08 Jan Setting yourself up for valuable advice
Being an entrepreneur can feel lonely. Particularly for a someone founding a business by themselves. But even for a pair or threesome discussions can soon get stuck in a rut.
That’s why it’s super useful to have some good external input and support, and to know how to get genuinely valuable small business advice. However, having advisors, mentors and others around can too often cause more problems than value.
Often as an investor I see a page of a pitch deck full of headshots and names, sometimes with a brief biography, under the title ‘advisors’. I know the entrepreneur hopes I’ll be impressed by all the expertise and experience they have gathered around them. But, actually, most often I get turned off, as I cannot see any thought given to what is hoped to be achieved by each individual, and only see the risk of:
- A pointless list of people without commitment, time or proper understanding of the business (sometimes just on a vanity project to burnish their own credentials)
- An organisational minefield that slows down decision making
- Confusion born from random conflicting advice & direction.
Business advice: Sorting the wheat from the chaff
To avoid these common pitfalls and gain the most value, three questions need to be answered:
1. What do you need from external input?
Particularly at the start of a business you might be looking for consumer insight and/or sector insight and expertise. The obvious hunting ground being someone currently or recently retired from an established business. The watch out here is their ability to adapt what they know from a large, mature business into the context of a resource constrained high growth start-up.
A network is hugely valuable for any start-up – connections lead to serendipity, and it’s remarkable how this ‘luck’ translates into investors, customers and other help. Again, someone from within the industry is likely to have a useful network.
Think about whether this is a one-off need, such as finding suppliers, or an ongoing requirement, such as building a pipeline of customers. When it is the later, this might be best to be an agreed and remunerated role.
2. Who is well qualified to help? ‘Well qualified’, not just available.
A director in a business is a formal role. Given the obligations on the director – and that it is easier to take on than get shot of directors – it’s a role that shouldn’t be taken lightly by either party. A substantial investment is very likely to require the oversight of an investor director. Ideally this is someone that has relevant skills & expertise, with facilitation & judgement to help make effective decisions.
One to be avoided is the ‘board observer’ – someone giving investors some oversight but not committing to actually understanding or contributing to decisions being made. This invariably ends up making the board meeting a highly inefficient information sharing exercise rather than strategic decision-making forum.
To be effective, any director needs to commit to more than just attending board meetings. As a minimum the preparation and intimacy to be up to speed on the business between board meetings. But ideally also some real involvement in the areas where they bring expertise, for example finance, marketing, sales, production or funding.
It is useful to ensure a very tight board in the early days. Nimble decision-making and speed are one of the advantages of a start-up and shouldn’t be frittered away on an unwieldy board.
But as a business grows the board may need wider experience, or additional investment may require representation. Any meeting of more than five or six people requires facilitation to be efficient. So, at this stage you may nominate one board member to lead the board or take on a formal Chairman. A Chairman role is useful if they have credibility to be a figurehead, particularly with potential investors. But again, the commitment and expectations need to be really clear.
What about a mentor?
‘Mentor’ is an oft used word – and often utterly meaningless or worse positively destructive. Google think their team can ‘mentor’ a start-up during a 30-minute conversation. Compete tosh. Real mentoring is useful if it looks like understanding the business, contributing expertise, helping to create and explore possibilities, helping explore decisions, ensuring robust decision making and all the time ensuring the entrepreneur is developing their own capability.
Sometimes an entrepreneur just needs some moral support – a shoulder to cry on, someone looking out for their personal well-being and motivation. Friends and family are good for this.
3. What is the agreement between the parties?
Once you’ve decided ‘what’ and ‘from who’, you need formalise the expectations. As an investor, I want to see the credibility from an advisor relationship.
If someone has put their own money in (or at least committed subject to other funding) then that shows belief. When a specific role has been agreed then clearly there has been a mature conversation.
If someone has contractually committed (and are being rewarded with equity or options) then there is two-sided agreement where both parties can hold each other to account.