Why Your Startup Needs an Advisory Board (and How to Choose the Right People)

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Never be the smartest person in the room. If so, then you are in the wrong room. This is advice I would give to all entrepreneurs.

As a founder, the talent you hire into your startup is crucial. Although it is difficult to attract and retain employees, the people you hire should ideally be more competent than you in their respective fields. After all, startups are created by generalists and scaled by specialists.

It's no secret that entrepreneurs are expected to know many things. Nevertheless, with so many aspects of starting a business, founders often hire employees to fill gaps in their knowledge or experience. However, top talent doesn't come cheap, which brings us to an advisory board.

Below, I discuss the importance of having advisors, steps to ensure the right match, typical terms offered, and ways to get the most out of these relationships.

Related: Why Every Entrepreneur Needs an Advisory Board

What is an advisory board?

An advisory board is a group of people you, as a startup leader, trust to provide valuable business advice. The role of an advisor is basically to serve as a mentor to you and your business.

For the most part, advisors typically offer suggestions or advice in the following areas:

Find investors Building a corporate culture Implement growth tactics Acquire and retain employees Planning or executing an exit strategy

Your board should be diverse. Whether it's a CMO who can coach you in marketing or a lawyer to help you navigate legal challenges, advisors are meant to complement you as a founder. Relationships with these people will often be personal and sometimes informal, leaving both parties to communicate via text, email or video chat.

Related: 8 Steps to Building an Effective Advisory Board

Benefits of having advisors

The most frequently asked question is: is the return of an advisory board worth the cost?

I generally recommend that all entrepreneurs hire advisors, as the foresight of these people is often invaluable. Many founders initially balk at the thought of giving up capital, but rarely regret the decision as they progress.

With prior experience to offer, advisors allow entrepreneurs to weed out countless mistakes that could very well prove fatal to any startup. It only takes a few occasions to see a tenfold return on investment from an advisory board, and on that note, let's look at some of the benefits of having advisors.

Ability to fill knowledge gaps and improve your performance as a founder and CEO Serve as a testimonial for your business to foster trust between investors and customers Offer advice on critical business functions to help accelerate your startup's growth Establish credibility if it is lacking in the eyes of internal and external stakeholders

Once you decide an advisory board is appropriate, it's time to start your search.

Related: 10 Reasons Leading Entrepreneurs Join a Peer Advisory Board

How to select your board members

Finding people is easy, but finding the right people is hard. Here are some tips to consider when looking to fill positions on your advisory board.

Assess your needs: what areas are you most lacking in knowledge? For example, if this is your first fundraiser, you can seek out an advisor who has experience in investor relations. Once you have established your needs, you can then refine the search. Leverage personal relationships: Ideally, a counselor will act as a close confidant, providing advice on short notice if needed. Determine if you have any personal connections in your network that could add value to you and your business. Screen candidates thoroughly: Always do your due diligence. Be sure to research a candidate's past roles and get testimonials, if possible. Additionally, determine if a candidate has any potential conflicts of interest that may cloud their judgment. Go to entrepreneurial hotspots: Sometimes the be...