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. Pradeep Aradhya is the founder and CEO of Novus Laurus, a serial Board member, and a member of the Forbes Business Council. Making an Advisory Board Work for Your Company, by Pradeep Aradhya. Deal Closers is hosted by Izach Porter and is produced by Earfluence.
Starting and running an e-commerce business requires juggling many priorities—from marketing to order fulfillment. But one area often overlooked is planning for an eventual exit. Building a board of advisors early on can help guide you towards a profitable exit. This article breaks down the importance of having a strong advisory board, how to choose the right members, and how to leverage them to scale and sell your business.
A board of advisors is a group of external experts who provide strategic advice and insights to help your business grow. Unlike a board of directors, advisors do not have fiduciary responsibility but can play a critical role in decision-making, offering advice on scaling, financial planning, and preparing for a business sale.
As a small or medium-sized business, your advisory board can help you tackle challenges such as:
In essence, they serve as a fresh set of eyes, offering solutions and strategies that align with your growth and exit goals.
When selecting advisors, it’s important to focus on expertise in your industry, particularly those who have successfully exited businesses. Depending on your growth strategy—whether through organic means or acquisitions—the right board members will bring experience that complements your business model. Choosing advisors based on your exit strategy is crucial. For example, if your exit involves selling to private equity firms or merging with larger corporations, you need people with connections in those areas.
Having diversity on your advisory board—both in terms of skill sets and traditional diversity metrics like gender and ethnicity—is essential. Diversity can drive creativity and problem-solving by bringing a wider range of experiences and viewpoints. However, it’s important to manage these diverse perspectives to ensure that they contribute meaningfully to your business objectives.
Most advisory boards meet on a monthly or quarterly basis, though startup businesses may benefit from more frequent interactions. These meetings provide a structured opportunity to assess business performance, discuss potential challenges, and explore new opportunities.
Virtual meetings have become the norm, particularly since the COVID-19 pandemic. These allow for more flexibility, but it’s still important to prepare adequately. Pre-meetings, agenda items, and background materials should be shared in advance to avoid chaotic sessions.
Building a board is not just about finding the right people; it’s also about incentivizing them to contribute. Compensation can vary from offering small equity stakes to stipends, but sometimes flattery and the opportunity to be part of something innovative can work just as well. It’s also important to offer clear metrics for what you hope to achieve with their help.
Your board should assist in developing a strategic plan that aligns with the market landscape and growth opportunities. This includes market research, identifying risks, and creating a roadmap for achieving long-term goals.
Advisors can help refine your financial plan, ensuring that you’re making sound investments and operating efficiently. They can also offer advice on improving processes, whether it’s streamlining your e-commerce fulfillment process or optimizing your order management and shipping costs.
For those looking at inorganic growth—such as acquiring another company—advisors with experience in mergers and acquisitions (M&A) are invaluable. They can identify suitable acquisition targets and help navigate the complexities of M&A deals.
The most important role for your advisory board is guiding you through the process of selling your business. Whether through a merger, acquisition, or private equity sale, having advisors who have been through this process can help maximize the value of your business and ensure a smooth exit.
Even the best advisory boards can face challenges, from conflicting opinions to advisors not delivering the value you expected. One solution is to set clear expectations from the start, using metrics to measure the performance of each advisor. If someone is not meeting expectations, it’s important to reassess their role and, if necessary, replace them.
When choosing advisors, it’s tempting to focus on general M&A experience, but domain expertise is often more valuable. For example, a tech company looking to sell should bring in someone who has sold tech businesses, not someone with only manufacturing experience. This ensures that your advisors understand your specific challenges and can offer relevant, actionable advice.
1. Define clear objectives: Know exactly what you need from your board members. This could range from financial planning to growth strategies.
2. Seek out diversity: Not just in demographics, but in skills and industry experience.
3. Set expectations: Clearly communicate what you expect to achieve with your board’s input.
4. Regularly assess performance: Measure the value each advisor brings to your business and make changes as necessary.
One common question is whether a board of directors or a board of advisors is the better option for a small business. A board of directors has legal responsibilities and is often more concerned with governance and oversight. In contrast, a board of advisors is more tactical, helping with day-to-day decisions and offering advice on specific issues. Advisory boards are often less formal and less expensive to maintain, making them a better fit for smaller businesses. However, as your company grows, transitioning to a board of directors may make sense, especially if you plan to raise capital or prepare for a large-scale acquisition.
Evaluating your advisory board is an ongoing process. It’s essential to track what your board members contribute and whether they help you meet your business goals. Set metrics that align with your strategic plan and regularly review whether your board is adding value. If not, it may be time to make changes.
A well-chosen, well-managed board of advisors can be the key to unlocking your business’s potential, whether that’s through improved operational efficiency, new revenue streams, or a successful exit strategy. By focusing on diversity, setting clear expectations, and regularly assessing performance, you can build an advisory board that helps you grow, scale, and eventually sell your business.
If you like the show, be sure to rate us. Please write a review, press the follow button, and share it with your network. If you’re looking for help selling your eCommerce business, be sure to visit the website closers.com. I’m Izach Porter, and we’ll see you next time on the Deal Closers Podcast.