How To Locate The Right People For Your Board of Directors (or Board of Advisors)
The most valuable asset you can build into your company is a board.
It can be daunting to figure out whether a board of directors or advisors is right for your organization, and you might not know where to start looking for highly experienced people to join your team.
In this episode, Chris clears all of that up for you.
You’ll find out which type of board will suit your needs, what you need to do before you look for potential members, and how you can locate the right people who bring the right relationships and knowledge to the table.
Tune in and hear the two lists you need to make right now and how you can start finding your board members today.
A board of advisors adds this layer of highly focused expertise to your team.
In this Episode:
- The primary difference between a board of directors and a board of advisors
- The first list you need to make before you look for board members
- How to determine what kind of people you need on your board and the expertise you need them to bring to your company
- Think you don’t know the right people for your board? Think again, and hear how to locate them
- The best way to open a line of communication with potential board members
Find out exactly what aspect of your company is the current weak link that, if fixed, will help you scale faster and more successfully.
Enjoy the show? Check out the most popular episodes of Built to Grow!
- The Best Paperwork for a Board of Directors or Board of Advisors
- 8 Mistakes I Made Scaling My First Business
- Checklist for When You’re Ready to Hire a COO (Chief Operating Officer)
It’s true that the single greatest asset that I’ve built into any of my companies is a board. Now, that can be a board of directors or a board of advisors. In a health company, it could be a scientific board of advisors. Board of directors has an obligation to oversee whoever it is that makes up your top-level management team. Their job is to make sure that management develops strong, strategic plans and then executes them and then delivers value to the shareholders.
Meaning a board of directors is put together to make sure that the ownership is doing the best job possible to scale that company. Both in reach, meaning the number of people that they’re reaching with their message and in revenue. Or the amount of money or sales that they generate. So that the investors get the greatest value for their investments.
Legal Parameters Around Board of Directors
There’s a lot of other legal parameters around a board of directors. Plus they have a fiduciary responsibility to the company. So to be clear, although I’ve spent thousands of hours speaking to attorneys over the years and I have this special eye twitch, I’m not an attorney. So if you need more details on the legality surrounding a board of directors, definitely speak to a good corporate attorney.
But let’s weigh that board of directors out with a board of advisors. A board of advisors have no legal responsibility or fiduciary duties to a company . Because of that, we as business owners can leverage them in a greater way when done right which is what I want to go over today. Because a board of advisors simply adds this layer of highly focused expertise to your team.
What You Should Look for From Your Board of Advisors
For example, if you’re a supplement company who’s built a really strong supplement company with just online sales, but you want to get your supplements into stores, then you probably want a board of advisors that includes somebody with amazingly strong relationships, maybe at Walmart or some other really big retail outlets.
Plus, you might want somebody else who’s built a really large supplement company in the past and then sold it, right? You want them on your board because they’ve already walked that path before. And maybe you also might want somebody who has strong relationships in manufacturing or distribution. Because when you get picked up by retail outlets, you’re going to need connections in those areas. So that you can scale rapidly without hitting all the roadblocks that can stunt your growth or literally crush you.
And I’ve seen it happen literally dozens of times. In our investment firm, we won’t fund any company unless they have a strong board of advisors to help them navigate all the pitfalls that will arise after they get funded. Every single time a company gets funded, different roadblocks happen, right? And I want every company, before we put any money into it, to have that board of advisors so that they have that brain trust to be able to knock things around with and have doors opened up to them. Now it’s a no brainer.
Board of Advisors vs. Board Members
And putting a board of advisers together can literally cost you less than, I don’t know, $24,000 a year for the entire thing, right? For everybody and everything associated with it. I’ll go over how to pay board members and how much they would expect. If you need to give them stock and how to run your meetings. I’ll even tell you the three legal documents that you absolutely need to make your life much, much easier when you put together a board.
I’ll give you all that in the next few episodes. But this episode is all about how to locate board members, right? Because you have to do that before you do any of the other steps.
So first of all, you needed to know the difference between the board of directors and a board of advisors before you could decide who you want on your board. And my guess is that most of you watching this are going to opt for a board of advisors. Now I’ve put a board of directors together for one of my companies and they’ve been with me for a decade and a half. And I’ve also put together separate boards of advisors for other companies that I’m involved in. And finding members for each of those boards is the same. You simply start with a target for where your company is going in the next 12 to 36 months.
List All Your Targets
So think about this. Are you aiming at a certain revenue range? Are you looking to sell? Or interested in acquiring other companies? Will you be moving into other industries? Or does your game plan include all those things, or something different? List all your targets.
Make one big list of all your targets for the next 12 to 36 months. Plus a list of all your core competencies or the relationships that your company will need to reach those targets. So those are two completely separate lists.
So if you want to sell your company, then you’ll need to know how to position your company for a sale. And you’ll want to know all the landmines on your path and how to avoid them. So you don’t get killed by taxes or taken advantage of during negotiations, which unfortunately happens. You’ll want to know where to put your money after the sale so you could keep far more of it.
What Happens If You Sell Your Company the Wrong Way
Unfortunately, I learned that lesson the hard way. One of the main lessons that I learned from the sale of my very first big company was that if you sell your company the wrong way, you’re going to pay millions more in taxes.
If I had access to somebody who had sold a company before, I would have walked away with easily nearly double the money in my pocket. That lesson cost a lot of money to learn. But I’ve built, I’ve sold and I’ve acquired dozens of companies since then and I never made that mistake again. Why? Because the next time around I had a board and they made sure that I knew how to handle every step of the process. They introduced me to the right attorney, to the right investment team and to the right people to take care of almost every step along the way.
When I had a problem, I went to them. So the real lesson that I learned from the sale of that first company was that I needed guidance from someone who had a track record of selling businesses.
Start With a Target
So putting together a board of directors starts with a target for where your company is going to be in the next 12 to 36 months. List all the core competencies or the relationships your company will need to reach those targets. Then the final step is to make a list of the people who you know who have those core competencies.
Don’t think that you don’t know enough of the right people because you do. Whether you know them personally or someone you know knows them and they could give you maybe a handshake to those people. Or maybe you just spend a lot of time on LinkedIn vetting everybody there and making a list of the best people to sit on your board from there.
When you have that list, you open up a line of communication with them. That’s it. Don’t offer them a seat on your board, don’t pitch them your product. Just communicate with them. Trust me, I’ve been pitched to be on the board of dozens of companies this year alone. I can promise you that an open line of friendly communication with a person is the best way to get them to listen to why they absolutely need to be part of your board.
I’ll cover that in the next episode. We’ll also touch on how much you might have to pay them. Or how to motivate them to actually be on your board for free. I’ll show you the legal documents that clearly define what they get and what your company gets in return if they accept a seat on your board.
MEET CHRIS GUERRIERO
Chris is an entrepreneur, investor, bestselling author, and advisor to a handful of high growth companies.
He has built four 8-figure companies, developed winning leadership teams in six industries, and designed business systems that predictably grow multi-million dollar brands.
He’s been featured in financial periodicals such as: Success, Inc, Bloomberg TV, and in Entrepreneur as a top entrepreneurs of the time.
In addition to his own companies, Chris is also an advisor, investor and equity holder in companies across a variety of industries, including health, medical, digital advertising, legal and real estate.