Seven Key Reasons Why Advisors are Essential for Startups
Startups are one of the hardest endeavors you'll ever engage in. Despite careful planning and execution, there is a significant amount of risk involved and ever-changing outside circumstances. Startups often comprise of young and sometimes inexperienced talent. While abundantly competent in a particular technical discipline, startup teams typically lack deep business experience. It's therefore important to seek sound counsel when tackling the challenge of entrepreneurship. Here are seven key reasons professional advisors are essential for startups.
Expertise: Perhaps the most obvious reason is that advisors bring strong expertise to the table. Entrepreneurs often engage professional advisors for their subject matter expertise in capital raising, accounting & finance, sales & marketing, operations and more. A key feature of many startup incubators & accelerators is an entrepreneur-in-residence program that facilitates the connection of startups with subject matter experts. Advisors also bring industry insight on the competitive landscape, advising you on how to best position your company in the market.
Experience: A close, yet distinct cousin of expertise. Professional advisors with several years under their belt bring valuable experience to the table. They have seen it all, so to speak - often in situations quite similar to those that young entrepreneurs find themselves in. Such experience can be invaluable in helping teams to avoid costly mistakes. Many advisors have been or still are entrepreneurs. so their perspective is unique and invaluable in helping you grapple with the tough challenges you'll face.
Connections: One of the most important reasons to take up with an advisor is for the connections he or she can help you make. The saying 'it is all about who you know' could not ring more true than in a startup setting. Advisors are typically very well-networked individuals - and the right advisor brings credibility to your company, opening doors that are otherwise closed. Advisors' connections can assist with business development, fundraising and specific problem solving. For example, getting the opportunity to pitch the right investors often hinges on a credible reference from an advisor. Likewise, an advisor can often make an introduction that leads to a valuable strategic partnership with a well established company.
Objectivity: Each startup team needs an outside set of eyes & ears that will be non-biased and fair. Good advisors can bring that essential, neutral position to complex problems you're encountering. And, advisors add 'diversity of thought' to your team. For example, if you are an optimistic person (as most entrepreneurs are), the advisor can help you & your team members stay grounded in reality. Advisors can often bring an objective viewpoint on emotional issues like terminating an employee, resolving a conflict with an investor or negotiating a compromise between founding members of a team that have grown apart. In most relationships in life, an outside party's opinion is crucial for healthy growth and stability. The same goes for your startup.
Cost Savings: When embarking on a startup endeavor, any way to save on operating costs and stretch previous capital is obviously desired. Advisors can help delay the hiring of expensive management team members until the time is right. Using advisors on a very part-time basis saves you the burden of a full-time employee until the position warrants someone full-time. An advisor's network not only helps in sourcing funding and in developing your revenue opportunities, but can also provide the right talent for the company at the right time, helping entrepreneurs avoid costly search processes or hiring mistakes.
Accountability: One of the key problems encountered with startup teams is that they lack accountability to their stakeholders. Particularly when times are tough, entrepreneurs can withdraw and become 'islands unto themselves', not wanting to disclose the nitty gritty of the challenges they are facing. It is often easier to internalize issues; hoping and praying things work themselves out. But honest and open communication will serve individuals far better in the long run. An advisor can help establish a practical framework for accountability, which often consists of (a) regular meetings, (b) consistent, formal reporting of operating and financial results, (c) informal discussion of challenges and setbacks, and (d) strategizing solutions.
Encouragement: Last but not least, advisors can be an encouragement along an often times rocky road. In fact, this one might be the most important reason to engage with an advisor. Startups are difficult, they are HARD! Startups deal with several risks - technical risk, market risk, intellectual property risk, competitive risk, financing risk, and ultimately the toughest of all, execution risk. In fact, the odds of success are stacked against you in a startup. You will invariably experience problems that are anticipated and many more that are not. Having someone to encourage you and support the team through difficulties can be essential to being resilient in the face of difficulty.
Using an advisor does not mean relinquishing control, taking unsolicited advice or blindly implementing strategies without careful consideration. The best advisors come alongside of you and become vital members of your team! The best advisors truly want to see your team succeed, and will do what they can to bring expertise, experience, connections, objectivity, cost savings, accountability and encouragement to help on the road to entrepreneurial success.