Getting the Most Out of Your Advisors

Welcome to part two of my three-part series on working with advisors. Last week, I discussed How to Find the Best Advisors for Your Business. This week I share my top tips on utilizing their expertise to foster the growth and success of your business.

  1. Be clear about your expectations and create accountability

A new advisor may have been planning on a phone call every quarter, while you envision monthly face-to-face meetings. In the article “How to Use Advisors to Supercharge Your Business,” Eli Portnoy writes about giving up some equity in his company to his advisors and getting nothing in return. “Our advisors were fantastic and really wanted to help. The problem wasn’t them, it was me. My advisors were brought on at random, and furthermore, I failed to create structure and accountability.”

Leveraging the lessons he learned the first time around, when he brought on new advisors he made it clear what he was looking for from them. He drew up a two-year contract that stated they would meet or talk on the phone every other week and have an in-person session or dinner once a quarter. If all obligations were met, they would receive equity in his company after the two-year period.

  1. Be honest with them

To get the most out of your advisors, you have to operate in an arena of mutual trust. That means you have to share the challenges you are facing and your financial situation accurately.

This may be uncomfortable at times if things are not going so well. But perhaps especially in bad times, your advisors can prove crucial to weathering a difficult situation by first forcing you to confront the issues.

I devoted an entire chapter to facing your harsh realities in my book, “How Not to Hire a Guy Like Me: Lessons Learned From CEOs Mistakes.” Failure to do so is one of the major mistakes I have seen CEOs make, time after time.

If you share your information honestly, your advisors can be the ones forcing you to face your harsh realities before it’s too late. Maybe you are having a cash flow problem and aren’t sure how to resolve it. One of your advisors may have dealt with a similar scenario and have suggestions on the best way to deal with the situation. You can’t get the best advice without revealing the true picture of the financial situation of your company.

Your advisors may have some other great ideas to share with you even when it’s not a time of crisis. Let’s say you’re having your most successful year yet. Your advisors may have ideas on how to build on and leverage that success.

  1. Listen to their advice

While this sounds like just common sense, I can’t tell you how many people I’ve dealt with who had ended up in dire financial shape and it wasn’t because they weren’t getting good advice. They just didn’t listen to it.

I read an article in the Wall Street Journal last week, “Tuning Out: Listening Becomes a Rare Skill.” The article cited a study done in 2011 in Organizational Behavior and Human Decision Processes that found that the more powerful the listener is, the more likely he is to dismiss advice from others.

You can gather the best advisors in your industry and share details about your business. But none of that will do a darn bit of good if you don’t actually follow it. These leaders are those that John Steinbeck was speaking of when he said, “No one wants advice – only corroboration.”

Finding the right advisors and working with them in the best way possible can make a huge difference in the success of your company. Eli Portnoy, the young man who made mistakes the first time around and then instituted structure and accountability, saw a huge difference in his company. “Thinknear took off within months of creating the new advisory board and structure. My personal weaknesses as a CEO became strengths and with the help of my advisors I was able to supercharge our trajectory.”

Advisors can make a big difference in your business, but there are still professional advisors you need to hire. For part three of this series, I’ll talk about those.

How to Find the Best Advisors for Your Business

A trusted team of talented advisors can be essential to the success of any business. But how do you go about finding the right ones for your business? And after you have identified them, what is the best way to utilize their expertise?

In this three-part series I’ll share tips on how to find good advisors and after adding them to your team, the best way to leverage their skills to foster the growth and success of your business.

For the first two parts, I am focusing on hiring for an advisory board. While advisory boards can be invaluable, any successful business needs to hire professional advisors as well. In part three, I’ll discuss what professional advisors you need to hire.

  1. Don’t hire advisors from your fan club

You may have some friends and colleagues who listen to your business ideas and respond with enthusiasm, cheering your every decision. These are not the people you want advising you. You want to find people that challenge your ideas, present opposing sides of view and are not afraid to play devil’s advocate.

A good advisor will bring up issues and concerns that you may not have considered, laying the groundwork for you to deal with those issues now and travel down the right path, rather than pay for those mistakes later.

While it may feel more natural and certainly more comfortable to surround yourself with people who share your outlook, they will function more as “yes” people than advisors. You need someone to challenge your less viable ideas and present alternative viewpoints.

  1. Look outside your existing network

Seek out new networking opportunities to expand your circle and find people with successful businesses who may be able to help. Finding the time to make and foster these contacts can be particularly challenging during high-growth periods for your business, but networking can pay off in ways you can’t foresee. As author Jared Kintz said, “Unless you are a pile of cat hair, you can’t succeed in a vacuum.”

  1. Hire advisors with different areas of expertise and skill sets

Identify areas of expertise where you are less than proficient and seek out advisors with relationships and experience in those areas. Maybe you have a great product, an excellent design team and people with marketing experience, but not the necessary expertise to reach your target market. Find an advisor who has those contacts.

Having access to skill sets your business lacks is crucial. I once worked with a university that was in dire straits. One of the issues it was facing is that senior management was trying to handle areas that were outside their expertise. That does not go well.

Finding a good, functional advisory board takes some time and effort. Some business people forego it altogether, perhaps believing as Judge Arthur Goldberg did, “If Columbus had an advisory committee he would probably still be at the dock.” While that may be true of some advisory boards that seem to serve as more as hindrances than boots to progress, if you find the right team of advisors you’ll have a better chance of smooth sailing.

Family Businesses That Have Thrived and Survived

During my long career as the Turnaround Authority, I’ve worked with many family businesses. The particular challenge of working with family members as opposed to just co-workers is that they are emotionally connected to each other, which has led to some rather, well, let’s say interesting interactions. Like the time a disgruntled son pulled a kitchen knife on his mom. Fortunately, family disputes don’t generally involve weapons. But the fact is it can be difficult to keep them running. Seventy percent either fail or are sold before the second generation and just 10 percent survive to the third. That’s a lot of companies when you consider that about 35 percent of Fortune 500 companies are family controlled. And family businesses account for 50 percent of the gross domestic product of the U.S. But many family-owned companies not only survive, they thrive.

Laird & Company owns the first liquor license distributed in the United States. The company remains family run.

Laird & Company owns the first liquor license distributed in the United States. The company remains family run.

We are familiar with many of the large, well-known family businesses that include Wal-Mart (Walton family), Mars (Mars family), News Corp. (Murdoch family) and Comcast (Roberts family). Here are a few interesting family businesses you most likely haven’t heard of, one from each of the past three centuries, that are still thriving. • Laird & Company owns the #1 liquor license distributed in the United States. Alexander Laird began producing Applejack in 1698 for his friends and neighbors. One of his descendants built the Colts Neck Inn in 1717 and sold Applejack, with the first commercial sale recorded in 1780. The company even survived Prohibition by producing brandy for medicinal purposes. Seems a lot of people were feeling poorly during those 14 years. • Rogers Funeral Home in Frankfort, Kentucky, has been helping people say goodbye to dearly departed loved ones since 1802. It is now owned by Mary Anna Rogers, whose daughter Doherty Rogers Reynolds and her husband Tim operate the home. They are the seventh generation of the Rogers family to own the business. • The Butt family still operates H.E.B. Grocery with 300 stores, primarily in Texas. Florence Butt opened the first C.C. Butt Grocery Store in Kerrville in 1906 with an investment of $60. Last year the company had $20 billion in revenue and was listed as #14 on Forbes list of America’s Largest Private Companies. I’d say that investment paid off. Death, alcohol and food. Maybe it helped that these businesses deal with products and services with a constant demand. So I was curious to see what the country’s oldest family-owned restaurant is, considering the high failure rate in that industry. The National Restaurant Association reports that 30 percent of new restaurants fail in the first year, with another 30 percent closing in the next two years. The distinction of the country’s oldest family-owned restaurant goes to Antoine’s Restaurant in the French Quarter of New Orleans. In 1840, Antoine Alciatore, a native of France, made his way to Louisiana where he felt at home among the French speakers there and began serving French-Creole cuisine. His son Jules ran the restaurant after his death and invented the famous Oysters Rockefeller. While the odds may seem against family businesses, many do survive into the third generation, and beyond. Of course, a business can increase its odds by hiring trusted advisors to help them navigate difficult times. In my next two posts, I’ll discuss how to find the best advisors for your business, and then how to make the most of their participation in your business.

Tips on Handling That Unsolicited Offer

No doubt it’s flattering. You’ve worked hard building or running a business and now someone has expressed interest in buying it. You hadn’t considered selling but maybe now is a good time. But be careful how you respond. It’s easy to get caught up in the excitement and make costly mistakes. Here are a few tips on handling that unsolicited offer.

• Be careful about sharing information

If the potential buyer is really serious about buying your business, he won’t mind signing a non-disclosure agreement. Even then, be selective on any financial information you share. Your current financial statements were most likely prepared with the goal of minimizing the company’s tax liability and not to showcase its profitability. Make sure your financial statements are prepared to show maximum profitability.

You may also wish to hire an independent auditor with experience in your industry. Buyers may request independently audited records for the past two or three years.

• Hire a team to value and negotiate any potential sale

If you become serious about contemplating a sale, hire the best team you can to guide you through the process. In addition to any regular advisors you may have, you may also need a business broker, a financial planner, a lawyer, a financial advisor and an accountant.

Before you enter into any type of negotiations, you need to get an accurate, up-to-date valuation of your business. Selling a business may be the biggest financial transaction of your life. Don’t try to handle it on your own.

• Don’t be swayed by flattery

It’s intoxicating for someone to admire what you have created or have been running. Just beware of someone who heaps on too much praise — don’t be blinded by it and let your guard down, which may cause you to share too much information or value your company too low. As Adlai Stevenson said, “Flattery is all right if you don’t inhale.”

• Think about the potential future of your business

Dana Levy sold the email newsletter Daily Candy to Comcast for a reported $125 million, right before the market crashed. When ad sales didn’t materialize, Comcast began trying other avenues to raise revenue, changing her one-a-day email business model. In 2011 Comcast acquired a majority stake in NBCUniversal and shut down Daily Candy in March 2014. She and her employees immediately tried to buy it back but Comcast wasn’t interested.

“What they didn’t try was maintaining the brand integrity,” Dana said in a video interview on inc.com. “What Comcast acquired wasn’t necessarily a list. It was a brand, a brand that was adored.”

How would you feel if the acquiring entity of your business is unable or unwilling to continue your business as you envisioned it?

• Ask yourself, do you really want to sell?

It’s nice to have a potential buyer and maybe it is a good time for you to get out of the business and try something new. But this is a question only you can answer for yourself. Do you still enjoy and feel passionate about your company? Do you wish to stick around for a while and be instrumental in its future success?

Selling a business is in all respects, a big deal. Be sure to give it the consideration it, and you, deserve.

Professions of Our Founding Fathers

As we approach 4th of July, which marks the 238th anniversary of the birth of our independence, I found myself pondering the professions of our Founding Fathers, in particular those who signed the Declaration of Independence, and what they would think of the world today.

There is little doubt in my mind that as representatives from the 13 colonies sat sweating in those heavy, uncomfortable clothes in the sweltering Philadelphia heat, struggling to craft what would become the Declaration of Independence, they could never imagine the business world of the 21st century.

It’s interesting to speculate what would have shocked them the most. Would it be the acension of women to positions of power? The huge number of large global companies? The size of the United States and its population growth from 2.5 million in 1776 to more than 320 million today would certainly present a surprise.

Of course, the advances in technology alone in the past 238 years would be enough to astound every one of the delegates. I like to imagine Thomas Jefferson and Benjamin Franklin, amateur inventors themselves, adapting quickly and rushing out to buy the newest Apple products and carefully selecting their Twitter handles.

All white males, those 56 delegates who gathered in 1776 to craft a document to tell Great Britain to take a hike and form a new country ranged in age from 26 (Edward Rutledge from South Carolina) to 70 (Benjamin Franklin from Pennsylvania.)

There were several lawyers, which was the most popular career at the time. Others were farmers, merchants, businessmen, writers and physicians. Some attended seminary, with a few ministers among them, while many were serving in public office.

Most were well-educated, although Benjamin Franklin had no formal education past the age of 10 and like several others, was self-taught. While many were from wealthy families, several of them lost their fortune during the Revolutionary War. Benjamin Rush from Pennsylvania was a professor and physician who published the first American textbook on chemistry.

A few didn’t fare so well as businessmen. Samuel Adams from Massachusetts was an unsuccessful brewer, who would be mighty surprised at the success of a beer named after him. Two signers, John Adams and Thomas Jefferson, later became president.

There’s no way of knowing what the Founding Fathers would be most blown away about the state of American business today. But one thing I believe would make them all smile. They each had a hand in creating the United States, which has the world’s largest national economy with a GDP of approximately $16.1 trillion. Now that’s something to celebrate.

Happy 4th of July!

 

 

 

Lessons From the Marshmallow Challenge

In 1988 Robert Fulghum wrote the #1 New York Times best-selling “All I Really Need to Know I Learned in Kindergarten.” It contained such gems as “Play fair.” “Put things back where you found them.” “Clean up your own mess.” “Live a balanced life.”

The simple reminders of the book seemed to resonate with many people across the world. That book, plus his seven other non-fiction books, have sold more than 17 million copies in 103 countries.

I was reminded of that book recently when I watched a fascinating TED Talk by Peter Skillman, formerly the VP of Design at Palm. He talked about an experiment he conducts with marshmallows and spaghetti and the surprising results he learned from one group.

The Marshmallow Design Challenge is conducted with teams of four that each has 18 minutes to create the tallest freestanding structure possible with 20 pieces of spaghetti, a meter of tape, one piece of string and one marshmallow.

photo (4)He had been conducting the experiment for years with groups that included engineering students from top U.S. schools, telecom engineers from Taiwan, business school students and lawyers when he learned something that shocked him.

While architects and engineers consistently built the tallest, most stable structures, he found that kindergartners, on every objective measure, scored higher than every other group of adults.

The lowest performing? Business school students. Many of them got zeros on the experiment. Lawyers didn’t fare much better.

So the question is why did five years olds perform so much better and what can we learn from that? Peter found two key factors that differentiated the kindergarten teams.

• They don’t waste time seeking power. “Kindergarteners do not spend 15 minutes in a bunch of status transactions trying to figure out who is going to be CEO of Spaghetti Corporation. They just start building,” he said. “This gives them a better and immediate understanding of the structural properties of spaghetti.”

• They don’t sit around talking about the problem. They just start building to determine what works and what doesn’t. If something doesn’t work, they discard it and try another method, employing what Silicon Valley refers to as “Fail fast, fail often.”

Here are a few more lessons Peter says he has learned from conducting this experiment with almost 1,000 people.

  • Building develops your intuitions about how process and materials are connected.
  • You learn by doing, discovering problems you can’t predict in advance.
  • Simultaneous iteration allows you to see a lot of good ideas.
  • Being first to market isn’t always the best.
  • Multiple iterations usually beat a commitment to making your first idea work.
  • All projects have resource constraints; however, you can often get additional resources. But you’ll never get them if you don’t ask.
  • Exercises like this illustrate the value of deadlines.
  • Encourage wild ideas: What if I tied the structure to the ceiling?

Many corporations have used the Marshmallow Design Challenge with their teams, which takes less than an hour and costs just a few dollars to conduct.

Tom Wujec, a Fellow at Autodesk, is a big believer in it, and gave his own TED Talk on it. “I believe the marshmallow challenge is among the fastest and most powerful technique for improving a team’s capacity to generate fresh ideas, build rapport and incorporate prototyping, all of which lie at the heart of effective innovation.”

If you’d like to conduct your own Marshmallow Design Challenge, you can find the rules here. Chances are you’ll have fun and learn something to improve your business. And you can always make S’Mores after you’re done.

Joining the Team at GlassRatner

I’ve been chuckling to myself about the rumors of my retirement that I discussed in a previous column, “No Desire to Retire.” I wanted to let you know that I’m embarking on an exciting new opportunity.

I’ll be joining the well-respected team at GlassRatner Advisory and Capital Group LLC as a principal effective July 1. GlassRatner is a nationally known financial advisory services firm. I was attracted to the integrity of the GlassRatner team members, its national platform and reputation, and the work the firm has done in providing solutions to complex business problems.

They seem to be excited to work with me, too. And they love “How Not to Hire a Guy Like Me,”which of course, is an effective way to win my loyalty.

It’s funny; this opportunity just presented itself a few weeks ago and we’re off to the races already. In my work as a turnaround authority, I’ve learned to recognize good opportunities for growth and success when I see them. I am excited and honored to be joining GlassRatner and believe we will both benefit from the partnership.

Another aspect of GlassRatner I found attractive is its reputation as a collegial firm and the way they function as a team. Look for some of those team members to be guest contributors to my blog. I’m sure you’ll enjoy getting to know them as much as I will.