- What are the experience buckets?
Okay, so I call these experience buckets,
what's experienced?
where I'm going over the next three to five years?
What level of experience should I have
for areas that are gonna come up?
(upbeat music)
Hey there, I'm Dan Martell, serial entrepreneur,
investor and creator of SaaS company.
This episode, I'm gonna share with you
how to leverage or understand
the difference between board of advisors
or board of directors.
And be sure to stay till the arrow and tell you how
to get access to my Dream 100 framework,
which is the exact same process I use
to build multi-million dollar companies
in about 16 months, by identifying the people
that are gonna support you to grow it.
So obviously, it's gonna help support
recruiting board of directors, board of advisors,
be sure to stay the end, but let's get into it.
This topic is one of the most important to me.
I mean, when I think of my life,
and what's been the most valuable, capital money,
or relationships, relationships towers over
the amount of investment capital or my own personal capital,
even I've reinvested in the growth of my business.
The reason why, is because the right relationship
will buy you an answer.
They will literally give you an answer
through that relationship.
Having people that are gonna help you
raise your expectations for your own performance.
Introduce you to people that you're gonna hire to be able
execute strategy, and just give you perspective
to avoid landmines, you know.
That's why I've always had mentors and coaches,
because I want people to show me where the faults?
Where the things that need to consider?
What's appropriate for my size of the business?
So it's a topic that's really important to me,
because I've probably advised over 100 companies
as a formal advisor, I've sat on about a dozen boards
as a board director.
And knowing the difference, understanding
what are the pitfalls to look for.
Why do they exist?
And how to use them the best way,
and specifically for you to understand the differences.
So you don't accidentally use something that you should
really go to your advisors for, bring it to your directors,
and they get upset with you.
I want to share these five different areas
that make them different.
And for you to understand,
how to get the most out of each one of them.
So let's dive into the five areas
to get the most leverage out of your BOA, Board of Advisors
or your BOD, Board of Directors.
Number one, work focus.
So it's really important to understand the different groups,
your BOD, Board of Directors or your BOA, Board Advisors.
Who do they work for?
Well, here's the deal.
Your Board of Directors, they work for the corporation.
They work for the shareholders.
They do not work for the CEO, because their job
is to provide guidance and fiduciary focus of the CEO
but this CEO can come and go of a company.
So just so you know that,
if you set up a board of directors the right way,
they're there to argue for the best interest
in the shareholders in the corporation.
Yet, the board of advisors, this is one that most founders
can put together, make it informal kind of thing.
They're there to bring you and fight
for the management team and the CEO.
They're there to bring you ideations,
to tell you what to look for.
It's informal, you know, it's kind of like, it's fun.
You know, I sit on a board of advisors
for an incredible company is growing.
And they're the fastest growing company in Canada, right.
Not the fast sorry, they're in the top 10
fastest growing company in Canada.
And listening to their roadmap and their strategies
and their business development and their partnerships.
And then getting them asking other people
that are I think there's like 16 people on the call,
these incredible minds to offer up ideas.
That is a beautiful thing that's available to all of you
just understand the differences.
Board of Directors are there to represent
the shareholders in the corporation.
Board of Advisors for the CEO and the management.
Number two, Formalities.
Now I have, I will admit that I'm very informal
in my approach on boards.
Now, I follow the by-laws, I understand, you know
how to second motions, and I understand that aspect.
But the reality of it is Board of Advisors
are incredibly informal, or they should be
or you can make it that way.
And Board of Directors are typically formal.
They're legally bound as directors
to represent the best interest of the shareholders.
Whereas, an advisor is really there to support,
again, the executive team.
So just know, that there's a difference in formalities.
And if you're kind of more like loosey-goosey
on how you operate your business
so you don't want to add too much
like stuffy you know, tie, suits you know,
kind of conversation language,
maybe just stay on the border stuff,
and just do that with your account, sorry your account,
your lawyer and you know,
when you got to do your annual stuff your AGM
even if you're a small company
or you don't have a lot of shareholders.
You can do that, keep it formal there, minimise that
and spend most of your time on the informal advisory board
but there, the formalities are completely different in both.
Number three, the size.
Okay, so most Board of Directors, I think the best ones
are three to five people.
Some people have huge Board of Directors, and that's fine.
But stage appropriately, so three to five.
On the advisory side, the size can be, you know,
six to eight, I think is a good number.
I've sat on larger ones, and it's kind of like
a brainstorming meeting.
But just understand that usually, I would say,
as a rule of thumb, probably twice as big, then you know,
Board of Directors versus Board of Advisors.
And that is, all I got on that,
the size is really gonna depend on
what you think you're missing, to attract those people,
to fill in those knowledge gaps.
But you know, three is an awesome Board of Directors size,
maybe five, and then you know, six to eight on the advisors.
Number four, Compensation.
Well, this is a fun one.
Because A if somebody is asking you for cash
to sit on the board of directors, you should run away.
Cash should be saved in your business
to reinvest in acquiring customers.
Because you can't pay to acquire customers with equity.
Facebook will not take your equity, to run Facebook ads,
for example.
And the reality of it is if somebody is an investor,
they're gonna sit on the board
to represent their interest because their shareholders
ideally, and if they asked, you should give them maybe one
not a whole bunch of investors a board seat.
And then, if anybody else is gonna be on there,
like an independent or somebody else you want
to invite to participate.
Typically, the equity is gonna be and I got this
from Brad Feld and incredible startup investor.
But he says, like whatever you would compensate a VP level
kinda, I would say 2.2% and equity to 1% and equity,
divide that in half.
And that's kind of what you want to do
for a board of directors.
And you may even consider doing investing period,
kind of like a two year a roll up.
Same thing for advisors, typically less equity.
But the truth is for the right advisors,
you could just hire them for consulting.
So like, maybe you have like a marketing person
that you want on there.
And their hourly rate is 500 bucks for consulting.
You just pay them, you know, maybe every two months
when you do your board advisor meetings, 500 bucks.
Now, you could do that, or you could give out equity, right?
I think equity is very valuable.
And yes, it's good to defer, but certain people
might be just best paying them.
But that's the way I think about it is, just ask,
what's your hourly rate?
Some people be like 50 bucks an hour, 80 bucks an hour.
Great, lawyers?
They're a little crazy sometimes.
But they might decide to do the advisory board.
If you make it fun, you teach them, you involve them
in the strategy and the ideation
of where you're bringing the business
and then there'll be motivated
to be part of that advisory board.
But it's usually a little different
on the compensation side.
Number five, Recruiting.
So how do you recruit for both parties?
The Board of Directors or Board of Advisors.
Here's my favourite way, is I'll sit down
and I'll ask myself, what are the experience buckets?
Okay, so I call these experience buckets,
what's experience?
Where I'm going over the next three to five years?
What level of experience should I have
for areas that are gonna come up.
Maybe you're building a big team of 100 people,
you've never done that before.
And you need somebody that's an HR specialist,
or maybe you need to, you know, you got to build,
you got to spend 250k a month in ad spend,
you've never done it before you need somebody
it's a paid acquisition expert.
So think of these experience buckets that you may not need
that you want to fill, right, you want to fill with advice.
And my best strategy for reaching out to people
to fill those buckets eventually building relationship
that feels confident and comfortable enough
to ask me part of either one of the advisors, the directors,
is to just ask for advice, you know.
I have this rule in life that you ask for advice,
you'll get anything.
You literally ask for advice or get a partnership.
Ask for advice, get investors.
Ask for advice, get a new employee.
Ask for advice, get a new board of directors
or board advisor and you can decide.
But it's a good way to kind of like try before you buy.
Just like reaching out some like on LinkedIn,
say I've got this mini problem.
I'd love to get your perspective, they reply seven minutes.
You kinda follow up, you get some more, you know.
And like that, to me, just feels right.
And that's how I've always recruited for both of those.
Obviously, for the directors, typically, they're investors
and they need a board seat.
But even the independence if it's somebody that I know of,
but I don't know, that's how I'm gonna start
that relationship to recruit them
into my board of directors.
So quick recap, five aspects of building a world class
board of advisors and directors.
Number one, the focus the work focus.
Number two, formalities.
Number three, the size.
Number four, compensation.
And number five, most important is recruiting.
So as I mentioned, the beginning of this episode,
I wanna share with you a exclusive training
called the Dream 100.
And it's what I use to build a network of success
before I enter into a new business or a new project.
And the way it works at a high level is I'll identify
the 10 mentors, the 30 advisers and the 60 peers
and then I'll build that list and approach those people
so that over time, I'm, you know,
your network is your net worth.
And if you want to know that my strategy for reaching out
and how to structure, that click the link below
to get access to that Dream 100 framework.
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but as per usual, on challenge you
to live a bigger life and a bigger business
and I'll see you next Monday.
(bright upbeat music)