What can I offer to convince some heavy hitters to join my start-up?
Assembling a strong board is one of the best things you can do for an early stage company. It adds strength and credibility to your company which can in turn attract capital, staff, expansion opportunities, etc.
When you are starting out, you need to preserve cash, so here are some non-cash ways to attract board members to your company:
- Equity: You can offer potential board members equity in your company in return for them being part of your board (either as a director or advisory board member).
They receive shares, which can be structured in many different ways. They can receive shares upfront (eg. 5% upfront upon joining), bit by bit (eg. 1% per annum), subject to assisting to achieve milestones (eg. sales or profit targets) or after a period of time (eg. after two years).
Usually what works is something upfront and then more after milestone events. Few experienced people will add their name and time to a company if they don’t get something upfront.
- Contra: If your business can provide them with something of value, you could exchange this for their contribution to your company.
For example, say you make websites. You could build them or their company a website in return for them joining your board.
I knew of a personal training franchise that paid a board member by keeping them fit through personal training sessions. It was a mutually beneficial exchange.
Another example was a start-up company who benefitted from the experience of an advisory board member each month by taking them to their favourite restaurant.
The meal cost only $50 and in that time, the entrepreneur was able to ask questions to the mentor which helped shape his company.
- Profit/revenue share: This is where you incentivise a board member by giving them a percentage of sales or profits that the business makes.
So for example, if the business makes over $1 million in sales, then the board member receives 1% of revenue (or $10,000). This way the incentive is aligned to the revenue or profit growth of the company.
It may seem hard to get someone with credibility and experience to help you and your business. But you’d be surprised how keen some of these individuals are if they like you, like your business and have already achieved success in their lives.
I find that wealthy, successful entrepreneurs are always keen to help others achieve success. It’s their way of giving back.
Also, when you are starting out, just get one board member on to start with. See how you go with them and how they add value.
Don’t go adding five board members when you are still in the early stages.
As the business grows, so can the size and strength of the board.