The 7 Levels of Scale: Building Your Advisory Board

When it comes to growing and scaling your business, the 7 Levels of Scale give you everything you need to know and do—and in the exact order you need to do it.

 

In previous episodes, co-hosts Roland Frasier and Ryan Deiss have walked through levels 1-4 of their proven and powerful framework, The 7 Levels of Scale. In today’s episode, they’re unpacking Level 5, Build Your Board. This board of advisors is a carefully curated group of people who will help guide you in the direction you want to go with your business.

 

The sequence of these levels is crucial here. The framework only works in this order: 

 

• Level #1: Sell and serve 10 customers.
• Level #2: Build a growth flywheel.
• Level #3: Build an upgraded scalable operating system.
• Level #4: Double your take-home pay.

 

• Level #5: Build your advisory board.

 

• Level #6: Complete an acquisition for expansion.
• Level #7: Hit your number.

 

So catch up on episodes if you need to, then listen in for everything you need to know about Building Your Board.

 

Two Kinds of Boards

 

When you have a corporation, legally, there are different levels of people who have a role in the company. The first level is the owners, the shareholders. They elect the Board of Directors. The Board of Directors is responsible for creating the strategic vision of the company. Then, to execute the vision, they elect officers like CEO and President. 

 

Roland and Ryan are talking about a different kind of board: a Board of Advisors. This board of people will give you guidance toward moving in a direction you want to go. The biggest distinction between the Board of Directors and the Board of Advisors is this: The Board of Directors is really there to advocate for the shareholder, to make sure everything at the company is happening like it should. That may or may not include you. The Board of Advisors, on the other hand, is primarily there to support you. 

 

The nice thing about a Board of Advisors is that you can have as many as you want, helping in all the areas you need help in, and they don’t get to control anything. They’re truly just giving you advice. 

 

Who Should Be on This Board? 

 

Broadly speaking, your Board of Advisors should be made up of two types of people: mentors and peers. Mentors are the people who have been where you want to go. Obviously, they’re a critical aspect. They’ll help you with your endgame and close skills gaps, broaden your network, and hold you accountable.

 

You also need peers. A mistake a lot of people make is filling their Board with only mentors. You need peers who are also in the trenches, but maybe in slightly different areas. These peers will help you through some bottlenecks, call you on your shiny object syndrome, commiserate on losses, and also help you celebrate some wins. 

 

After mentors and peers, there are two more categories you might consider. The first is strategics, people you aspire to do business with, people who are a connection to a business you want to get, people with a big network you want to tap into. Can you get someone on the board that’s part of a business you want as a strategic business partner? It doesn’t hurt to get to know those people upfront, sooner rather than later. These could be people with a financial or legal background, or a traditional retail background. Basically, anyone who knows things that will be valuable to you.

 

Roland likes to add an optional category: celebrity. Celebrities can bring huge credibility, a huge following, and access to audiences and markets you don’t already have. This person might just be a celebrity in your particular industry. Being in business with celebrities opens a lot of doors with customers, potential partners, and vendors. 

 

Who would you ideally like to have on your board? Roland likes to start with his Dream List of people in each of the four categories and go from there.

 

What’s the Ideal Board Size?

 

Roland was recently in a meeting with a Board of Advisors that had 13 people on it. That meeting takes a long time because each person has something to say. They’re all smart and have valuable insights, but it lasts forever to get through all 13. In the interest of expediency, he recommends 7 as a high number, 5 as a minimum. Between 5-7, you can get someone from each of the 4 categories and a couple more important people as well.

 

If you can build an Advisory Board that’s 10-15 people, not all of them will commit to a quarterly meeting. You should definitely have regular meetings, but there could be folks on the board that you don’t ask to attend. By saying, “this person is on my board,” you’ll be able to attract more people. You’re looking for someone who, if you text or call them, they’ll answer. They don’t have to come to the monthly/quarterly meetings. That’s too much to ask. 

 

In general, if your board is made up of 10-15 names, the number who gather will be 5-7. You’ll also have people who will come on and off. It doesn’t need to be a perpetual commitment. You want at least a minimum one-year commitment, but then they can choose to renew or not renew at the end of the year. Two years is better. But it’s not a lifetime commitment. It’s not the Supreme Court. 

 

How Do You Work with Your Board?

 

There are two ways to work with your Board of Advisors. You’re going to ask them to show up regularly to a meeting, either offline or online, typically online. You’re going to ask them to take an hour or two out of their day for you to throw out your issues and questions. You’re sharing financials and high-level business metrics and asking for feedback. You’re giving the big-picture perspective of how you are doing right now: highlights, lowlights, areas where you need help. 

 

Remember, some folks will show up and some won’t. This second category is just available when you need them. They’re like advisors on tap. Roland likes to be this kind of person on his friends’ boards. He doesn’t want to go to boring meetings. 

 

He suggests getting creative and making the meeting cool, something that’s fun for everybody. A nice place to eat. A retreat. Go have fun, meet with your friends, and business is just part of it. The reason you picked these advisors was to build relationships. You want to be able to give them an experiential bonding time, and you want them to be able to connect to each other. 

 

Maybe do this and hold one meeting a year. It’s a hybrid model that makes things more interesting and personal and fun. It’s a lot easier to get people to gather quarterly if it’s made up of peers and maybe one mentor who knows how to facilitate meetings.

 

How Do You Compensate Your Board?

 

What methods of compensation work best? First of all, pure cash. If you can afford it, pay them cash. No matter what, you cover their expenses. If you’re asking them to come somewhere, you fly them however they usually fly, whether that’s first class or whatever. Roland likes a quarterly cash payment. If you do much less than $5k/quarter, you would be not valuing them in a way that means anything to them. Hopefully these are people who are already very successful.

 

Tell them that, once you know how the company is going to do, maybe you’ll do equity. Equity, actual ownership of your company, is very precious and the most expensive thing you could ever give away. If they take actual equity, they’ll have to pay taxes on it without even getting the money yet. Also, keep in mind that people with equity have rights. This can get in the way of operating your business. You want to have some right to buy them out. In general, don’t go the equity route. It won’t motivate most people.

 

Peers will be motivated by the reciprocity of this relationship. The motivation is access to what’s going on in your world, and you want them to help you out with yours. Mentors might want access to emerging entrepreneurs because they want to give back or stay in the game. Maybe it’s access to deal flow. Maybe they’re companies you want to acquire. You might significantly discount what you’d do it for if you saw it as a way to get a foot in the door. It might be worth investing what it costs to get one high level person in the room, because that’s what will draw other people in at low/no investment.

 

Stay tuned for Level 6: complete your first acquisition for expansion. In the meantime, head on over to 7LevelsofScale.com to take the assessment to see where you’re at right now and where to go next. 

 

RESOURCES:

• 7 Levels of Scale Workbook  

 

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