Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
As an Upsize reader, you will see yourself and your business represented somewhere on the spectrum below.
Having spent some time advising businesses at all these levels, and a couple of decades watching firsthand how entrepreneur-driven businesses use advisers, consider the following observations.
Generally, in the early stages of business development, founders take information from anyone in their network. This seems particularly true for first-time entrepreneurs with minimal management experience or education. Not that Uncle Joe’s comments over Thanksgiving dinner don’t have merit, or that reading a few blog posts and Guy Kawasaki’s “Art of the Start” won’t be helpful, but these inputs barely meet table stakes.
Thoughtful entrepreneurs know one individual won’t have all the answers necessary to drive a successful business. Early on, your team likely includes more worker bees than strategic managers. That’s the time to cultivate new connections. Here are some options:
Consider joining a group that facilitates personal engagement with other CEOs. This delivers twofold rewards: it offers a forum for discussions about how to run your business, but also builds perspective and a network for discussing future opportunities.
You may find this kind of network enhancement through groups like the American Marketing Association, National Association of Women Business Owners, or various chambers of commerce. Consider what you’re looking for because the dynamics differ greatly.
Most start-ups rely on a good accounting firm, but not all take the time to find a firm with a track record and active stable of entrepreneur-run businesses. Sure, any CPA can help manage a balance sheet and file your taxes, but a little research to find a firm that understands the nuances of growing a business helps.
Similarly, your personal lawyer or sister-in-law may be completely competent attorneys, but only a few phone calls to your network should unveil several firms attuned to business. Further, the extra effort to find a firm aligned with your industry or the specific needs of your business will save time, money and headaches in the long run (i.e. – you may not need a patent attorney now, but will you in the future?).
Business consultants are another often overlooked resource. Certainly, spending money on advice feels extravagant when you’re bootstrapping, but if you get good recommendations from your network, the value of the right consultant should exceed the cost over time.
Marketing communication agencies or operations management specialists are additional “business advisers” that can deliver long-term returns on your investment. Again, do your homework and look for firms that appropriately challenge you, but follow through as directed.
Eventually, your business must evolve beyond random acts of advising. Often this takes the form of the CEO asking a few of the aforementioned informal advisers to formalize the relationship.
Often the leader continues to access these formal advisers as-needed, specific to their expertise. Over time, some may advise together on a particular issue. A business owner may start letting some designated advisers see more of what goes on behind the curtain. Don’t hesitate to ask for a non-disclosure agreement at this stage. It protects both your business and the adviser, and anyone who refuses most likely isn’t a fit.
The ad hoc approach may seem efficient and cost effective, but eventually the time comes to cross-pollinate the advice. This means: establishing some regular meetings; fully disclosing your business financials; expecting presentations from key leaders (including you) — just like a true board of directors.
According to Kathleen M. Pytleski, CEO of the strategic planning consultancy Sekstant:
“When I help a firm build an advisory board, I start with understanding what it is they wish to accomplish… What are the desired outcomes? We then outline the roles and responsibilities for the board, determining desired skills, knowledge, experience and interpersonal skills to have a well-rounded board. From that we create the mandate, focus, size, meeting frequency, terms and compensation. After that, we can begin to source proper candidates.”
With an advisory board, the CEO can take or leave the consensus of advice after the meeting. The key evolutionary change – the individual experts discuss and brainstorm your business challenges and successes in real-time, uncovering opportunities and pitfalls the siloed advisers can never fully reveal.
The final evolution likely stirs the most internal conflict in entrepreneurs, particularly business founders. Your emotional connection to the business generally helps drive success, but it may also create blinders to hard decisions. If the advisory board unanimously urges you to make changes that in a public firm would be obvious, yet you hesitate because of some internal conflict, the success of your business may require formalizing the board. This forces you to act as that group mandates regarding such issues.
Pytleski suggests:
“A Board of Directors has fiduciary and legal responsibilities to the shareholders of a company … the ‘duty of care’ and the ‘duty of loyalty.’ As a company becomes larger and more complex, a Board of Directors provides additional oversight for the shareholders. This is especially important if there is a large, diverse group of shareholders and/or shareholders who are not part of the company’s management.”
She also advocates that the CEO keep in mind that working with a true board of directors:
A final consideration: both a board of advisers and a board of directors can help firm up business operations. However, in preparation for transitioning a company’s leadership from one generation to the next, or more critically, in seeking a merger or acquisition, the more formal director format provides documented management oversight, which increases the confidence of a suitor that the transfer of management can be handled professionally.
