Apr 20, 2024
Everything About a Tax Advisor
understanding the role and importance of a tax advisor
You would agree when we say that it is always nice to have some guidance and mentoring in every phase of our lives as it helps us to navigate challenges and new terrains with ease. In a startup, this role is played by Startup Advisors.
Startup Advisors typically should not only be mentors who are called in for some far rooted advice or suggestions, as they have a larger role to play. They are actively connected to your business and are people who can be called at any time to offer critical services like mentor, counsellor, sector expert, financial advisor, lawyer, accountant, etc.
Startup Advisors should be people who have a deep knowledge of the industry you are working in and can bring expertise in resolving crucial bottlenecks and suggesting appropriate growth models for your startup. To no surprise, many studies have revealed that startups with good advisors are far more successful in securing investments and becoming profitable.
Before you look for the right advisor for your startup, here’s a list of 5 tips to help you find the right one:
While the advisor might have interests and experience working in various industries and companies, it is important to ensure that the advisor has a genuine interest in your industry and can bring the right ideas and suggestions to the table. It is important to have an advisor who is passionate about the problem you are solving and should genuinely believe in you and your idea.
It is also crucial to assess that you do not hire a yes-man for the job who simply approves your plans. You need a person who can be upfront of their opinions and bring critical and strategic viewpoints to the fore. Your advisor can have questions on your work, but they should be willing to voice them and work on strategies to make things better.
The first and foremost thing to decide is how you are going to compensate the advisors. Some people adopt a fixed compensation plan, while others opt for a success share method where advisors are given equity in the startup and are proportionate beneficiaries of the startup’s growth.
Discussing compensation method upfront is important to understand the advisors' intention as you would want to protect yourself from advisors who come only for financial reasons without any accountability in the growth of the company.
You would also have to decide on how often you want to meet the advisor and how to keep the advisor UpToDate with the work. You would want to establish a weekly or biweekly reporting meeting to keep them in the loop constantly. Here, you will also have to discuss emergency scenarios and how quickly the advisor can show up and offer their services.
Before formalizing any advisory relationship, establish clear expectations on both sides. Discuss the time commitment, areas of involvement, and compensation, if any. Both the parties should be on the same page regarding the business goals and milestones they need to tap.
It's important to have a mutual understanding of what each party expects to avoid any misunderstandings down the line. A good advisor will be transparent and willing to outline how they can help and what they expect in return.
Once you have a list of possible mentors, you need to get your homework done. Examine their past performance. Which startups have they advised, and what kinds of successes have they brought about? Competent advisors have been known to encourage growth of companies and their success.
Never hesitate to request case studies or references. It might be quite helpful to talk to former clients to learn about their working environment and how they have helped other companies succeed.
While choosing the right advisor, it is crucial to analyze the unique skills they possess. You might want to ask them to solve a problem statement before hiring them to understand the skills they bring on the table.
It is advisable to look out for skills that you feel are missing in your core team so that advisors can come handy in solving crucial challenges on the way.
Finding an excellent startup advisor is an important first step that can have a big impact on your company's future. Most Importantly, trusting your instincts is paramount. Selecting an advisor involves more than just crossing things off a list; it's also about developing a rapport, a strong relationship that can foster even in tough times.
Briefly explain your venture and what type of advisor you are looking for right at the start. Mention why you believe they are appropriate for the position and describe specifically how you feel they will be of use. Acquaintance referral or direct contact might be useful.
Yes, it can which allows being familiar with different opinions and different amounts of knowledge. To avoid giving contradictory advice, make sure that each advisor is aware of their specific responsibilities and that there are no overlaps. Advisor coordination is essential.
Advisors that overpromise, lack relevant knowledge, have conflicting interests, demand large fees without demonstrating value, or show little interest in learning about your company should be avoided. Feel your gut if something doesn't feel right.
