Three secrets to setting up an advisory board
An advisory board can be a great asset in building a sellable company. Pick advisers who have been involved in business transactions before, and they will guide you through the process, point out what drags down your valuation and challenge you to build something sellable.
One hidden advantage to an advisory board is the ability to play good-cop, bad-cop with a potential acquirer. For example, you may tell the acquirer that your advisory board:
- Needs to meet to consider the offer, which buys you more time to drum up competitive bids;
- Is concerned the offer is too low;
- Is counseling you against accepting certain conditions in the offer.
This allows you to be the good cop in the negotiation process, ensuring you can have a positive working relationship with the acquirer post-sale.
Ron Dersch of Edmonton-based DAI Capital Advisors agrees. Dersch’s firm represents both buyers and sellers of businesses and believes an advisory board can be an important asset in the sale of a company. I asked Dersch for his secrets of setting up an advisory board:
- Pick the right people. “Select members who will complement weak spots on your management team and are willing to challenge you.”
- Shut up and listen. “Smart entrepreneurs listen to their advisory board. It’s a different dynamic than a management team meeting, where you can debate the issues. In an advisory board meeting, you should do most of the listening.”
- Pay them. “If you don’t pay them, you won’t have engaged advisers. Too many entrepreneurs think advisers will come out of the goodness of their heart, and that’s a mistake. Pay for their time, and both you and your advisers will take the meetings a lot more seriously.”
Curious about whether you could sell your business (and for how much)? Take the 10-question Sellability Index Quiz at www.BuiltToSell.com.
John Warrillow, author of Built to Sell
www.BuilToSell.com
Copyright 2010. Author retains ownership. All rights reserved.
