What Is An Advisory Board? Do you need one?
Last month we discussed why I think that business cases are a necessary part of making money off of your idea (even though some sources don’t agree). Now, how do you bring that business case to life?
Well, there are three main options with many variations within those three categories:
Sell the idea to the highest bidder
License the idea to many companies/manufacturers
Turn the idea into a business yourself
Although the first two are important, and often good or great options, I will focus on the third option today – turning the idea into a business.
First of all, this option may have the greatest potential for making money BUT it also has the greatest risk of failure. So, you need to be honest with yourself about whether or not you can handle it.
Question you should ask:
Are you cut out to be a business owner? Not in the Shark Tank, The Social Network, glamorized kind-of-way. I mean, do you enjoy the hard work and the emotional rollercoaster that is owning a business and are you able to delegate things that you might enjoy doing so that you can focus on money-making activities that you may not enjoy? If the answer is “no, I am not okay with those things.” That is perfectly okay! Not everyone is! You should probably consider going with options 1 or 2.
If, however, you ARE okay with those things and want to move forward as a business, then let’s keep going.
*Actual Fortune Cookie fortune from Shreya’s lunch last week. Who says they’re BS??
For one of the patents that I am working on, we are finding that the best option is to build the idea into a business for now and eventually sell the idea and/or business to someone – to flip it like a house (or a pancake).
We had to do some self-reflection at this point. Yes, we’re willing to do the work, BUT we don’t necessarily have the connections or the experience it takes to build this particular business. So, what do we do? Give up?
NO. We had two options as we saw it: 1) we hire a “CEO” or business partner who already has connections to introduce us to people and ease our entry into the market OR 2) we get help from an “Advisory Board.”
What is an Advisory Board? It is a group of more experienced and better-connected individuals who can provide guidance and/or connections but that will take a laissez-faire attitude towards the business. They are not too invested.
The CEO is a great option and we thought that we NEEDED this option at first. What we learned, though, is that it is an expensive option. No one with the experience needed would put their time and energy into helping a wee start-up like ourselves without a significant chunk of equity (think: 50%). We did not want to give up that equity. Plus, we are willing to do the legwork. We are willing to knock on doors, put ourselves out there, and otherwise put the sweat in and put the ego on the line. Therefore, the advisory board is looking like a much better option for us. Small equity options for the advisors, minimal time investment on their part. They help to ensure that we are knocking on the right doors and that the doors will at least open for us.
So, for us, the Advisory Board was just what we needed. You may need more than that or you may not know people who would be a good fit.
Hope this helps…and until next time.