.e. a CFO with ‘x’ amount of experience that can provide an ‘x’ amount of value is typically paid $’x’. This would equal ‘x’ number of shares if our company is valued at $’x’.
Also, bear in mind that if you’re turning over advisors every year you will want to give very small amounts of equity otherwise you’ll end up with no company left and no equity to give to other advisors which you may need down the line.
Collaborators, competitors, opportunists, helpers, and challengers, eventually they will all show their true colors, but in the meantime, your advisors will act as a vetting system to protect you and your company.
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