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Informal Board of Advisors

SURGE Blog about surrounding your company with an informal board of advisors to help you breakout and scale.

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Informal Board of Advisors

  1. 1. The Power of an Informal Board of Advisors by Kirk Coburn Founder & Managing Director, SURGE Ventures (For Copy with Audio, Please Email Me)
  2. 2. About Kirk Coburn ★Founder & Managing Director, SURGE Ventures ★SURGE is leading seed stage venture fund and mentor-driven accelerator for Energy Technology Entrepreneurs ★Founder of 3 Successful companies Prior to SURGE ★Founder and CEO of Chief Outsiders (acq. 2010), named the #6 Fastest Growing Company in Houston and was noted as one of Inc’s 5000 fastest growing companies in the US in 2014. ★ Prior to Chief Outsiders, Coburn launched The PGA TOUR Network on Sirius XM (acq. by SIRI). He remained CEO for four years from launch to successful acquisition. ★Spent 8 years at Dell during the 1990s in senior roles including strategy, procurement, marketing, and finance. ★Loves the Outside! kirk@SURGEVentures.com Read my BLOG @ SURGEVentures.com
  3. 3. Agenda * The Business Case for a Board of Advisors * Case Study: HappyLawn of America * What Kind of Board Is For You * Strategic Board Best Practices * Peer Board Best Practices
  4. 4. DO YOU NEED A BOARD OF ADVISORS? Four Questions: * What are the three or four biggest challenges in your business right now? (What keeps you up at night?) * How do you handle stress? * How has your business changed over the last three to five years? * Where do you get your best counsel and advice, in terms of driving your business forward?
  5. 5. WHY YOU NEED A BOARD OF ADVISORS? Comments from fellow Entrepreneurs & CEO’s: “I felt I had reached my current natural limits on learning how to be a CEO, was not getting enough” “My advisory board is responsible for driving 85% growth in revenue the first year and 35% the year following.” “Running a business is simply easier if you have some help and advice from a group of trusted individuals dedicated to seeing you succeed.” “I determined that I wouldn’t have made my 3 biggest mistakes in my company if I had myself accountable to a group of experienced businessmen who I respected.”
  6. 6. WHY YOU NEED A BOARD OF ADVISORS? YOU are in good hands…others that have proven the model
  7. 7. Case Study: Happy Lawn of America Situation: Barrett Ersek had a US$2.2million dollar lawn care company that seemed to be stuck – he could not grow his company at a rate more than 5- 10% per year. Problem: Barrett could not see past the industry’s key bottleneck, the cost of the long & complicated sales process Solution: Barrett created an informal board of advisors. Out this came an assignment, “Think about your biggest bottleneck, solve it, and if possible think of a way to improve the process or product in a way that would give us 10 times the advantage over our competitors. Solve that and you will win in your business.” His advisors helped him find an “X” factor. Result: Barrett had developed a proprietary patented selling process that allowed the company to grow rapidly from no sales in 2004 to US$10million by year-end 2007. Today, operations cover Northern Virginia all the way up to Northern New Jersey, USA.
  8. 8. FORMAL OR INFORMAL? The recent Sarbanes-Oxley Act imposed on public companies has soured private firms on having a formal Board of Directors. “ The biggest loser in Sox: the small and medium businesses that create over 90% of jobs in the U.S.” – Tom Meredith, key Dell Architect, former Motorola CFO Don’t give your advisors the fiduciary responsibility of a formal board. It does not align with your main objective: helping you grow!
  9. 9. 2 TYPES OF INFORMAL BOARDS Strategic Boards Peer Based Boards Definition Strategic Boards are what most would consider to be a “Board of Advisors”. This board should consist of strategic influencers that can individually help your business succeed where you are weak. This is a board made up of peers. At SURGE, this consists of fellow founders of other Energy IT companies that meet together to resolve and learn from one another. Purpose This Board exists to advise your company on strategic matters similar to a President’s Cabinet. This board should be made up of key business leaders that can serve as a source of credibility and value to help the company grow and navigate business issues. Peer Boards are put together to help the entrepreneur succeed and grow professionally and personally. This is the place that an entrepreneur can go to discuss the deepest issues that employees, strategic boards, investors and stakeholders cannot. Pros and Cons PROS Helps companies get new customers, serve as credibility, raise capital, consult on operations and finance, form better partnerships with stakeholders CONS Not a great place for an entrepreneur to let his or her guard down on personal failures/concerns. Must be on “A” game when managing PROS Helps entrepreneur manage the “X” factor: finding ground breaking strategies. Place of safety for entrepreneur to learn without fear CONS The entrepreneur is not truly accountable to the peer based board and cannot rely on board to help execute
  10. 10. COMPENSATION STRATEGIC BOARD: * 0.25% to 1% of your equity per person * Pay a Daily Fee plus Expenses * In some cases, pay an extra Retainer for extra work added during board meetings * As your business becomes more successful, time to renegotiate compensation with each advisor independently PEER BOARD: Join SURGE and gain access to many other founders as part of the SURGE alumni network.
  11. 11. STRATEGIC BOARD: HOW DO I CREATE ONE How do you attract an Advisor? * JUST ASK and KEEP ASKING * Make sure you test drive them for 90 days and ensure alignment in strategy, style, and most importantly, core values (just like employees otherwise you will suffer from “Culture Debt” as described by HubSpot Co-founder Dharmesh Shah) How many should be on the Strategic Board? * Find where you are weak, and get someone to be on the board than can offer strength * The actual size is important. Read Venture Hacks article entitled “Create a board that reflects the ownership of the company”
  12. 12. STRATEGIC BOARD: WHO SHOULD I ASK? WHERE ARE YOU WEAK? * Energy and Utility Deep Domain Expertise * Finance * Strategy * Leadership * Marketing * Client Services & Business Development “I felt I had reached my current natural limits on learning how to be a CEO, was not getting enough consistent and targeted professional development from groups like my CEO roundtables, and felt I didn’t have time for full-time school. How can I keep on learning in real time on real issues that I’m facing? She went for two members first one to bolster her skills in finance, strategic relationships and senior teams and one to support her continuing efforts in service quality. Besides crediting them with her growth in revenues, they’ve helped her transition the entire leadership team into new roles, managed a major trade market infringement scenario, and helped her work out their business plan for the next 4 years.”
  13. 13. STRATEGIC BOARD: ONE FAVOR AT A TIME Maximize everyone’s time, pick one specific action item for each board member to pursue on their own (Examples from Verne Harnish, the Growth Guy) * John Cone helped Verne nail down the GE, Dell, and Southwest Airlines benchmarking events. * Boyd Clarke, CEO of the Tom Peters Mgt Consulting Co, advises him on marketing. * Bill Gladstone, one of the top author agents in the country, is working with Verne on a potential second book deal * Ted Leonsis, Vice Chairman of AOL and investor in Gazelles, was key to securing a relationship with Fortune Small Business magazine * Arthur Lipper, former owner of Venture Magazine, is helping Verne get some business in Singapore
  14. 14. PEER BOARD: HOW DO I CREATE ONE How do you attract a PEER Advisor? * Join SURGE * Find the best organization that fits your personality and business need and JOIN. Leading Peer Based Board organizations include: - EO: Entrepreneur Organization (www.eonetwork.org) - YPO: Young President’s Organization - Vistage - CEO Roundtable How many should be on the Peer Board? * Between 6 & 10 * Less than 6 members there isn’t sufficient experience in the room to ensure each member benefits from the Forum. Over 10 becomes too crowded
  15. 15. PEER BOARD: SIZE CONSIDERATIONS Advisory Size Pros Cons When there is a small number of members · The intimacy level can grow stronger more quickly because there are less personalities involved. · It takes less time to go around the table during exercises. · It can be easier to achieve consensus with a smaller group. · When one person is absent, the value of the Forum meeting is more significantly impaired. · There are less experiences and knowledge to be shared around the table. When there is a large number of members · When one person is absent, the value of the Forum meeting is not significantly impaired. · There are more experiences and knowledge to be shared around the table. · It takes more time to go around the table during exercises. · It can be more difficult to achieve consensus with a larger group.
  16. 16. PEER BOARD: KEY TENANTS Best Practices from over 7,000+ entrepreneurs generating over $101 billion in revenue, employing over 924,000 people * Safe Environment of Confidentiality * Non-Solicitation * Protocol of Gestalt, Experience Sharing
  17. 17. PEER BOARD: THE LIFE CYCLE Level:  Casual  Connection  Commitment “The 5%” Content Safe subjects they would discuss with casual acquaintances Real life dilemmas they would only discuss with a few trusted confidants Things they may not have ever discussed or thought about Environment Low trust; few risks, low commitment, no emotional investment Acceptance, openness, trust and respect Members share their vulnerabilities openly Feelings Mild anxiety, optimism, excitement, and potential distrust Caring, comfort, confidence with group Highly emotional, strong acceptance & commitment Sample Presentation Topics New product line, office relocation, H/R benefits, new workout regimen, hiring new sales people Partner problems, strategic planning, family issues, health problems, life balance Overwhelming business loss or challenge, fear of failure, impending divorce, depression, etc.