ADVISORS - Business Tactics

Situation: You have a small but growing web business selling bicycles you and several of your friends are buying used and fixing up. You just found out that a school district in the city did a “donate your old bike” program to raise money and they are willing to sell you 500 bikes for $20,000. You know you can turn around and sell these for $40,000 with a couple weeks of re-habbing. That said, they need to know in 48 hours or they will sell them to a salvage place. Fortunately, you have been working with a local bank to put in place a line of credit for this kind of big purchase. The bank is well respected by people in the community and has been around for a while. After providing the bank with tons of information about your business and your personal situation, they are willing to give you a line of credit. You just received the loan documents.  Knowing you should, you slog through the papers - while pretty complicated, it all sounds fine to you and you grab your pen. Just before you press the tip to the paper, you think…hmmm I could have my friend Jim who used to be a banker read this just in case, but I wouldn’t want to trouble him to get this done in the time I need. You sign. You get the money, you buy the bikes, the world is good…

Two days later, while you and a team of friends are covered in grease working the new bikes, the bank calls you and says they have had a change in strategy and, pursuant to section 6.c of the loan agreement, they are accelerating payment on the $20,000. "Please come down and pay us by the end of the day...Huh?!?!?!?” Shocked, you pull out the document and on page 12 you read section 6. entitled “Other Provisions”. 6.c says “In the sole discretion of the lender, in the event that the lender feels insecure, the lender may accelerate all outstandings under the line of credit.” You scramble, and fortunately you are able to borrow $20,000 from your friends to cover it.

You might think this is an extreme example – it is not. Two years ago, I had a friend who was running a business much larger than the bike business above that, before he pressed the pen to the paper, called me. I read the loan document and that exact language was in the agreement. The bank was using the “insecure” language to give them a broad “out”. This is a very reputable bank and they weren’t trying to screw my friend, it was just their boilerplate language that was there to protect them. Fortunately, I told him to go back to the bank and have them change that section and about 5 others. They did and he got a loan that he could live with…the world was good.

Seek Advice

Regardless of your experience, energy level and commitment, the first thing any business person understands is that you need help. Until cloning technology advances sufficiently or your dream of the 36 hour day becomes real, you will not be able to do everything yourself. While obvious, this is often a difficult thing for driven entrepreneurs and CEOs of established companies to come to grips with. It might be the “I can do it” DNA that has made them successful, the belief that a leader has to have all the answers, they don’t want to bother their business acquaintances, or they are wary of people that get paid as consultants.  That said, a truly effective leader knows that he/she doesn’t have all the answers and they strive to surround themselves with a strong engaged team (that might be smarter than the leader in many subjects) and a broad network of willing advisors.

The most obvious areas where advisors play a significant role are Legal, Finance / Banking / Raising Money, Accounting, HR, Insurance, Web, etc. Also make sure you seek input on other core topics like Strategy, Branding, Operations, Sales, Marketing, etc. Seek out experts in all these areas. Tell your story to as many people as you can, always listen and consider how what they say might improve what you are doing.

There are endless vendors that look to get paid to provide you with services, advisory or otherwise. That said, in many of these cases you should be able to get a significant amount of free advice or work if you actively seek advice from your network of friends and business acquaintances. They might not be able to provide you the advice, but they probably can point you to someone who can. When you do have to pay for advice, you will likely be buying it from a vendor / advisor that is connected to your network and cares about building a relationship with you, not just selling you a service.

I want to spend a minute on this last point. Virtually all service providers / advisors will insist that they care most about “building a relationship”. I can’t tell you how many times I have heard this. Unfortunately in the vast majority of cases, “building a relationship” in their minds means they want to get to know your business so as not to sell you just one product, but to sell you every product they have. Getting to know you and building a relationship in this sense is highly one-way.

In evaluating advisors and vendors, look for that vendor that truly helps you build the business. They are out there. For example, I have worked with an accounting firm that, before they were even hired to do accounting work, provided highly valuable advice on systems, financials, tax issues, compensation challenges, personal financial topics and connected me with several parties that helped me raise money and grow revenues. All for free.

One interesting facet of this relationship is that my main contact person there is a tax guy, probably an area one considers very narrow relative to vendor advice. What makes this person so unique, and consequently my view of the firm so different, is that he is able to call on all parts of his organization to help - for free. He is able to “make the corporate elephant dance”. This reflects incredibly well on the firm. They are going the extra mile and truly building a long term relationship that is two-way. This firm is a trusted advisor and one with whom I will do business the rest of my career.

Thoughts on getting the best advice.

- Mine your network of friends and business acquaintances for advice or connections to experts.

- Go to all those boring business networking events and get to know the respected firms / people.

- When you meet someone with an expertise, tell them what you are doing and gain insight – they may offer to help.

- In evaluating an advisor, trust your gut as much as looking at their pedigree, firm or client list.

- Ask yourself if they will truly build a long term relationship, or will they be a “drive-by” vendor.

- Are they getting to know your business to sell you more stuff or so they can best leverage their network to help you (make their elephant dance).

- Do they help you in “non-billable” aspects of your business: Provide free services, introduce you to people that help build your network or business, refer business your way, etc.

- If you are bidding out work, make sure you have several strong firms competing against each other so that in addition to getting the best service, you are getting the best price.

- With any vendor, make sure you speak with many of their past clients and compare what you hear.

- Seek more than one opinion.  The video link below is an obvious example of that.

If you consider the above points, you will likely find people that are willing to give you very sage advice, in many cases for free. In order to get the sufficient expertise or depth of advice you may need to compensate some people for their input.  If you sufficiently canvas the people you know or know in the industry, you will likely be getting the best advice when you have to pay for it.

-Bob

Click here to see a pretty well known (though not necessarily respected) advisor get something very wrong

...and just to prove the above photo was not a fake.