Who do you trust? More specifically, aks David Molian a Visiting Fellow at Cranfield School of Management, in the context of running your business, who do you trust to give you well-informed professional advice?
In the early days, most business founders use professional advisers as sparingly as possible. Partly this is down to cost, as start-ups are usually founded on a shoe-string budget, but mostly because there is a limited requirement to use such services. An accountant may help you set up the trading entity and advise you on your VAT returns, and a law firm create a Shareholders’ Agreement. If your business is based on IP, you almost certainly need to consult a patent attorney/trade mark agent. But most of a founder’s energy is directed to getting the business up and running and acquiring customers. Contact with advisers is intermittent and only as needed.
In my experience, entrepreneurs generally find their business advisers through recommendation and referral via their personal networks. More often than not, these are locally-based, small firms or one-man or woman bands who’ve set up as freelancers. They’re conveniently located, keen for the business, and price their services accordingly. For the start-up and early-stage phases of the majority of businesses, they’re ideal.
If you’re ambitious to grow, the question you have to ask yourself is whether they’re the right people to accompany you on the continuing journey. Businesses entering the Business Growth Programme at Cranfield typically started the course with a clutch of advisers who fitted the description above. Many left with a growth plan that included a change of advisers, appropriate to the organisations they aspired to become, not the businesses as they currently stood. This change of mentality largely resulted from hearing the stories of guest speakers, past participants who had gone on to grow significant and successful enterprises. I hasten to add that Cranfield received no referral fees in this regard!
Why, you might ask. There were several reasons.
First, participants were on the whole realists who understood the general principle of horses for courses. The small firm round the corner would be proficient in preparing the quarterly VAT returns or doing the annual audit of a small and relatively uncomplicated business. This was their bread and butter work and they thoroughly understood it. What they wouldn’t necessarily understand, for instance, was how to raise expansion capital or the range of options available for raising such capital, or how to structure an acquisition deal. If participants’ businesses were going to grow, such expertise would be needed.
The second reason follows from the first. If a firm wants to play in the next league up, it needs advisers who understand what it takes to play in the next league up. When Cobra Beer reached the point where the brand needed to raise its profile through advertising, Karan Bilimoria engaged a division of Saatchi and Saatchi to devise its campaigns. He could have bought promotional services more cheaply – but it would have shown in the finished product. Beer companies have a long tradition of producing slickly professional ads. Looking like the poor relation would have done nothing for a business seeking to punch above its weight.
Third, it’s not just what you know, it’s also who you know. If you swim in a small pond, you encounter small fish. The larger the pond, the bigger the fish. To achieve their ambitions, entrepreneurs have to build their network and advisers with clout can be mightily helpful in making introductions and folding newcomers into their magic circles.
In the features that follow we’ll be looking at the process of choosing and using advisers who can propel your business to the next level.
David Molian is a Visiting Fellow at Cranfield School of Management and former Director of Cranfield’s renowned Business Growth Programme