How to Find the Right Advisors for Your Business

By Colin Darretta, co-founder at Innovation Department, WellPath, and Finn; former private equity at CI Capital and banker at Goldman Sachs

Assembling the right team of advisors for your fledgling enterprise can have a profound impact on your business, especially in the early years. But getting it wrong is expensive. Advisors cost meaningful equity. Three advisors, a fairly standard number, can represent as much as 3 percent of your business. When you think about the amount of blood, sweat and tears you will invest into building the enterprise, that 3 percent is (and should be) precious. If you really succeed in a big way, it can be millions, or tens of millions, of dollars.

So how do you determine the right advisors for your business? The first step is understanding what types of advisors are out there. Here is how I think about them.

These are the brand names. Think Daymond John. They are brands in and of themselves. Having them involved with your business immediately adds credibility to your endeavor, similar to the way having a top-decile venture fund invest might.

The inherent belief is that these people must be busy and circumspect with how they spend their time; therefore, if they are willing to invest that time in your business, there must be something special about what you’re developing. This is the message that you hope large swaths of the outside world will infer. And that can be powerful when it comes to making noise in a crowded marketplace or getting investors excited.

So, what’s the downside? Well, for one, they are already incredibly busy people. Many take on many advisory roles. Besides, they realize that attaching their brand to your brand is how they add value. Their level of involvement beyond lending their name may be modest at best.

These are the advisors on the other end of the spectrum. They’ve not yet become global names. They might not even have respectable Twitter followings. What they do have is the sort of attitude that is predisposed toward going above and beyond to make your business succeed. It becomes a matter of principle with them — they’re part of the team, and instead of the two hours a month of advisory work required by the contract, they spend 10 without batting an eye.

They might not have the depth of expertise in your particular industry, but usually, they have had some degree of success in their careers and can guide you on the broad operational challenges that are inherent in every entrepreneurial venture. Of course, without deep subject matter expertise, they probably can’t help solve your most insidious problems, and without a big brand, no investor will flock to your business when they see its name on an investor deck. But they do the hard work and mentorship that you might not get anywhere else.

The last of my broad buckets are the individuals who don’t have a big brand, nor are they going to be workhorses, but they do have a very specific set of knowledge that is narrowly focused on the problem you are trying to solve. If you are building something niche, there may be only a few suitable subject matter experts in the market. As you might expect, these people are likely already in high demand because they number fairly few, so they often end up being more expensive than any other type of advisor.

Now that you understand the variety of potential advisors you can seek out, who do you give up a precious piece of your company in pursuit of? Ultimately, that’s unique to your business needs. If you have an incredibly specialized product, you probably want a subject matter advisor. On the other hand, if you’re trying to create the next massive consumer brand, you may be best served by having an individual whose brand will build yours. Finally, if you find someone who has built a business that looks a bit like yours and will put in lots of work, you may determine that’s the right partner for you.