On looming source of risk for an early-stage social entrepreneur is not knowing what you don’t know:the fog of ignorance. If you’re entering a new industry your area of ignorance is huge; the problem is that you don’t know it until you’re tested in market. One way you can shed some light in the fog is to build an advisory board.
The group can number 3-5 people. They each bring important skills, networks and knowledge that you lack. They’re not friends and family who want to please you. They are people who care about your venture but will hold your feet to the fire and provide invaluable resources of knowledge and networks and maybe funding.
Unlike a Board of Directors for a corporation or nonprofit, this group is not a part of your governance. It reports to you exclusively and is there to help you. Here’s an excellent series to dig deeper in advisory boards from the publication, Entrepreneur, called Advisory Board 101.
There are 3 priorities in planning your Advisory Board:
1/Determine your business’s greatest area of need;
2/Set the expectations of what you’ll need from board members
3/Devise what you will offer board members in return
Your Advisory Board is as formal or informal as you like since it’s not a part of your governance. That being said, effective Advisory Boards are well-managed and expectations clearly set. Otherwise, members will lose patience if their time is not well-used and you will not leverage the intelligence you need.
Terms of Reference
For example, it is important to develop a Terms of Reference so that you can manage expectations. Clauses would include term limits, often of a couple of years. This reflects the fact that your advisory needs will change over time and you’ll want to find new kings of expertise. It also allows you to turf advisers who are not contributing.
You don’t have to compensate the advisory board in the early days, which means you need them to believe in you and your venture strongly enough to give of their time, a hugely valuable resource. Later, you will need to consider compensation, whether financial, in-kind services or shares.
You can meet as often as is reasonable for everyone, quarterly being a common schedule.
Here’s an hour-long video from MaRS’ Entrepreneurship 101 series on Advisory Boards that includes a real-life example from an entrepreneur. You can find several templates for agreements on the Internet. One of the most popular is from The Founders Institute.