It happens every year about this time: thousands of bright, enthusiastic students graduate from college with entrepreneurialism on their minds. Many of them already have a business plan and are ready and anxious to start up.
Some even have businesses that are already operating. They have good ideas — even great ideas — and they are filled with fire and passion.
Still, almost all of them need help. Maybe it's a little — probably it's a lot. It might be in finance, accounting, marketing, feasibility, human resources or something else. But these aspiring entrepreneurs need help.
But where does a 22-year-old find such help? Even if the young entrepreneur has an idea, energy, vision and low risk aversion, he or she still lacks one of the most important ingredients for success: experience.
Often the initial management team is made up of peers, who are just as clueless as the young founder of the company. Many startups flounder and die because new entrepreneurs lack the experience that is needed to avoid making major mistakes or to use common sense. It really is a Catch-22: by the time you've accumulated the experience that owning and operating a small business hammers into your head, you've lost some of that great, youthful energy and optimism.
So where do those who are fresh out of college go to receive the benefits of wisdom and experience? They can go to former professors, but again, the experience needed to operate successfully doesn't always transfer from the classroom to the real world — otherwise all of the professors would be out starting profitable companies.
Then there are advisory boards, which usually consist of successful people who have agreed to be advisers to the company. But successful people usually don't have time to sit down on a daily or weekly basis with the entrepreneur to show him or her exactly how to do things, such as setting up the accounting for the company. Members of the company's board of directors are pretty much the same — they are interested, but they are busy and are usually only willing to advise over the phone or during board meeting.
So what is the answer for the young startup founder who needs all kinds of hands-on management help? It's simple: pay for it. Individual members of an advisory board or a board of directors should be selected for the skills that you do not have: marketing, finance, production, accounting, human resources, etc. So I would pay the board a token fee for being on the board — say $100 per meeting. They should also have some equity in the company, including both stock options they were granted as a board member as well as stock they bought with their own money as the company was founded. If a board member or an advisory board member is not willing to put up some of their own money to invest in the company or the idea, then they should not be on any kind of a board. Period.
So you can feel comfortable calling on board members for advice because you are paying them and they have a vested interest in the company's success.
As the need arises and you need to draw more intensely on specific expertise, pay the adviser $100 per hour while they come to the company office and actually help lay things out. It's important that they come to the premises rather than try to help long distance. People who have real skills are often generous with their time and talents, but they will focus their full attention if they are getting paid.
Trust me — it is worth every hourly fee to be able to draw from the experience of veteran successful entrepreneurs. If you don't have board members who have the skills you need, find out who your competitors are using. The hourly fee will be the best money you spend, and it just might help you avoid making major mistakes that your adviser made on his or her own dollar.
Joseph Ollivier is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at firstname.lastname@example.org.