Typically, people who start their own businesses have learned a trade. They may understand the operational side of running a company, but they may be unfamiliar with the business details involved. If all they know is the core business and they don’t understand all the factors that impact operations, such as financing, legal, accounting, tax and insurance liability issues, they have to rely on professional advisers for guidance.
And, they do not always have the time to become experts in those areas. Time notwithstanding, they have to protect their companies, mitigate their risks and take advantage of opportunities. The most effective way for business owners to do that is to form appropriate teams of advisers in both their start-up and strategic planning periods.
Smart Business spoke with Roger Gingerich, CPA/ABV, CVA, a principal with Skoda Minotti, about advisory teams, who should participate and how they can help.
Why should owners set up advisory teams?
In the short-term, it is so a business owner can focus on the core parts of his or her business and growth early on. Long term, it is so owners can start thinking strategically and work with people who have ‘been there, done that’ to help them through whatever challenges they might face. Advisory teams are particularly critical for business owners who want to grow a million-dollar company into a multibillion-dollar company. In either case, the advisers and owners should involve themselves in an information-sharing process that can help make sure that, as a company grows, it grows the right way.
Are there different types of teams?
There are two basic structures, the ‘blocking and tackling’ team and the strategic planning or ‘Where are we going from here?’ team. Every small business owner should create the first layer of advisory team. The ‘blockers and tacklers’ come into play when a company is formed and starts to grow. They help owners create the foundations of their companies and drive their internal workings once they are launched. Not every business will need to field a strategic planning team, however.
Who are the ‘blockers and tacklers’?
Depending on the type of company, the players might include an accountant, attorney, banker, bonding agent, financial adviser and insurance agent. These specialists handle all facets of the business of which the owner might not have in-depth knowledge. The ‘blocking and tackling’ team allows owners to concentrate on their core businesses, which is what they are really good at.
When does the strategic planning start?
The strategic planning team doesn’t enter the game unless the ‘blocking and tackling’ team is in place. Remember, the first team addresses the day-to-day or short-team goals and challenges a company faces. Once that team is in place and performing well, owners can start thinking strategically and long term. That is the point at which owners can form their boards of directors or advisers.
Who plays for the strategic planning team?
The strategic planning team is a board of advisers or directors. It is for more sophisticated businesses or companies that are looking to grow strategically. The players might include a customer, a vendor, a specific industry leader who is very familiar with the type of business, and someone who has worked with a similar-sized company and who understands all the challenges a business owner is going to encounter to evolve from a company that is just moving along to one that is planning strategically for the next four to fives years and beyond.
Who quarterbacks the advisory team?
Every team needs a quarterback. In the business environment, it is often the accountant, since a lot of the day-to-day financial operations impact insurance, banking and business transactions. Or, it can be someone internally, such as a CFO, who is working closely with team members and knows when or when not to bring them together. Regardless of who the quarterback is, someone should lead the team, and that someone should be an effective communicator. Communication is essential with an advisory team. And, the communications should not be merely between the client and individual advisers. All the advisers and the business owner have to be on the same page to prevent them from working at cross-purposes, which requires them to communicate frequently and effectively.
What are the risks of not putting these teams in place at any stage?
For one thing, business owners might run into pitfalls or land mines of which they might not be aware without having people with specific expertise to consult. Or, they might miss opportunities. For example, there might be tax law changes that can affect investments into research and development or capital improvements. If the right advisers are not on board, owners can miss tax-planning opportunities that involve tax incentives for research and development or creating jobs.
ROGER GINGERICH, CPA/ABV, CVA, is a principal with Skoda Minotti, based in Mayfield Village. Reach him at (440) 449-6800 or email@example.com.