Are you setting up a new business? Maybe you’ve considered starting a bricks and mortar company, an online business or something else. Whatever brought you to the starting line, setting up a new business can be an isolating experience, especially if you are doing so on your own.
Obtaining the right advice and support is essential to ensure the success of your new venture. Small business advice can come in many forms. Advisors, mentors or a director with the experience you require are all options. Here, we will look at those choices in more depth.
Advisor or mentor?
An advisor or mentor with a background in your business area, such as a retired person from a similar firm, may help you establish a supply network or build a customer base to help get your business off the ground. They could also introduce you to an established business network for your industry.
Business networks involve a network of companies collaborating to achieve a common goal and a successful outcome for all parties. The participants are often from across the supply chain, such as suppliers, distributors and developers.
Investor director or board observer?
When an investor puts money into your venture, it is very often on the proviso that they appoint a director to the company’s board. This will give the investor some input into decisions made by the board.
Despite the often-felt fear of losing control of your business once an investor director is appointed, they are only likely to have a minority stake in the company and will, therefore, be unable to overrule the majority shareholders in the business.
An alternative to a board investor is a board observer or advisor, who will observe board meetings without having a formal place or a say in proceedings. They will not have a vote on the decisions made by the board. A board observer can be a particularly useful alternative to a director if the business has been through multiple fundraising rounds; this scenario could, otherwise, see each investor placing a member on the board, potentially leading to an unworkable outcome.
The disadvantages of a board observer are that they have no legal obligation to the company nor commitment to the board’s decision-making.
Ideally, a director will bring relevant skills and experience to the firm in areas such as finance, sales, fundraising, marketing or running an online business. Furthermore, the director should ensure that they are involved in, or aware of, the running of the company and should not limit their presence to board meetings.
Once a business has grown and the board has increased to around five or more people, it may become necessary to appoint a leader of the board or to hire a chairman. However, a chairman must have suitable credentials that will appeal to current and future investors.
When a decision has been made as to the right type of advisor for your business, an agreement should be formally put in place.
The Government’s Business is Great campaign offers a range of advice and support for start-ups, including a Business Support Helpline. It also provides links to a range of services supporting entrepreneurs and start-ups at: https://www.gov.uk/browse/business