When you’re starting your e-commerce business, your sole focus is getting the business off the ground. Constantly on your mind are things like, How do I set up my website so it’s functional and attractive? How am I handling shipping? Do I build a team right away or do I take it slow? Where should I spend my marketing dollars?
One thing you’re probably not thinking about is your exit strategy – and building a team around you to help you think about that on day one.
Making an Advisory Board Work for Your Company, by Pradeep Aradhya
Izach Porter: You are listening to the Deal Closers Podcast brought to you by websiteclosers.com. This is a show about how to build your e-commerce business to be profitable, scalable, and one day even sellable. I’m Izach Porter, and on the show today, we have Pradeep Aradhya. He comes to talk to us about building your board of advisors with an eye towards your eventual exit.
So when you’re starting an e-commerce business, you have so many things to think about that are simply, you know, getting the business off the ground, there’s a gap in the market. Is there a demand for my product? How do I set up my website, so? It’s functional and attractive? How am I handling shipping? Do I build a team right away or do I take it slow? Where should I spend my marketing dollars? We’ll get to all of those topics later on in the episode.
One thing you’re probably not thinking about is your exit strategy and building a team around you to help you think about that exit strategy that will come one day. So let’s welcome Pradeep to the show. Pradeep is the CEO of Novus Laurus, and a member of Forbes business council. Pradeep, welcome to the Deal Closers Podcast.
Pradeep Aradhya: Thank you very much for having me. Happy to be here.
Izach: Yeah man, excited to talk with you. So Pradeep I’ve been, I’ve been looking through your LinkedIn profile and it looks like after getting your PhD from NC state, you were a software engineer for a while.
Uh, then you started your company Novus Laurus in 2009. and I want to talk a little bit more about Novis Laurus in a, in a little bit but one thing on your profile that kind of struck me and stood out is that you have been on eight boards of directors eight different boards, including Starbucks women’s impact board. So let’s just kind of start at the beginning. What was your first experience being on a board and how has that you know, shaped your perspective of the importance for building an advisor, the board going forward?
Pradeep: Sure. I think my first board was actually a nonprofit board. It was a, since I’m not on that board anymore, I can say a little bit about it, it was the Science Club for Girls. This is an organization that provides afterschool stem education for underprivileged girls here in Boston. And I, encountered them during a presentation that they made. And at that point they were making a part of our business, Novus Laurus business was to make apps. And I knew it was fairly simple to make apps and everybody was excited about apps.
So I asked their executive director whether I could give their girls a class in app making, and they said, yes. So we set it up. We spent a day, I think when the first hour we actually managed to get eight girls’ pictures and names on an Android app and publish it to the play store, which was phenomenal.
They saw it, they loved it. After that day, there was some programs to see if they could take that particular program a little further forward, but they were not able to do it. And then I asked the executive director why, and then a bunch of reasons came up and then I said, you could solve it this way.
You could solve it this way. And then they said, you know what, why don’t you join our board? Yeah. So that was my first advent into a board of the non-profit. I think my first for-profit board was XB Insight. That is also in the, in the past now. And I think, as an investor, I’m on the board of innovation women. So I get a board seat because I’m an investor.
Izach: Interesting. So you’ve got, you know, not only board experience, but board experience with non-profits, paid board, and kind of active investor board seats. So, which of those do you think has been, you know, that maybe the most interesting or the most demanding from your perspective?
Pradeep: It’s a little bit like apples and oranges. I think the non-profit work is particularly close to my heart. They’re all mission-driven, cause-driven and those were great, but they’re not huge challenges that think the problems that you solve there and the time at which the pace at which you sold them are not as stringent as for-profit or when you’re on a board of a startup that you have funded. I think the most challenging has been the startup funded board positions, primarily because you’re defending your money in some way, but you also want to give the entrepreneur, enough freedom to do what they think is reasonable.
So the for-profit board position was a little different of a challenge because there are a lot of different voices in that room. They all had different sets of experiences, which is great for diversity, but getting consensus and moving forward quickly on time with those boards was also difficult.
Izach: Yeah. So I, I had read an article that you wrote for the Forbes business council called Making an Advisory Board Work for your Company. And we’ll, we’ll link that article in the show notes for any of our listeners who are interested, but in the article, you listed some reasons why companies might want to set up a board of advisors. And I want to, I want to dig into that a little bit on the show here and specifically with a focus of how setting a board of advisors may be helpful for, you know, a small to medium-sized business and how, that can support an entrepreneur who’s planning to exit their business one day.
So, maybe you kind of, to kind of start off that discussion, you know, who should be on a board of advisors and how many people are on a board of advisors when you’re thinking about, you know, relatively small businesses.
Pradeep: Sure. I think, many considerations apply when you’re trying to constitute a board for a small to medium business, primarily you’re focused on strategy and growth. You’re also trying to solve problems that have, sort of caught you by the collar and, you know, either you need a fresh pair of eyes on it, or you need just, some very specific skillsets that you do not quite have.
So advisory boards are typically constituted for either creating credible strategic plans, which include, you know, look at the market, look at the trends, look at the competition, look at the risks and figure out what the reasonable path forward might be a time-bound path forward might be, or lead us into really interesting revenue opportunities, which may be slightly off the beaten path or, you know, larger than, the revenue opportunities that we’ve encountered so far.
slightly more tactical things would be, how do you make a credible financial plan? How do you sort of take a deeper look at the processes that you’ve got going on and make them a little bit more efficient? So those are probably the four reasons. Number one, strategic planning, number two, revenue introductions.
Number three financial and other kinds of operational planning and lastly, specific process or technology centric, questions that you might have for a board of advisors.
Izach: Gotcha. So how do we build a board with a focus on specifically on growth and exit, you know, who do you need to kind of put in those seats and then how do you identify people who would be helpful if that’s, if that’s the vision?
Pradeep: Izach, you well know that growth can be both organic as well as inorganic. You could continue to grow with the products and services that you provide, or you could go out and say, here’s a company that I can acquire either for a book of business or for a complimentary set of products and services to your own.
Right? Both of those are possibilities as far as growth goes. I think the skill sets required to identify those opportunities and make them happen are slightly different. As also the opportunities for exits, I think in order to do an exit you need to have a credible network of either companies that, that are interested in you or private equity partners or other people who could just promote you into a sale of some sort.
So all of those skillsets are slightly different. I think what you have to do is to clearly identify very, you want to focus your efforts. You know, if inorganic growth is not part of your makeup, then maybe you don’t spend time looking for people chasing that, or if that is your objective, then you go find people who look quad companies, who’ve done mergers and acquisitions and you onboard them.
I think the exit thing is a slightly more complex beast. What you really want to do is to bring on board people who’ve done it. Who’ve established a path and a reputation for selling companies. And you want to have them come in, look at your company, look at all of the financials, look at all of the competitive advantages that you might have and figure out how to position yourself for a sale.
Izach: Yeah. And that’s, that’s something that I I’ve spent a lot of time speaking with entrepreneurs about, you know, we, I tend to interact with companies when they’ve either they’re, they’re beginning to start to plan their exit, or they’ve already made a decision to exit. And one of the most frequent questions I get is what, what can I do to increase the value of my business as we go to market?
And so I think your point about having a board or, or even a member of your board who has some experience, going through an exit process could be, it could be really informative. You know, we’ll, we’ll often work with our clients in a consulting capacity to help them plan and get ready for the exit.
But I think, you know, having someone who’s a trusted advisor inside of your company as a sounding board to, to test these ideas could be just enormously valuable. And I think it’s, an exit is something that a lot of entrepreneurs haven’t done yet, and typically once we see somebody make their first exit, you know, a lot of times their, their immediate plan is to make a second exit.
Because they’ve gained so much experience with the first one, they realize that they can replicate that success. And so I think having, having a board to help you through that just makes, makes a lot of sense. So, yeah.
Pradeep: Well good on you and your clients for being able to do that consistently. I think, the one thing that might be worth adding there is that exits are fairly domain specific. So, it might be tempting to bring in someone who’s done mergers and acquisitions or whatever not in your domain space and that can. Cause delays with what you want.
I think it’s much better to bring in someone who’s in the domain space that you’re in, who’s understood who has done some sort of mergers and acquisitions in that space to start with. Otherwise, you’re going to have someone come in who doesn’t really understand your space and doesn’t really understand the complementarity of companies and tries to go and put you in places that you don’t really belong.
Izach: Totally really interesting point. So when you say domain space, are you talking to. Kind of for the business model, you’re operating the size of the business. Maybe the capital structure of the business or the capital structure. Post-closing how do you, how would you define that a little bit?
Pradeep: I think the size of the business is very important. Whether you can exit it all as part of that, the climate in which you’re trying to exit is super important, but if you’re a technology company trying to sell in some other space that’s far-fetched. So for example, Amazon acquiring Whole Foods was a really interesting and veered.
Amazon is really a technology slash book company start with, but they’ve branched out and they’ve done really well. But to have, you know, if you look at it from the perspective of Whole Foods, to approach Amazon or to be interesting to Amazon is probably not their call, I think probably was the other way on. Amazon came in and said, okay, we want you for these reasons.
So, I think all of what you said, which is the size of the capitalization, the particular technological or industry area that you’re in are all very important. But if you’re trying to get out of your industry area, it could happen. It’s just that spending time on that is going to take a lot more time.
Izach: Yeah, that’s a really interesting point. So I worked in commercial banking for a number of years and worked on acquisitions for manufacturing companies, and that is, dramatically different process and kind of deal structure than when we go to market with an e-commerce or a technology business. So I think that it’s, it is very important to have you know, a team around you who knows what the market is, right, for the type of company that you’re selling.
So how about, talk to me a little bit about diversity, how important is it, is diversity when it comes to choosing the right people for an advisory board?
Pradeep: You know, typically to answer part of your earlier questions, typically boards of advisors go anywhere from five people to I’ve actually seen one that had 11, which was really interesting. They were primarily extensions of the sales arms, but really speaking the board of advisors, can be diverse both in terms of skillsets, as well as in terms of what we traditionally use diversity for, which is gender, LGBTQ, ethnicity, et cetera.
I think you’re very fortunate if you can get both kinds of diversity in a single board member or several board members, if you cannot you should, you should try and get that diversity in some other manner, it’s not always possible to get, you know, just for instance, an LGBTQ, African-American technologist. They are there, but, if you go chasing just that, then you may not get your technologist in a while.
So I think it’s a matter of what you need most currently and what you can get. Having said that though, putting into our city on your board is fantastic. I think the number of ideas that come out are great, I think the experiences that diverse people bring to you and their perspectives are fantastic. The challenge though is going to be does that add more noise on the advisory board? And how do you sort of control that towards a credible outcome?
You want to be able to take advice from the advisory board that you can actually implement rather than, you know, here’s a bunch of crazy ideas that are meaningful, but not relevant immediately.
Izach: Yeah. That, makes a lot of sense. How about just logistically, how often should the board meet and do you see these meetings happening, happening mostly virtual now?
Pradeep: Yeah, I think with the current climate of COVID virtual meetings are all there are though that you have, I think in the recent one month or so, we’ve had a couple of in-person meetings as well, typically boards and, advisory boards will meet once a quarter or once a month.
I personally with my startups, we’ll give them a spot at a time every week. They may or may not avail of it. I think the startup world works a little faster and the number of issues that they face in want advice for is much more varied. So, you know, giving them more frequent time is better, but I think it really depends on the particular entrepreneur or a business if they have.
So every time you call a board meeting, there’s a spot of work. You have to get material together; you have to have pre-meetings with everyone. So it depends. In the initial stages you’re going to have a lot of pre-meetings because you want to make sure that all of the board members understand what you’re going to ask them or understand enough to be able to reach some sort of consensus.
If you don’t put in that time, then your board meetings are going to be very chaotic. So that time is a huge cost on you and your team. And you have to balance that against what you might get from a board meeting.
Izach: You know, as we’re, as we’re speaking here, I’m thinking if I, if I’m a founder of an e-commerce business and gotten it to the point where I’ve had, I’ve had some success and profitable, you know, I’m thinking about putting together a board to help me kind of take it to the next level.
How do I actually incentivize someone to be on my board, you know, is it, do I have to pay them or get them to invest in my business to be interested, or, you know, have you seen situations where, you know, how does somebody actually go out and get people to be willing, to show up to a meeting once a month, you know, on a zoom and, and give them their best ideas for running a business, they don’t necessarily own?
Pradeep: I think the simplest payment is flattery. It may not always work. you can always reach out to people that you think are impressive and see if they have some time to give you. Typically, you’ll get some sort of a refusal or a reluctance, at which point you sort of pull back and say, maybe we meet only once a quarter or once a year or something like that, that’s up to you.
But a lot of younger companies are paying a board of advisors. The difference between payment for a board advisor versus a board director is vastly different. And maybe we can talk about that a little bit, but board advisors could get anything from here’s a small bunch of equity that’ll last over time or here’s a yearly stipend or something like that. And that varies vastly, like I said, it goes all the way from just flattery to, you know, maybe tens of thousands of dollars a month.
Izach: Gotcha. Okay. So, yeah. So yeah, let’s talk about the difference between a board of advisors and a board of directors and how they’re incentivized, maybe educate me a little on those differences.
Pradeep: A board of advisors does not own any sort of fiduciary responsibility. A board of directors is responsible for overseeing the company, making sure that they’re meeting all their legal and financial obligations, making sure that they’re looking at the company in an impartial manner, that doesn’t sort of just benefit them, but benefits the shareholders.
You know, if you’ve been following the Boeing debacle with 131s crashing, they just actually reached a settlement with their show shareholders. The shareholders sued the board saying that the board did not quite Oversee the company sufficiently and that’s the primary difference, right?
A board of board is sort of almost voluntary, the kind of advice that you get from ward advisors is much more detailed, much more tactical, if you will. With the board of directors it’s strategic, they don’t want the board in the nitty gritty. They just want the board to oversee, but the board of advisors is you can go to any level of depth in the.
You can’t even have them come in and sort of do part of the job if you want them to. With the board of advisors the pay scale is a little smaller, but the board of directors, the pay scale is much larger. You have several specific committees on the board of advisors, the executive committee, the strategy, the strategic committee the finance committee, the compensation committee, the governance committee, things like that. Each of the chairs of those committees gets a retainer. Each of the members get some sort of retainer or a yearly stipend. That much expenditure simply does not happen for a board of advisors.
Izach: Yeah, that makes a lot of sense. And I think, I think for the perspective of our listeners and the companies we’re working with, I think they would mostly be interested in developing this board of advisors, which is the topic that you’ve really focused on and written a lot of content around. So, that’s
Pradeep: For a startup it’s slightly different because usually a startup is made of two founders, a neutral party, and maybe two inventors. There is no actual pay being given to that board, but the decisions made by that board, you know, everything that the company does is driven usually by what the investor wants in terms of everything from employee stock plans to compensations for incoming VPs and things like that. And that’s also part of what a board of directors for a larger company does.
You know, even as a board advisor, you might hold sway and say, this is what you should do. But with the board of advisors, the actual decision to do that or not is left with the entrepreneur or the business owner.
Izach: So maybe just, you know, can you give us a couple of stories from your experience, Pradeep. Have you been on a board that was well run and maybe one that wasn’t well-run and kind of, what were the, maybe what were the lessons learned that our listeners could benefit from?
Pradeep: Sure. I don’t, I don’t want to draw really stark lines and say, this is a good board, this is a bad board what I’ll do is I’ll give you instances of good behavior and bad behavior. So one of the startups that I funded did a stellar job. They would you know, schedule meetings, send out agenda items, have pre-meetings.
They even went so far as to say, you know, not only do we need a board of advisors, a board of directors, they also need a board of advisors. So they actually had one board member dedicated to finding advisors that they needed, listed the skillsets, went out, recruited those board advisors and onboarded them. I think they did a fantastic job.
One of the earlier nonprofits, and this is the bad example, if you will. One of the earlier nonprofits that I was on the board of was very stuck in the mud. If you will with a bunch of things, they were distinctly a more mature board. They had ideologies that were perhaps belonged in a slightly older era.
Because of that, I think they had real trouble moving forward. They were stagnated at a certain, capacity and size for almost 10, 15 years because of that. They were not able to take any technological steps forward. They could not envision this company doing this organization, doing anything technical.
In fact, one of the things that was on their list of things to try was to go online with their systems. And they claimed that their methodology is simply was not amenable to going online, right. And I left this board, probably about four years ago and the pandemic hit and they were online with, or without methodology in two weeks.
Yeah, which was, you know, if they had done it earlier, they could have, their reach could have been far larger. But you know, things happen. Boards are held, the power is held very closely. And if you let that power be held for too long, with people who are not progressing the company, that is not a good board for you.
Izach: Oh, that’s really interesting concept. So, if, if you’re the owner of a business, right, and you’ve got this board of advisors and you, you feel, you know, somebody who’s taking up space and not helping, you know, how do you, how do you pull the trigger and get rid of that board member and bring in the new one?
Pradeep: Measuring what your board is doing is super important. So even when you recruit a board member, I think you should have a set of metrics to say, this is what we want to accomplish in this much time. And you have to socialize that and get the board member to agree to that before coming in. So that sets the stage up.
So if you can say, this is what you agreed to, this is what has actually happened in your tenure. Do we want to sort of give this a little bit more time, or do you think this is an untenable problem at that point, you can say, okay we can perhaps mutually or otherwise agree that this is not working? And so, you know, your tenure or your term is done.
Izach: That definitely makes a lot of sense. I think it’s important to put those metrics in, so you can be, you know, make that decision when it needs to be made. So, hey, tell us about Novus Laurus. what do you do, what you know, to give us some background on, on your, on your company?
Pradeep: Sure. I started Novus Laurus because I was sick of the corporate structure that I was in. I was a vice president of technology at a digital advertising company called Digitas. I had upwards of 60 startups coming in and pitching me their technological progress to say, you know, maybe marketing needs all of these technologies.
They were all interesting companies. They were all interesting concepts. A lot of them have actually taken root and started to boost what digital advertising does. But inside the company, I simply could not get anybody to take me seriously. there were all manner of reasons. And so I said, you know what?
I can do this on my own. So I stepped out. And I did something somewhat foolish. I launched three separate companies under the Novus Laurus umbrella all at once thinking that somehow I was going to fly all of them because I had the people. And the first mistake that I made was I brought in people that I could trust, but people that didn’t quite have the skills to run those.
And, you know, we failed fast. We didn’t spend a lot of money, but we fail fast. And I had to come back to my original digital transformation consulting track. And it took about four years or so for us to stabilize and start to get revenue and, you know, go back to old clients and get them to pay us.
So those Laura’s basically is a digital transformation company. So, what we do is we go into CMOs and CIOs and we look at their corporate structure. We’ll look at their internal technology and we paint a picture of what the future holds or customer expectations are, what production technology looks like, what operational technology looks like.
And we say, okay, if you want to go here, here’s your map to get. And we provide that consultancy. We detail out based on their technology corridor, the particular technologies that they should implement and what the timeline might be. And then we might introduce them to implementation partners, but we’re basically a consulting company.
What we also do are two other things. So as I started to build Noah’s Flores, I also spend a lot of time just advising smaller companies. You know, when I had revenue, it hit me that perhaps I should put my money where my mouth is and I said, okay, let me make a few investments and see. So, you know, our initial investments were on food companies and fashion companies and things like that.
And, it wasn’t very mature. Most of them failed. But you know, now we have a slightly better portfolio, if you will. It was all my money. Which was also another thing that I learned is not the best thing that you should do it. Think you should get a set of people, but I haven’t raised a fund yet.
Anyway, Novus Laurus is both a digital consulting company for large customers like Staples and Lowes and CVS. there are also a management consulting and advisory company for medium to large companies. And the third thing that we do is invest in startups. So we have over the time I think we’ve been investing for about four or five years now.
So we’ve got three areas that we like to invest in. The first is workforce diversity. This is very important. I think the business world would be much better off if we had more diverse voices in there. If you just think about the fortune five hundred and the, the general makeup of the leadership in these fortune five hundreds and the fact that they control economies and countries it’s, it’s a little telling.
So any diversity that we can introduce there in that leadership is I think, going to change the world. We made investments there. One of our investments there is called innovation women. it’s a speaker platform for any professional who is female would like to raise, list their abilities and go out and speak.
So the idea there is that visibility equals opportunity. So, you know, if you’re seeking investment, if you’re seeking for promotion, got somewhere and get a speaking engagement, be visible and you’ll get there. So that’s one thing. A second area that we like to invest in is anything that provides some sort of productivity opportunity or platform for work.
Then automation knocks a bunch of stuff out. So if you think about a 3d printing facility or even space exploration, you can get a lot done with very little work and very little personnel employed in the company. So that’s an area that we like to, to find interesting companies to invest in. The last one sort of came out because we started to go down the path of how do we get really interesting startups who are way ahead of the culture to popularize their culture without sort of going and saying, you know, buy this product and video and things like that got really interesting. But what also happened was we found that culture change is important all by itself, even if not for the sake of technology. So we started investing in movies that create culture change. Our second movie is out or almost out it’s about artificial intelligence and how artificial intelligence is not going to take over.
It is actually just going to make stupid mistakes because we didn’t tell him what to do properly or gave it access to things that it shouldn’t have access to. So that’s all I’ll say on that count, but the movie is going to be called Who is God.
Izach: Hmm. Interesting. So how can our listeners connect with you and a flatter you into being on their board of advisors?
Pradeep: Well, I just, the way that you got you found me, which is on LinkedIn and you know, I think you also have my email address. I don’t mind if you provide my email address on this form, just like you provided that link.
Izach: Well, that is Pradeep Aradhya CEO of Novus Laurus and board member to roughly 7,000 companies. As Pradeep mentioned, you can connect with him on LinkedIn or visit movuslaurus.com Thanks everyone for listening to this episode of the deal closers podcast brought to you by websiteclosers.com.
If you like the show, be sure to rate us, please write a review, press the follow button, share it with your network. And if you’re looking for help selling your e-commerce business, be sure to visit website closers.com. I’m Izach Porter, and we’ll see you next time on the Deal Closers Podcast.