What separates entrepreneurs from success may sometimes be access to industry knowledge and insider networks. Developing this knowledge often begins with the guidance of successful, experienced entrepreneurs. They know where the pitfalls are and can help you avoid many rough spots. Using mentors, advisers, and community resources can make the difference between success and failure for your business. They can serve as a sounding board and challenge your decisions and thought process, providing you with information and helping you make contacts at critical points as you boost your business into growth. Most entrepreneurs feel accountable to their mentors and advisers—which can help keep them on track.
In Homer’s Odyssey, Mentor is the character who teaches and nurtures Odysseus’ son while his father is away. The word mentor has evolved to refer to an experienced person who develops a one-on-one relationship, advising and nurturing a less knowledgeable person. An effective mentor can be an experienced entrepreneur in the same type of business or a professional who works with entrepreneurs and understands the requirements for success.
In addition to those relationships you are able to develop on your own and in this program, you may find other programs that pair entrepreneurs with a mentor. You may find it worthwhile to check if any formal mentoring programs exist in your community or find an online mentoring program.
Formal mentoring programs—Some formal mentoring programs may be available to you through organizations that serve entrepreneurs in your community. The organizations offering formal mentoring typically pair a successful entrepreneur with a less experienced entrepreneur. The match is usually based on type of business, goals, stage of business, personality, and other relevant criteria. Most formal mentoring programs specify the types of businesses they wish to assist. Yours may be among them.
Informal mentoring—Informal relationships are set up directly by the mentee and the mentor. The informal relationship may grow out of casual contact such as membership in the same chamber or industry association or through community volunteer work. It may also be facilitated by another person, such as a peer or relative. Ask others if they would be interested in helping you as a mentor and explain what you would like in a mentoring relationship. Realize that not everyone has the time or inclination to be a mentor.
To be most effective, the mentoring relationship should have an agreed-upon structure and focus. The mentor and mentee should discuss these parameters:
- What are you going to focus on during the time you spend together?
- How often will you meet?
- How will you meet and communicate—in person, over the phone, online?
- How long will the relationship last?
Board of Directors and Advisory Board
At every stage of your company’s life, you will need input from inside and outside the company. If your company is organized as a corporation, it must have a board of directors. The board is the managing agent for your company. It makes big-picture decisions and elects officers. In many states one person can be the sole owner of the stock in a corporation and the sole director on the board. A full board of directors, however, brings the advantage of ideas from many minds. The board of directors usually includes key members of the management team, including the CEO, investors, and independent outside advisers.
Some prospective board members may be reluctant to serve since the trend by creditors or disgruntled stockholders is to sue board members for their decisions or lack of oversight. Insurance is available and perhaps necessary to persuade members to serve on a formal board of directors.
Many small businesses can’t afford to hire a professional management team nor does their legal structure require a formal board of directors. So how do they get the expertise of a chief financial officer or marketing vice president? Form an advisory board, says FastTrac® graduate Jim O’Dowd.
Founder and president of OEI Telcom—a Franklin, Tennessee, company that installs telephone and voicemail systems—O’Dowd organized his first advisory board in 2002, and wishes he had done so earlier. OEI Telcom is on track for a 15 percent increase in revenue this year, and O’Dowd chalks up much of this success to his advisory board.
Unlike a formal board of directors, an advisory board is usually a group of business experts who do not directly work for the company they are advising. Entrepreneurs use advisory boards in many ways, but the ultimate goal is to get ideas, advice, and direction from these experts.
Business owners may view a board as a bureaucratic hindrance or threat to their control, says Jana Matthews, founder of Boulder Quantum Ventures, a Boulder, Colorado, firm that helps CEOs become better leaders and achieve long-term growth for their companies.
“To avoid that perceived loss of control, some entrepreneurs will not appoint a board of directors at all, or they populate it with friends and family who won’t give them a hard time or ask difficult questions,” explains Matthews.
Failing to form a board or allowing it only rubber stamp approvals provides little value to your company. Just as you need to find and hire people smarter than you, you also need to find board members who complement your weaknesses and can help your company grow.
“The right board of directors can open new doors for you and can help you avoid trouble,” Matthews says. “Yet you’ll need to invest some time and effort to make sure you choose the kind of board members who can add value to your company.”
Advisory board members may be bankers, marketing consultants, industry experts, financial consultants, customers, or other successful entrepreneurs. They may meet monthly, quarterly, or as you need them. They are usually compensated in some way, although compensation is small—a meal during the meeting or a small payment per meeting. Few advisers do it for the money. Many entrepreneurs attribute their success to the help that they received from mentors and advisers. Now, they feel it is their turn to give back and help someone else.
An advisory board doesn’t have the legal status or liability of a formal board of directors, but it’s an invaluable source of advice. Specific benefits include:
- Accountability—An advisory board forces you to be accountable by presenting regular progress reports at meetings.
- Brainstorming—Advisory board members bring new insights. For example, as a telephone systems installer, OEI wasn’t generating much recurring revenue. A board member suggested maintenance contracts, and today revenue from OEI’s Service Protection Plan (SPP) represents a significant portion of the company’s revenue. “We have very few claims, so the SPP revenue is almost all profit,” O’Dowd says.
- Sales leads—One of OEI’s biggest sales during second quarter this year resulted from a board referral. The prospect, a dermatology clinic, was located in an area that O’Dowd might not have discovered otherwise. “The board member put me face-to-face with the doctor who made the decision and gave a glowing recommendation on how good we are to work with,” says O’Dowd. “The sale was 90 percent closed before I ever walked in the door.”
To get started, seek people who offset your weaknesses. For example, O’Dowd wanted help with financial management, so he asked his CPA to join the advisory board. Because his ultimate goal is to sell OEI, he recruited a board member from a large consulting company that specializes in business valuation and sales. Establish term limits so board members understand their commitment. O’Dowd says, “Our members receive $100 per meeting. Granted, that’s not a lot, but at least it’s some recognition that their time is valuable.”
“Advisers are essential for entrepreneurs,” says Barnett C. Helzberg, Jr., former chairman of Helzberg Diamonds, a family jewelry business begun in 1915 and sold to Warren Buffett’s Berkshire Hathaway in 1995. Founder of the Helzberg Entrepreneurial Mentoring Program in Kansas City, Missouri, Helzberg says, “The best advice comes from knowledgeable third parties who aren’t afraid to tell it like it is.” He adds, “Cherish these people. Their expertise will help you build your company. Play your cards right, and they will also become friends who will help you build your life.”
An advisory board is most useful in providing strategic ideas or feedback on increasing revenue and building your business, explains Auren Hoffman, a serial entrepreneur and chairman of the Stonebrick Group, a San Francisco investment firm.
Advisory board members are not involved in the details of your company. Hoffman says, “You go to them, as you would an old high school friend whom you don’t see often, to catch up and pick their brains—for a view of your landscape from 20,000 feet.”
In contrast, a board of directors has legal authority. Members can provide guidance on a day-to-day basis about how to navigate choppy waters such as a lawsuit or the sale of your company. “These people give you a view of your business from 200 feet,” Hoffman adds.
Give careful thought to whether you need a board of directors or an advisory board. Remember, certain corporate structures require a board of directors who will have legal obligations to fulfill.
Small Business Development Centers, chambers of commerce, entrepreneur groups, colleges and universities, and libraries are some community resources that may be helpful to you as you grow your business. Counseling, classes, research, referrals, and peer groups are other resources from which you may benefit. As you build your network, be sure to include persons from organizations that provide services and community resources for entrepreneurs. Information, connections, opportunities, and ideas are some of the benefits that will help you grow your business.
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.
FastTrac Kauffman Foundation