David Molian is a Visiting Fellow at Cranfield School of Management, here he takes a second look at the thorny issue of reviewing business advisers.
In the last feature we raised the question whether the advisers you use today are the ones who will help you on the road to the business you aspire to create, and the reasons why you might seek to change.
A while ago we asked former participants of Cranfield’s Business Growth Programme about their advisers. Who did they consider to be their advisers and who did they trust? Their responses listed accountants, law firms and their bank managers as the advisers most commonly used, and in terms of “most trusted” that was the order in which they ranked them. They spoke more frequently to their accountants and shared with them more information about their plans for the future. They used lawyers ad hoc as the need arose – usually a “grudge purchase” – and, on the whole, were less than happy with their banking relationships. No surprises there, you might think.
In this column we’ll look then at that key relationship between a growing firm and its accountants. If you’re thinking of making a change, what are the prime considerations to bear in mind? First, you need to identify the main differences between today’s business and the business you envisage becoming in, say, five years [the timescale varies according to your planning horizon]. If today you serve a local market, will you go national? If you are already a national firm, will you trade internationally and, if so, which are likely to be your primary markets? Do you plan to diversify into new product or service areas, or even into markets unrelated to our current activities? Will the mix of talents and skills in your business alter in response to the changes you foresee in your customer base? No doubt there are other dimensions of change you can add to the list.
This exercise defines the kind of support you will need and the profile of potential providers. Experience suggests that a developing entrepreneurial business is best suited to the “Goldilocks” solution. If you jump immediately to a major accountancy firm you run the risk of being too small to get proper attention and paying for services you don’t really require. At the other extreme, exchanging one supplier that doesn’t have the resources you know you will need for another just like it makes no sense: you don’t want to go through more upheaval a couple of years down the line. The Goldilocks solution is to find one that’s so to speak neither too hot nor too cold – typically a middle-sized firm that deals every day with businesses like yours. They should have a presence in your nearest centre of population and at least one partner who has experience in your sector. It’s also vital that you get on with him or her, and the key members of their team. You probably don’t want a new best friend, but there’s nothing worse than dreading a meeting because you can’t stand the people you’ve chosen to work with.
Despite believing that it’s the right thing to do, business founders are sometimes reluctant to take this decision because of existing loyalties and personal relationships. This does not, however, need to be an all or nothing switch. It could make perfect sense to retain your existing supplier of routine accounting services such as payroll management or monthly trial balance, while a new provider advises you on the big strategic issues such as funding expansion or preparing the business for sale or acquisition.
In the next column, we’ll examine the process of finding and selecting the right partner if you decide to make this kind of transition.
David Molian is a Visiting Fellow at Cranfield School of Management and former Director of Cranfield’s renowned Business Growth Programme