By PAULETTE THOMAS
Question: My online service shows promise. My challenge is to manage growth. Do you recommend having an advisory board? How do I find and approach potential mentors who are in my line of business but not competitors? Are board members compensated?
-- Gwen Chambers, San Diego, Calif.
Gwen: Business can be cut-throat and competitive. But it's the collaborative part that is the most fun and rewarding. It's striking how many skilled, busy people are eager to help start-ups such as your own by being advisers.
Any entrepreneur looking to grow his or her venture beyond a subsistence size should think about assembling an advisory group. These advisers, of course, aren't to be confused with a board of directors, which bears a fiduciary duty and legal responsibility. Rather, these are advisers, generally unpaid, who have agreed to be associated with your business.
The experience they bring can be the key to your growth. They can offer you gritty business advice, such as who to go to for a particular legal problem or a good source for some bit of inventory. They can be an important node in your network, if they care to make introductions for you. And just by serving on your board, they are implying a vote of confidence in your business and integrity, which may be persuasive to potential investors or business partners.
"My advisory board made a huge difference in my business," says Jennifer Lawton, who launched a computer-network consulting business in the 1990s, Network Daemon Associates, which was later sold.
Ms. Lawton says it's easier than you think to assemble a board. She worked through her own network and industry sources. "For one thing," she says, "there's ego involved. People think, OK, I'm an adviser. They like that." Generally, the more prominent the adviser, the less time the person is likely to have to devote to your venture. The marquee name may have great value, though, if you are hoping to impress investors or potential partners.
In Ms. Lawton's case, she set out to create a formal advisory board in which each person brought a specific skill set and point of view: a lawyer, an accountant, a sales person, an expert in marketing, and so forth. The group gathered at quarterly meetings, and she shared financial results with them regularly. Other companies have more informal relationships with advisers, conferring by phone on occasion, for instance.
Compensation varies greatly, too. In most cases, advisory boards aren't compensated at all, other than covering expenses and the occasional fancy lunch. Some advisers are paid for specific work they do, as consultants. In Ms. Lawton's case, she also compensated the members with some company stock, and, when her firm was sold in 1999, they experienced a nice payoff.
Her board's greatest value, she says, was in blunt truth-telling. For example, she was under the impression that she was terrific at sales, but demand was so high that she was just taking orders from customers. Once demand cooled, the board helped her adjust. "I hated cold-calling," she says. "They helped me put my presentation together." They also helped her design a competitive compensation package to hire a top-notch sales team.
The board also could step back objectively and examine the big picture when she was buried in details. "They'd say, 'this is your budget, why are you over?' '' she says. "You want someone who can read the numbers and keep you honest."
For their efforts, she tried to make it worthwhile. "We kept it fun," she says. "We didn't take them for granted." Meetings, for example, were held in quirky, off-site spots, rather than the same office meeting rooms.
Where to find them? Who is successful in your industry? Are there local business academics who have a practical side and good contacts in the community? Once you've identified your list of dream advisers, call or email them about your business and what you think they'd add. If a third party can introduce you, all the better.
An excellent place to start is SCORE (www.score.org), the volunteer group of retired executives loosely affiliated with the U.S. Small Business Administration. There is a thriving group of volunteers in your home turf of San Diego, and there are similar offices around the country. "We have people we have been counseling from day one, and we are still helping them," says Martin Lehman of New York's SCORE. "We run the gamut."
-- Email your questions (startupjournal@dowjones.com) about starting a business. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.
