Should start-ups pay for Mentoring or Advisory services?

This has been a much debated point in various forums and is a question that plagues start-ups all over the world. Having taken part in numerous such discussions and understood different points of view, I felt that this would be a topic that would interest first-time entrepreneurs in India.

So, should a start-up pay for mentoring services?

In most cases, a mentor is someone who has successfully set-up, run and exited businesses, probably several times, and is now looking to give back to society by sharing his/her experiences with others wanting to do the same. Monetary considerations do not play a big role in such engagements. Some equity stake at some stage may be considered. Therefore, the common refrain is that a mentor should not charge for his services, as the concept of mentoring is to work with and evolve people, be it the CEO/Founder or some of his key people. A mentor works with people to help them understand their environment, evaluate options, identify with issues that affect them professionally and personally and generally act as a sounding board to help the person/s become more effective in, both, their professional and personal life. That is the basic concept of mentoring. It is more person-specific and for the mentor this is an opportunity to share his/her life experiences, successes and failures, and give back to society to help others become more successful.

Ofcourse, in the course of the mentoring he/she could share business ideas and experiences that could have an impact on the business itself. But the primary purpose is to help the individual get more effective and aware. If the start-up gets to be a success, then at that time the CEO/Founder may think of sharing some of that success with the mentor, if it is felt that the mentor played a significant role in the success story.

This is quite clear and I have heard enough people from across the globe expressing similar sentiments. Then why the debate? Why is the mentor still looking for remuneration for his/her services?

The problem lies with confusing the term ‘mentor’.

The young enterprise is looking for someone to help overcome its inexperience in running a business and putting in place business strategies that will help take the company to the next level and achieve short and long term business objectives. This is the primary objective of the start-up.

But unfortunately we do not have so many success stories to mentor the entire start-up community. Plus, even the one’s looking to mentor start-ups, can handle only that many and no more. So the wannabe ‘mentors’ looking to offer exactly the services that the start-up is looking for are actually Business Advisers. Not mentors. A business adviser in most cases does not come from an entrepreneurial background, but brings years of experience, skills and knowledge to help the business achieve its short and long term business objectives.

Now the million dollar question. Who should a start-up engage with – a mentor or business adviser? In the absence of so many mentors, the start-ups have no choice but to work with Business Advisors, who call themselves mentors, which is a very good thing as most first-time entrepreneurs are looking for the business experience that they lack, since most of them do not come from a commercial or marketing background. Since most are technology start-ups, in most cases the CEO or Founders are from a technology background lacking the background for running a business.

Working with an advisor is extremely critical for a start-up as they will help to significantly improve the chances of success and reduce wastage of time, effort and money by bringing their experience to the table and helping to anticipate all the typical mistakes that start-ups make and provide that objective external view point. Therefore earlier the better. Preferably at the ideation stage itself. Most start-ups have to pivot at some stage because they did not try to establish that product-market fit at the ideation stage itself. They did not ask themselves those critical and mostly uncomfortable questions, probably because it did not occur to them or it could have meant going back to the drawing board. An advisor could be of great help here.

So, should a business adviser be paid for his/her services?

Ofcourse, Yes. Such services have to be paid for because the adviser has invested years gaining that experience and this experience and knowledge has significant value. They are offering their service to monetize that experience and knowledge and is also probably a source of living. This cannot be expected to be offered for free. Ofcourse, there could be multiple engagement models that they could discuss and agree upon, which could also include retainer only, equity only or a mix of retainer and equity. That is left to the comfort level of both parties. Most important, the entrepreneur needs to consider this as an investment and not an expense, as this engagement is expected to have long term impact on the business.

Continuing to look for a mentor, just to avoid such investments, could mean losing precious time and money. Start work with an adviser at the earliest. Every start-up CEO is running around just to generate revenues, atleast enough to pay the bills. The sooner this happens the better it is and one way is to engage with someone who can give you those critical inputs that could pave the way.

As Peter Drucker rightly said, ‘The purpose of business is to acquire new customers’. It is one thing to have a great idea, but an entirely different ball game to get a paying customer for that idea. Getting a paying customer, for a start-up, is easier said than done. This is the challenge for most start-ups and that is why they need Advisers more than they need Mentors. This is my considered opinion.

The author, Srikanth Vasuraj, is a Business Consultant focused on helping start-ups to grow. He can be reached at +91-98454 78585 or srikanth@nodiva.co.in . Please visit www.nodiva.co.in for more information.