Q & A around pricing for start-up businesses

I was recently contacted, through The Icehouse where I work as an Executive in Residence & Business Coach, to answer some questions for www.stuff.co.nz on pricing for start-ups.

Here are the questions that I was asked and my full answers.

Written by Debra Chantry, Principal Consultant.

 

1.     Is there a temptation to price too low? What are the risks of just trying to undercut competition?

 

There is always a temptation to price too low, particularly when you’re a start-up and you think that the only way you can grab market share is to make it cheaper for people.

 

This is particularly evident in the service sector, where people look at ‘big company’ prices and realise that they can charge a lot less than big companies because they don’t have the overheads.

 

Pricing is always a short-term strategy & one of 2 things will happen over time. You will become a larger company and will start to encompass some of these overheads, which means that you can no longer sustain the lower prices, or someone with bigger pockets will drop their prices to match or beat yours… and no-one wins in this situation.

 

The reality is that if you have established a real ‘pain point’ and / or a ‘unique value proposition’ then customers will not choose you on price alone. They will come to you because you offer them something that they need or want and they will be prepared to pay for value.

 

The same applies for products & services.

 

 

2.     Is there a temptation to price to overvalue services in the hope of making big returns?

 

Not generally.

 

What I do find is that people underestimate the costs of running a company in general. Often people miss out on the basic costs or don’t think to the future when the company grows and what additional costs that is likely to bring. As a consequence they tend to undervalue their products & services and price too low.

 

I also find that Kiwis, and particularly female entrepreneurs tend to undervalue their own time & experience. We work with many companies where we take them through an exercise to understand what value they truly offer and it almost always results in increasing prices.

 

That said, there are cases where people have over-valued their product or service and often a change in price will create significant increase in demand, that substantially affects the profitability of a company. This can work both with a price increase and a price decrease if the pricing is wrong. It’s about getting the right balance and understanding what value you offer, what margin it can support and the competitive nature of the industry that you are working within.

 

 

 

3.     How do you accurately value your skills and services to meet the market when you’re starting out, so you don’t have to make big adjustments later.

 

We encourage every start-up to do an analysis of the competitive environment. This would include things such as pricing, features & benefits, positioning, quality, selection, service, reliability etc.

 

From here we work with frameworks that help you map out the environment and see where your niche is and what value is to the customer, and therefore what margins it can support.

 

Once a company has established their niche and their value, then pricing becomes an easier task.

 

 

4.     How common a problem is it for start-ups to get the pricing wrong – and what are the implications of getting it wrong

 

It is very common for start-ups to get pricing wrong. The implications of this is that they may get stuck in a business where they are working long hours, are not reaping the rewards and can not afford to bring anyone else in to help them.

 

Additionally they risk losing customers when they put their prices up.

 

It does sometimes happen in reverse when the price has been too high and a small adjustment can significantly increase demand but in general I would say that it is easier to start higher and lower your prices than it is to put them up.

 

Written by Debra Chantry (Principal / Business Coach) for stuff.co.nz.

The 4 stages of life every successful start up must go through

Taken from: http://pandodaily.com/2013/09/04/the-four-stages-of-life-every-successful-startup-must-go-through/

 

If you’ve ever been to a startup event, you’d be awed by the intriguing ideas entrepreneurs come up with — revolutionary jumps that change the way we think about the world, or small incremental ideas that make us relearn everything we know about friends, work, or even coffee. It’s pretty hard not to be awed.

But for all their brilliance, most startup entrepreneurs have distorted ideas about customer service, and what it means to their seedling ventures. After all, when you are a garage startup trying to change the world, the first and most important thing you need is traction, and the second: staying alive. Most startups procrastinate on servicing customers to keep them happy until they have gone mainstream. No surprise that a good chunk of these startups don’t survive very long.

The idea of customer service has moved beyond old school concepts like phone lines and operators, email and FAQs. With social media and word of mouth, the level and quality of support that a startup offers right from its zeroth customer can make or break their brand.

How and why should startups care about delivering exceptional customer experiences?

Typically, there are four stages of life every startup goes through before it hits critical mass. And the way it manages customers through each stage can be the difference between survival and death.

1. From 0 to 100: Winning traction – No matter how brilliant an idea or how excellent a product you have, you don’t have a real business until you win your first 10 customers.

So, how do you spread the word to get your first 10 customers? You can bomb Facebook and Twitter with promos, but that will probably lead you to bankruptcy before you even get the product out. Or you can get the big name evangelists to talk about you. Except you can’t build your startup on the hope of a Robert Scoble review.

Some businesses, like Dropbox, have woven virality into their products. But for most other businesses, the fastest way to both achieve product/market fit and generate referrals through word of mouth is by creating lasting customer experiences.

It’s important for early-stage startups to stay close to their customers. What do their beta testers really think? How are the first few customers using their product? What are the biggest problems they face?

The first five customers who stay with you for over three months will be steering your startup’s direction forever. Get closer, know them, and solve their problems, and you can win.

2. Life in the chasm – There is a big gap between what early adopters expect from a product, and what the bigger chunk of the market actually needs. The main reason behind “startup infanticide” is the failure to identify and overcome this gap. It’s important for marketing to be targeted and aligned with each type of customer.

Geoffrey Moore’s book “Crossing the Chasm” best describes the Grand Canyon that every adventurous entrepreneur must leap over to “get” to the market. The Chasm is the region of uncertainty a business goes through before it gets to product/market fit. And the shortest way to get there is by actively listening to the customer and implementing the promised features on schedule.

Most startups forget to create easy mechanisms in their products that can tap and organize user feedback. And when entrepreneurs aren’t listening to bug reports, feature ideas, and support requests from customers, bad things begin to happen.

KurbKarma is a great example of a startup that had to fight hard to find product/market fit. Early adopters found the concept of an app that helped people find and share parking spots in San Francisco interesting. But that wasn’t enough for the company to hit critical mass. The only way KurbKarma could reach its market was by listening to and incentivising existing customers to get more active. Today, if you are stuck trying to park between Market and 10th, KurbKarma makes it easy to first find a parking spot, and then share it with the world when you are ready.

Alternatively, you can jetpack your way across the chasm by going viral like UberConference did. Every UberConference call includes an unobtrusive suggestion for participants to sign up with the service. It is simple, effective, and provides your business inherent virality.

But don’t slack off or stop once your business gains traction. Get feedback and incorporate it. If you build software, stick to your promises and product cycles.

3. Uninhabited communities: Jumping the Graveyard – The third stage of the life-cycle starts once customers trickle in. Early customers bring with them ideas, suggestions, and bug reports at no cost. As KurbKarma showed, an engaged user community is the fastest way to get to any startup to the next stage.

When people pass by a building with broken windows, it’s natural for a few to throw a stone and further damage the property. The level of anarchy then progressively increases until soon you find squatters and a whole bunch of antisocial activities at play. The Broken Window Theory is often used in criminology to explain how a small problem can quickly escalate to a much larger crime.

Interestingly, the theory and its fundamental psychology play just as hard in the success of a startup as it does in criminology. Nobody wants to be the first to refer a friend or start a conversation.

This is where your passionate users come to your rescue — directing customers to an online community where the business actively participates and gives them the platform to engage and get all the help they need. Seeding conversations, building relationships, and engaging with users even before launch day ensures you don’t end up with a ghost town.

Seed discussions and inspire early users to build out your community right from Day Zero.

4. Credibility and building trust – The final and perhaps most important stage in the lifecycle of a startup is getting to a point where customers can comfortably whip out their wallets and pay for the service they receive. But first, they need to trust you. And you get there by being responsive, eliciting user feedback and communicating with your early, most enthusiastic power users.

Let’s face it, though. There is no quick and dirty way to earn credibility, especially in the early days before a startup acquires its first customers. The best bet is to provide every customer with an experience that keeps him asking for more — right from signup and on-boarding, all the way to customer service and beyond.

In other words, the surest way to build credibility is by consistently wowing customers through exceptional experiences.

Debra Chantry in NEXT Magazine’s 30 Women of the Year 2013

Wow – I am so excited to be a finalist amongst these amazing women – Debra 🙂

NEXT Magazine – October 2013 – Read the full article here.

Back bigger and better than ever, the fourth NEXT Woman of the Year Awards has attracted entries
from all corners of the country and all walks of life.

The countdown is on to the announcement of New Zealand’s most inspirational female: the NEXT Woman of the Year 2013. This month we introduce the finalists in our six categories: Arts & Culture, Business & Innovation, Education, Community, Health & Science, and Sport. While many impressive women entered, these 30 stood out.

They’re all innovative, inspirational leaders with tremendous determination, passion, perseverance, lateral thinking and courage who have battled their way past numerous obstacles. And they’re all having a positive impact on the people around them and the country we live in. Whether they’re helping migrants settle here or sending birthday cakes to sick children, starting charities in their garages or founding film festivals and arts projects, championing isolated groups or fighting for law change, making major medical breakthroughs or discovering new planets, leading the world in their chosen sport or helping businesses become sustainable, every one of them deserves a round of applause. And an encore.

Debra Chantry - Business Coach - NEXT woman of the Year Finalist 2013 - Business Category

 

Next Woman of the Year 2013 - Finalist - Business Category - Debra Chantry | Business Coach
Debra Chantry - Business Coach - NEXT woman of the Year Finalist 2013 - Business Category

5 benefits of hiring a business coach

Today there is a growing knowledge of the term business coach. Not many years back, very few people were familiar with the term or exactly what one did. More familiarity was in terms such as business advisors and business consultants. Even though these terms are often put in the same category as coaching, they are not the same.

When you think of a coach what comes to mind? Is it a sports coach? There is soccer, football, softball, baseball, basketball, to name a few. Professional sports people are very familiar with the benefits of coaching. Most today have one on staff or seek out guidance on various occasions.

What are some benefits of hiring a coach?

Coaches through encouragement and accountability get their players or clients to work harder for peak performance.

Coaches enhance performance through more effective methods or skills they learned or figured out for themselves.

Coaches offer realistic assessment of where you are and how to improve.

Coaches help to identify personal strengths and weaknesses and help you focus on what you do best.

Coaches help you brainstorm for ideas for needed changes and help you plan how to make the change.

There are a variety of coaches for all areas of your life. There are life coaches, organizational coaches, business coaches, sport coaches, executive coaches, career coaches; you name it and you can probably find a coach to suit your needs. The greatest commonality with all of these types are their goal is to help you reach the greatest potential in the area of focus.

The most successful people today either have had a coach or a mentor in their life. Having someone to guide you in the direction of your goals and give guidance for success is one of the greatest decisions a person can do for self-improvement.

With the abundance of coaches available today, some things to be aware of when searching for one:

Compatibility-when speaking and spending time with the coach you should feel comfortable and able to speak openly.

Professionalism-is the coach credible in the fact they are competent in the area of your focus and able to bring knowledge, skills, and good advice? Do they have references?

Listening skills-are they a good listener? If your first conversation, phone or in person, is one-sided and mainly from them you may want to consider interviewing others. It is the coach‘s job to help you find your inner wisdom while giving guidance and advice but they can only do this if they are listening effectively.

Most coaches offer a free introductory session to alleviate the fear of taking the next step and working with them. Take advantage of the offer and seize the opportunity to see if you are ready to be coached to reaching your ultimate goals.

To schedule a free coaching call to see if coaching might be the help you need, simply call 760-930-9604. There is no charge. This is a no-pressure, no-obligation opportunity to see if coaching is right for you.

 

Greg Clowminzer offers advice and personal coaching for CEO’s, small business owners, and professionals who are stressed out and overwhelmed by the challenges of business, relationships and life.

 

Why Hire A Business Coach?

The benefits of a top CEO Coach

The question is; you’re already the CEO so why should you make the investment into retaining a Top CEO Coach? The obvious anwswer is CEOs simply have more to gain from intelligent counsel than any other person on the org chart. Given the nature of the position, along with the numerous studies, which provide ample data affirming the extraordinary results that can be achieved by utilizing a top CEO coach, I’m always amazed at the number of CEOs who don’t yet have a coach on retainer. In today’s blog post I’ll examine the reasons why I believe all (yes, I said all) chief executives should leverage the services of a top CEO coach.

 

As bright, talented, experienced, motivated and savvy as most CEOs are, they are only one person. Moreover, CEOs are the individual in the company most likely to be operating in a vacuum. The only thing CEOs can count on is their performance is constantly being evaluated by virtually everyone in the value chain. Combine that with the fact performance standards and expectations are constantly being raised, and it is no wonder that CEOs often feel overwhelmed. The simple truth is, there is no more difficult job than that of the chief executive. This is largely because the proverbial buck stops with the CEO as he or she is expected to have all the answers and make all the tough decisions.

 

Executives who rise to the C-suite do so largely based upon their ability to consistently make sound decisions. However, while it may take years of solid decision making to reach the boardroom, it often times only takes one bad decision to fall from the ivory tower. The reality is in today’s competitive business world, an executive is only as good as his/her last decision, or their ability to stay ahead of contemporaries and competitors. CEOs who don’t maintain an edge will be replaced by those who do. One of the keys to maintaining such an advantage is to find someone who can keep you on the razor’s edge (see why CEOs most often call me).

 

As the CEO, the reality is you have no true peers within the business, so where do you turn for advice and counsel? If you’re like many CEOs, you’re put in the awkward position of seeking feedback from those individuals reporting to you. This is not where you should seek unbiased information, as it’s unlikely your subordinates will tell you the hard truths or provide you with open, candid criticism of your actions. They are certainly not in a position to hold you accountable, or most times, even provide you with intellectually challenging input.

 

Most successful chief executives make heavy investments in building their skill sets, knowledge base, and subject matter expertise early in their careers, only to make minimal investments in their professional development when they reach the C-suite. It is however at the C-suite level an executive must be on top of his/her game as they have the broadest sphere of influence, the largest ability to impact a business, and they also now have the most at risk. It is at this point in the career lifecycle the CEO should make the heaviest investment in refining their game because it’s at this level increased performance will pay the biggest dividends.

 

Wouldn’t it be nice to seek counsel from an objective third party who has walked in your shoes, and is not caught-up in office politics therefore having no axe to grind or turf to protect someone who has an extensive network outside your business and is a true intellectual and experiential peer of yours? A top CEO coach can afford all these benefits and more…

 

In addition to my operating duties at N2growth, I also maintain an active personal advisory practice where I’ve worked with thousands of leaders around the globe, including working directly with more than 150 public company CEOs (most of whom are Fortune 500 chief executives). For most of these professionals, the decision to retain my services was driven by one of two distinct motivations;  some had a defensive motive wanting to protect what they had worked so hard to achieve, and; others had an offensive motive looking to take their companies or careers to the next level.

 

Regardless of which camp the aforementioned CEOs fell into, they were already very successful people who recognized that its lonely at the top, and that they could not afford to keep operating in a vacuum. I actually have a few clients where I am just one member of a coaching team that is on call to deliver real time advice and assistance when the need arises.

 

I don’t actually like the term coach as a descriptor for what I do as that particular label can tend to give the wrong impression. Sure, in some cases I coach and/or mentor, but most of my clients simply view me as their closest personal advisor. As their advisor, my role is to serve them in the manner of greatest value whether it be behind the scenes or in plain view. Over the years I have played the role of ambassador, emissary, influencer, facilitator, expediter, personal brand manager, lobbyist, buffer/shield, crisis manager, negotiator, publicist, strategist, tactician, collaborative thinker and a variety of other roles as needed. These are the capabilities chief executives should look for in a coach. I urge you not to settle for anything less than the best advisor available.

 

The question is not whether coaching will provide results, rather, it’s can you find the right coach capable of producing the results you’re looking for? While my personal practice is somewhat limited in terms of the type and number of clients I work with, we have other coaches that can assist you, or I can provide you with referrals to other professionals outside of our firm. Regardless of how you find your advisor, you should consider asking the following representative questions when evaluating a potential coach:

 

1. Who’s paying the coach? It is my recommendation that you personally retain the coach or use company funds under your discretionary control. You want someone whom you can trust implicitly, and whose loyalty is pledged to you and you alone. If the coach is being paid for by the board of directors or company investors then while you will likely still receive good advice, the coach’s loyalty will reside with someone other than you.

2. Is your coach qualified? Remember that the coaching industry is full of practitioners that paid a few hundred dollars for a professional designation, but yet have little or no real experience. Make sure that your coach not only possesses a track record, but that their skill sets and competencies are relevant to your needs.

3. Does your coach have references? The best indicator of a coach’s ability to help you will be based on how he or she has helped others…No successful clients’ equals a coach that should be avoided.

4. What does the coach charge for his/her services? Remember, you get what you pay for. If your coach is only charging a few hundred dollars a month it’s likely representative of the caliber of advice you’ll receive. If your total annual compensation is well into the seven figures, and your company is producing billions in revenue, then you can afford to (actually you can’t afford not to) retain the services of a tier-one coach.

 

In closing, I’ll issue an open challenge to any CEO reading this post: I can come-up with a virtually endless amount of legitimate reasons and benefits for why you should leverage the services of a top CEO coach, and I’ll bet you can’t come-up with a single valid reason (excuses are not reasons and don’t count) why you shouldn’t. If you would like to discuss how coaching can benefit you or your executives feel free to contact me. If you still have doubts about coaching Click Here to see what other noted executives and the media are saying about retaining an executive coach. Best wishes for continued success.

 

http://www.n2growth.com/blog/ceo-coaches/

– See more at: http://www.n2growth.com/blog/ceo-coaches/#sthash.oNw59zrv.dpuf

12 Point Advice on Start Up Advisory Boards

I recently had a lively discussion with Yolanda Wardowski from the Avalon Group on the subject of Advisory Boards. This helped me frame some more specific thoughts which I am sharing in this post. I came up with 12 observations. What did I miss? What don’t you agree with? All comments appreciated!

The Big Picture

1. In my view Advisory Boards can give start ups great advice and access as well as being a resource that is always “there for you”. But, in the vein of “take advice, don’t follow advice”, a CEO needs to balance the input they get from their Advisory Board with their own expertise and the confidence they have in their own and their team’s abilities. Bottom line you don’t want to be (or be seen to be) too reliant on your Advisory Board.

Advisory Board Basics

2. You can have an Advisory Board at any stage. 
They can add value for the smallest start up through to large public companies.

3. The Board part of the title is a misnomer! This is because Advisory Boards rarely meet … as a Board. Rather they are mostly all one on one bilateral relationships with the CEO. Communications tend to be ad hoc with perhaps monthly preset check-in calls but with a verbal understanding (very early stage) transitioning to written expectations of time expended (later stage.)

Structure and Benefits

4. Cosmetic Advisory Boards are a very bad idea. By this I mean lots of names of “important” people on your website … but where the reality is these folks do very little for you. Needless to say if investors (or actual/potential customers in a B2B context) ask to talk to Advisory Board members as part of due diligence, and it becomes clear they have no meaningful role, that sends a bad signal. This is especially the case if you put those names in a pitch you deliver to investors. By represented them as being part of your team … if fact they aren’t … well, let’s just say you were being “economical with the truth”. So have a functioning Advisory Board, or don’t have one at all.
 
5. A CEO/company that who establishes a strong functioning Advisory Board has multiple wins.  First and most obviously you get advice from folks who are consistently involved and add value so in areas that are key to the CEO and the business. But this also sends positive signals to potential investors to the effect that, in addition to that valuable advice: a) You can identify and engage with experienced individuals relevant to your business (so says something about your people skills and judgement) b) The fact that those people are willing to commit time to support you and your business is a form of social validation of itself.
6. A well constructed Advisory Board is composed of people with diverse skills/experience that are relevant to the CEO/founding team. Meaning they can support the company’s progress in clearly defined areas. e.g. finance, customer acquisition, marketing, scaling, technology etc etc. or who have broader experience e.g. a former CEO in the space who has scaling experience. (How do you find these wonderful people? And how do you work out where an Advisor best fits the companies needs and the CEO/Founders strengths and weaknesses? I don’t address those issues here – that is another couple of posts on their own!)7. Better to have 3-6 strong engaged players than 7+ not very engaged people. Start Ups are time starved so work with a small number of committed partners who can give you time and add value. Avoid everyone else! And by having too many members a CEO will make declining engagement a self fulfilling prophecy, simply because she/he will not have the time to interact with all the Advisors at a meaningful level.
8. Whatever role they fill Advisory Board members should expect, and be used, for their full network. Use each Advisory Board member to the full. So the person who has a clear role as your financial expert say could well have valuable connections to the media, to other domain experts or whatever. One thing to be wary of – having a known active investors as an advisor but who is not him/herself an investor in your company. That can send a bad signal too for obvious reasons, although not in my view where that individual’s personal investing is clearly focused on another area of domain knowledge or expertise.

Formal vs Informal

9. At the early seed stage, so at and shortly after friends and family financing, these Boards are usually pretty informal. This means Advisor relationships are based on a verbal understanding of time commitment and responsibilities. I see no issue with this – avoid red tape at all costs!
10. Heading to the A stage and beyond they become more formal. This make sense too in my view. As the business develops having written Advisory Board contracts is the way to go. (Law firms can provide standard versions so this is not a big deal.) The contracts should have specified time commitments (at a minimum) and can include written details of what each Advisory Board member is expected to contribute.

Compensation

11. Advisory Board positions are typically not compensated at the very early stage. This speaks to the informality mentioned above. These are willing supporters who do it for one reason – they have faith in and want to support the founding team.
12. At the Advisory Board contract stage stage compensation starts to make sense. As the business expands adding professionalism in all areas is a must. Advisory Board compensation is a matter of agreement but I start from the position that early stage full Board members (who are not founders/VCs) typically get 1% of equity through options vesting over 3-4 years. An Advisory Board member will have less time commitment and no fiduciary responsibility. So, logically, should be paid less. How much less? Something like 0.10%/year seems fair. Maybe more depending on contribution. Again this is a matter of agreement and also the magnitude of the expected benefit to the company. Note that this is not a fee for “showing up” or answering the email/phone from time to time. Optimally this compensation should be tied to specific deliverables and with the options being granted on appointment but not vesting until a later date. (One year out say.) And typically, no cash component … other that for reasonable expense reimbursement. Advisory Board members are best remunerated through direct connection to the value creation process.
With thanks to – http://adamquinton.blogspot.co.nz/2013/08/12-point-advice-on-start-up-advisory.html

How An Advisory Board Can Grow Your Business…

Entrepreneurs don’t have to go it alone. They can put together an advisory board for their business made up of people who can provide insight into marketplace trends, gauge future trends, make introductions to customers, facilitate funding, and suggest alliances.

 

Building a top notch advisory board is one way that Lisa Xu, CEO, NopSec is ensuring the success of the company she leads. NopSec identifies and fixes IT security vulnerabilities. In other words NopSec makes sure corporate computer systems can’t be hacked and if they are, the vulnerability is fixed quickly. She specializes in the financial services industry, which requires computer systems that are extra secure.

 

Xu  is thoughtful and strategic about asking people to be on the NopSec board of advisors and in how she uses the board.

 

1.) Choose the right people.

When forming an advisory board, determine the skills you are seeking. Xu knew the types of people she wanted on her board: potential customers, partners, and companies that might want to purchase her company down the road. She wanted industry experts, investors, and people who would make introductions to all of the above. She also wanted experts in technology, sales and marketing, finance, and the financial services industry.

 

Choosing among candidates wasn’t just about resumes and lists of accomplishments. Only by getting to know a potential advisor in advance could Xu determine if a candidate could provide actionable insights and if she had chemistry with the person.

 

She met one advisor, Adam Quinton, at an event. They then met for coffee. His value became readily apparent — potential investor as well as introductions to other investors, customers, media, and other entrepreneurs. Other advisors represent companies including CA, Cablevision, Dell, and SecureWorks. These companies can be customers or strategic partners.

 

2.) Set expectations.

When inviting a candidate to join your advisory board, you should lay down the ground rules about what is expected in terms of time, responsibilities, and term of office, advises Xu.

 

Xu is both formal and flexible about the relationship. A formal agreement, between NopSec and the advisor details what is expected and what the compensation is. However, the agreement is flexible. After all, startups do pivot. When priorities or workflow change, the agreement changes.

 

3.) Engage the board by making the work interesting and mutually beneficial.

The compensation for the advisors isn’t only financial. They also benefit from networking, sharing, learning, and shaping something that has enormous potential. Xu wants the Nopsec board to be emotionally invested and proud to be building something with great potential. She also wants to make sure that the board enjoys the experience and has fun.

 

The advisory board meets quarterly, but Xu schedules individual meet-ups with board members. She does her homework and knows exactly what she can expect from each. She finds LinkedIn a great tool for researching which advisors can introduce her to an opportunity.

 

4.) Incentivise your board.

Depending on whom you are asking and how involved you need them to be, compensation can vary from just providing food at meetings  to covering expenses to stock options to cash payments to a combination of all four. Xu gives options, but board members have other motivations. It’s a chance for them to give back, feel appreciated, and get recognized. It’s a great chance to network and learn. Advisors don’t do all the giving.

 

For more advice about advisory boards, see what Quinton has to say.

 

What could an advisory board do for your business?

 

With thanks to – http://www.forbes.com/sites/geristengel/2013/08/07/how-an-advisory-board-can-grow-your-business/

Why Start-Ups need Advisory Boards…

An outside perspective is critical to building the future of any business, big or small.

 

As we built our business from a bedroom start-up to an Inc. 500 company, our priorities were creating a differentiated offer to our customers, building a world-class team, and managing cash flow to keep us afloat as the business grew.

 

The last thing on our minds was building an advisory board.

 

Advisory boards, we reasoned, was something that big, slow-growth companies have. We could get around to creating one after we took care of the more important business at hand.

 

We were wrong. Every company can benefit from a well-structured advisory board. External advisors bring networking opportunities and much-needed advice, but most importantly they bring something that is priceless to any successful business: an outside perspective.

 

One of our clients is a large, publicly-traded technology company, with a highly profitable business. They are no stranger to rapid growth, with revenues having risen from less than $100 million in 2002 to more than $1 billion last year. But guess what: they need an advisory board!

 

They have a business model that will be stable for years to come, but given the evolution of cloud computing, they also have some major opportunities for reinvention. As is true of many fast-growth companies, they are fraught with the innovator’s dilemma and have a strong incentive to stick close to their core business–a strategy that conflicts with the new paradigm and market opportunities offered by the cloud.

 

This is the problem when management teams that have incentives to maximize the core business are also expected to create a disruptive technology in a new space. For our client, winning in the cloud space will likely require strategic acquisitions and solid R&D investments. But to do this in a new paradigm, they need an outsider’s perspective. Specifically, they need a view that is removed from their core business.

 

A well-structured advisory board would provide this perspective. An advisory board can make critical contacts with CEOs of potential acquisitions and get real-time market knowledge of the start-ups that are currently working toward disrupting their core business. The right advisors will think about market transition as a start-up rather than an established company.

 

Our company is in the same boat. Seven years after founding the firm, we are finally getting around to building an advisory board. In fact, when we mentioned it to one client last week, he said, “I thought I was already a member of your advisory board.” That was a sign that we are behind the eight-ball. We need to move our company to the next plateau. And an advisory board will be critical to getting us there.

 

How have you used an advisory board to help your company achieve growth?  Share your thoughts and questions with us at karlandbill@avondalestrategicpartners.com.

 

Reproduced from: http://www.inc.com/karl-and-bill/why-you-need-an-advisory-board.html

Advisory Board Guidelines

What is an Advisory Board (Or Group)?

An advisory board or group (nomenclature interchangeable) is a collection of individuals who bring unique knowledge and skills that complement those of the formal head or board of an organisation, in this case you. The advisory group can help run an organisation by making recommendations or providing key contacts, information, knowledge, skills, or materials to your organisation that you might not have access to independently. Additionally, an advisory group can further aid an organisation by the members bringing their status or clout with them to enhance the reputation and reach of that organisation (while also benefiting themselves by adding to their own reputations.) However, they do not have the formal authority to make any direct business decisions.

In general, a three to five person advisory board should meet smaller organisations’ needs.

When should an Advisory Board be formed?

Any organisation should look to form an advisory board when its tasks become too complex or too demanding for the formal head or board of an organisation.

How does one form an Advisory Board?

Determine an objective: The most successful advisory boards are formed with a specific goal in mind. Therefore, when forming a board and company or organisation should make sure to think about what supportive roles it wants these advisers to play. This in turn will help the company decide who it wants to be on the board: Is the company looking for diverse representation of industries, age or gender? Is it looking to stay with people familiar to the company or work with new faces? A combination of these? And so on.

Look for “challengers”: A good advisory board will not be comprised of uninvolved or uninterested “yes” men and women. On the contrary, an advisory group should challenge the head(s) of an organisation to think differently about his or her company’s trajectory. To do this effectively, a board will need to have people that have skill sets different than those already in place.

Use networks: In addition to looking for people whose skills differ from the existing company or organisation management, the company should look for people who run in different circles as they can bring new resources with them. That having been said, regardless of his or her background an advisory board member should be willing to participate and interested in your program, otherwise they won’t do or bring very much, despite his or her potential.

Offer compensation: Advisory board members can be compensated in different ways, ranging from a nice meal once a quarter to annual stipends.

Create a contract: Although more informal than boards of directors, advisory boards should still be governed by some form of written agreement. This could include having members sign a nondisclosure agreement, drafting a charter that outlines a board’s responsibilities, and an agreement on logistics, i.e meeting frequency, expected time commitment, and compensation, if any.

Advisory boards and their respective rules and roles will differ depending on the size of their partnered organisation. For example, larger companies may want to have larger advisory boards and smaller or start up organisations should not worry about compensation from the outset. Therefore, parts of the board-forming process are adaptable to your organisation and its needs.

Ventell provides Advisory Boards to Owner-Managed businesses – ask us how we can help your business grow profitably? Or got our Business Advisory Board page.

 

With thanks to – http://dowelldogood.net/?p=663

Ten Tips to Creating an Effective Advisory Board

You don’t need to navigate unfamiliar waters alone. Put together a good board of advisers, and you’ll create a powerful asset that can make a huge difference when you need to get objective advice, scout the marketplace, gauge future trends, seek new strategic positions, have introductions made or build repeat customers.

 

Unlike corporate boards, advisory boards have no fiduciary responsibility and their advice is non-binding. Some are hands-on, meeting monthly or more, even getting involved in the daily grind. Others meet quarterly, with an eye to the big picture. Many consist solely of interested outsiders, but a good number include investors as well. What all such boards share is this: They advise, evaluate and play devil’s advocate.  Here are ten rules of thumb to follow when building an effective advisory board.

 

1.         Determine the Objective of Your Advisory Board: Advisory boards can be general in scope or targeted to specific markets, industries or issues such as adopting new technology or going global. They provide timely knowledge about trends and competitors, as well as identifying upcoming political, legislative and regulatory developments. They can help you enter new businesses and look at your own operations with an open mind. Advisory boards can also be made up of customers and prospects who provide insights into product development and marketing issues.

2.         Choose the Right People:  Of course, when forming a board you need to understand its purpose, but you also need to know what specific skills to seek. In general, look for diverse skills, expertise and experience. You want members to be problem solvers who are quick studies, have strong communications skills and are open minded.

Big names can be a bonus … but not always: Getting a heavyweight on your board of advisers can give you credibility, but it’s also important to have members who are going to spend the time to give you thoughtful advice or are well connected and willing to make introductions.

 

3.         Set Expectations: When inviting a prospective member to join your advisory board, you should lay down the ground rules about what is expected in terms of time, responsibilities and term of office. Specify the areas in which you’re seeking help. If the advisory board is going to discuss issues that include private information, members should be notified that they will be asked to sign a confidentiality agreement.

4.         Compensate Your Advisory Board: Depending on whom you are asking and how involved you need them to be, compensation can vary from just providing food to covering expenses to stock options to cash payments to a combination of the four. Keep in mind that your members will likely benefit themselves in a variety of ways. Being on your board will expose them to ideas and perspectives they may have otherwise missed. It will also expand their own networks and provide them with a way of giving back.

5.         Get the Most Out of Advisory Board Meetings: Prepare for meetings well in advance. Choose a site that is comfortable and free of distractions. Careful thought should be given to developing the agenda and managing the meeting. Solicit input for the agenda, and distribute important information ahead of time. Run the session as you would any professional meeting, and follow it with an action plan. The facilitator should know which experts to draw out and how to stimulate a dialogue. He or she should be result-oriented, as ideas without action aren’t worth much. The minutes should be written up and circulated to top management. The notes should include recommendations on key issues.

6.         Ask for Honesty: An advisory board must be open and frank, so don’t be offended if you hear things you don’t like. Your board will also suggest ways of correcting the problems they identify.If appropriate, encourage members to tell you about their mistakes so you can avoid making the same ones. You can learn a lot by finding out what other people did wrong.

7.         Consider Alternative Feedback Methods: Getting the entire board together on a regular basis may not be possible. Instead, meet or have conference calls with specific members about topics relevant to their expertise as needed. E-mail is a great way to reach everyone and have them respond to you at their convenience. Respect your Board’s Contributions:  Don’t abuse or waste their time. Listen to what the board says. Sometimes, a business executive is so close to an issue, you can’t see the forest for the trees. But remember: This isn’t a corporate board, so you don’t have to do everything they suggest. Ask yourself, “Does this work for my company? Am I comfortable with that?” Then make a decision.

9.         Keep Board Members Informed:  Once they’re on the board, keep members excited about your business by giving them updates at times when you aren’t soliciting their advice. The fact that they’ve agreed to be on your board means they care about your company, so keeping up-to-date will help them be of greater value to you. Remember that these people are evangelists for the company.

10.       Fire Bad Board Members: If you realize you’ve made a bad choice, get rid of him or her. Unlike a board of directors, advisers can be replaced without a lot of legal headaches.

Prepared by:

 

Geri Stengel, president of Stengel Solutions, a business strategist.  She can be reached at 212-362-3088 or E-mail

 

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