Chapter 15
Learning from the Experiences of Others
In This Chapter
Connecting with mentors and peers who can help
Assembling a board of advisors
Finding a partner
Tapping into trade associations and business incubators
Surveying other business resource options
What do you think the number one cause of small-business failure is? Do you think it’s lack of capital? How about poor location? Maybe inadequate marketing or distribution?
Answer: none of the above. Rather, the answer is isolation, as in the small-business owner’s isolation.
A lack of capital, a poor location, and inadequate marketing and distribution aren’t causes of small-business failure; they’re just symptoms — symptoms of the dreaded disease Owner’s Isolation Syndrome. The symptoms of this syndrome affect every small-business owner at one time or another, but if you commit yourself to preventing the disease, you can avoid many of the symptoms.
In light of our status as charter members of the Never-Bring-Up-a-Problem-without-an-Accompanying-Solution Club, we use this chapter to present a collection of options that will help you do away with the trial-and-error method of small-business management and learn from the experiences of others.
Utilize Mentors
We know two things for sure:
If we had our small-business careers to live over again, the first thing we’d do is find more mentors.
Somewhere within your reach, you can find a veteran small-business owner who will agree to be your mentor if you approach him or her correctly.
Effective mentors are basically consultants — who usually work for free. What they have to offer is the ability to draw upon their extensive experience, one of the best teachers of all. You can go to a mentor to deal with strategic issues — you know, the long-term, fundamental, and always-critical issues, like strategy, vision, and finances. (Note that most mentors prefer to focus primarily on your strategic concerns, as opposed to your operational issues.)
So get the help of a mentor. Sounds simple, right? Unfortunately, most small-business owners don’t know how to find those veterans who will agree to become mentors, nor do they know how to cultivate good mentor-mentee relationships after they do find them.
Finding your mentor
Here’s our three-step Mentor Search Plan:
1. Compile a list of prospective mentors.
Ask your banker, your accountant, your lawyer, and folks around town who are wired into the small-business community (people at the Chamber of Commerce, Service Corps of Retired Executives, and Small Business Development Centers) for the names of veteran small-business owners who may be interested in helping you succeed.
2. Contact the person that your research and intuition indicate may be the best mentor for you.
The best mentor is typically someone who has current or previous experience within your chosen industry, although this isn’t a prerequisite. (General business experience/knowledge, however, is a prerequisite.) Oftentimes, a good mentor is retired and, thus, may be motivated to help others as a way to stay involved in business.
The best way to approach a prospective mentor is to write him or her a letter introducing yourself, your business, and the reason for your interest. Follow up the letter with a phone call. Don’t use e-mail for the initial contact; it’s too informal and doesn’t convey how important the mentorship is to you.
3. Persuade your prospective mentor to sign on.
Proceed as follows:
• “Mr. (or Ms.) Veteran, my name is Wanda Wannabe. Mr. Legal Beagle, a mutual friend of ours, suggested I call you.”
• “Mr. (or Ms.) Veteran, I’m not looking for your money, but I am looking for your advice. Would you agree to spare a small amount of time each month to meet with me if I promise not to waste one nanosecond of it, if I provide you with a complete agenda in advance of every meeting, if I follow up on the suggestions you make, and if you can name the place and time of our meetings?”
• “Mr. (or Ms.) Veteran,” you conclude, with just a touch of a plea in your voice, “As you have probably surmised, I am looking for a mentor. Would you consider being that person?”
Don’t rush into the relationship; have a lunch or a dinner together first. (You buy, of course!) Remember, this is a relationship you’re seeking here; you want to make sure that you and your mentor will be compatible.
Building the mentor-mentee relationship
After you’ve found a mentor who matches your needs and requirements and is willing to work with you, work at fostering your relationship. Here are several tips that will help you retain your mentor and make the most of the relationship:
Understand that mentoring is a personal experience, not a business one. If the chemistry is right, the relationship will work well. If the chemistry doesn’t work, the relationship won’t work either.
Follow up. Drop your mentor a note after your meetings. Or the next time the two of you talk, let your mentor know how implementing her advice turned out and how much you appreciate the help.
Be honest with your mentor about the problems and issues you face. No sugarcoating allowed. Your mentor will see through the fluff anyway, and he won’t hang around for long if he thinks you aren’t being completely truthful with him.
Leave your thin skin at home. Good mentors speak their minds and aren’t shy about shooting down poor ideas.
Don’t blindly follow all of your mentor’s advice. Your mentor may have different priorities, ethics, and needs than you do. So, in the end, follow your heart as well as your head in making decisions based on your mentor’s input.
Network with Peers
Nobody knows the business of small business better than a retired veteran (see the preceding section), but finishing a close second in the antidote-to-lonely-decision-making competition is the current small-business owner — a peer who is facing the same day-to-day issues that you face.
Imagine the power of putting a dozen or so current small-business owners in the same room. Imagine the wealth of solutions that may appear when one of the members presents a nagging problem or a thorny issue and asks for help. Do you have a problem with an employee who can’t seem to get to work on time? Surely, another business owner has had the same problem before; don’t be afraid to discover from your peers what has worked for them. (See Chapter 16 for our two cents on the employee issue.)
Peer networking works because, as we say throughout this book, a small business’s problems are generic — that is, they’re usually not unique to your industry or niche. Thus, the solutions are often generic, too.
Second only to a good mentor, peer networking is the best of the small-business owner’s learning devices — if you can locate the right networking resource. (Sorry, we’re not talking Rotary Clubs or Chambers of Commerce here, although these are steps in the right direction.)
Some cities already have for-profit or nonprofit peer-networking programs up and running, and they’re spreading the word of the value of the concept. You can ask at your local Chamber of Commerce or your city’s or state’s small-business magazine or newspaper to find out what and where these programs are in your area. Here are just a few of the peer-networking organizations that you may find helpful:
Vistage International, Inc. (formerly The Executive Committee): www.vistage.com
American Business Women’s Association: www.abwa.org
The Alternative Board (TAB): www.thealternativeboard.com
President’s Resource Organization (PRO): www.propres.com
Opportunity Knocks (OK): www.opp-knocks.org (founded by co-author Jim)
One or more of these organizations (or another with a similar agenda) may surface in your city if one hasn’t set up shop already. Keep your eyes peeled.
Form a Board of Advisors
Boards of advisors are like breath mints: Almost everybody could benefit from one, but too few people partake.
Similar to a mentor, a board of advisors provides you with an affordable, outside perspective. Boards replace trial and error with experience and knowledge. They act as sounding boards, rebound boards, and boards of inquiry. They open needed doors and close unnecessary ones, while giving you an inside look at the outside business world.
Incidentally, we’re not talking about a board of directors here; we’re talking about a board of advisors. Directors are responsible for directing the company; advisors are responsible only for advising the president or Chief Executive Officer (CEO) — that’s you!
Reaping the benefits of a board
The primary benefits of having your own board of advisors include the following:
Credibility: Having a board is an indicator that your business is serious about its direction. Also, board members with solid reputations can bring additional credibility to your organization.
Lead generation: Your board can play an integral role in networking sales leads.
Connections: Your board will open a variety of doors that you can’t open by yourself.
Advice: You can diversify the skills of your board and then look to your board members for advice in their specialties.
In fact, there aren’t many valid reasons not to have a board of advisors. Yes, a board does take time to organize and coordinate, but that time will be repaid many times over if your board is a good one. A board is also inexpensive; most board members will gladly donate an hour or two of their time every three months or so for the price of a lunch.
Of course, you can reap these benefits only if your board meetings are well organized, if the board members feel that you’re not wasting their time, and if they feel that you’re heeding their advice.
Forming your advisory board
Most small-business advisory boards consist of three or five members, excluding the owner. (If you’re a home-office business or a truly small, small business, you may select the three-board-member size.) Here are some tips on how to assemble, utilize, and treat your board of advisors:
Select advisors from outside your company. No board of employees here, all nodding their heads in unison. You want knowledge and perspectives that don’t already exist in the company.
Balance your skills with the skills of the board members. If your strengths are sales and marketing, make sure that you cover the finance and operational bases through your other advisory board members. Could you use a banker on the board? A lawyer? An accountant?
Include a customer as a board member. No viewpoint can equal the viewpoint of a customer — especially one who knows your industry, pays his bills on time, and considers vendors to be partners. Never go to a board meeting without that viewpoint.
Round out your board with someone from your industry. After you’ve selected the banker, lawyer, accountant, and/or customer, and you still have a slot or two left over, feel free to include someone from your industry — someone with potential mentoring skills and/or someone with financing contacts that may eventually aid your growing business.
Schedule meetings regularly and well in advance. Give at least one month’s notice, maybe more. Quarterly meetings usually are the best; anything more frequent is asking too much from your board members.
Limit the meetings to two hours. Keep them meaty and keep the advisors interested.
Avoid surprises. Send out an agenda in advance of the meeting and then stick with it unless an emergency prompts some last-minute changes. Board members, like bankers, don’t like surprises.
Focus on strategic and overview issues. Board meetings take up valuable time, so make sure your board members spend each meeting resolving issues that have long-term impact.
• Strategic issues are issues of business direction and positioning; they include such subjects as distribution systems, marketing plans, and sales initiatives.
• Operational issues include specific problems such as administrative snafus, shipping and receiving roadblocks, and invoicing issues.
Typically, businesses don’t discuss operational issues in the course of board meetings. If you have an operation-related problem and a board member with the skills to help resolve it, approach him during non-board-meeting hours.
What about the most important issue of them all — cash flow? Although a shortage of cash really is an operational problem, it always results from a strategic problem — not enough sales, inadequate margins, or out-of-control expenses, for example. So your board should definitely deal with cash flow issues during board meetings.
Be truthful. Lose your credibility, and you’ll lose your advisors. Be candid — no sugarcoating or truth bending allowed.
Follow up on suggestions. Follow up on all your board’s recommendations, not just those that you consider to be valid. You don’t have to implement every recommendation; you should, however, have the courtesy to respond to all seriously considered recommendations and ideas.
Pay the board. If you can afford to do so, pay board members anywhere from $50 per meeting on up. If you’re a start-up and money is tight, at least buy your board members lunch until you can afford to compensate them.
After your advisors get comfortable with you and your business, you can ask to use their credibility and contacts to help you gain new customers, new vendors, and new sources of financing.
Get a Partner
Here’s a fact that not everyone knows: Partnerships outperform sole proprietorships by a wide margin. This statement is nothing more than simple math at work: One plus one equals at least two. Sometimes, one plus one equals significantly more than two if the partners can blend their skills and talents. (Google, Apple, and Hewlett-Packard are examples of companies that began as partnerships.)
So why might a partnership make sense for you? Here are just a few reasons:
Complementary skills: Although you’re probably aware of your own strengths, you may overlook your weaknesses. Ask those who know you well — family, friends, and current or previous coworkers — what complementary skills you should seek in a business partner.
Additional capital: Two savings accounts are better than one.
Greater problem-solving capacity: Two heads are (usually) better than one.
More flexibility: One partner goes on vacation or gets sick; the other one minds the business.
Ease of formation: Partnerships are easier and less expensive to form than corporations (but not as easy or inexpensive as sole proprietorships; see Chapter 5).
Less risk: Profits aren’t the only thing partnerships share. They share problems and losses, too.
For sure, you may have plenty of reasons not to want to take a partner (or multiple partners) into your business. Everyone knows juicy horror stories about business partnerships that turned sour and even ended up in court, destroying the business in the process (assuming anything was left to destroy). After all, warring partners seldom go down alone.
The success ratio of partnerships is highest when the two partners have complementary skills. You’re a salesnik? Find an operations type for a partner. Your skills are in product development? Find someone who has experience in getting the product to the marketplace and subsequently sold. You’re a mover and a shaker? Find someone who can count the beans that you’ll be moving and shaking.
How do you find a partner (or partners)? The same way you locate a key employee, a consultant, or a mentor (see the first section of this chapter): Identify what it is that you need (in this case, the skills you’re looking for) and then network your available resources. (Go to Chapter 16 for the skinny on finding superstar employees.)
When forming a partnership, you’re beginning what you hope will be a long-term relationship — a long-term relationship that often rivals a marriage in terms of complexity. If you’re smart, you’ll determine a way to test the chemistry of the partnership before you get so far involved that you can’t get out. Otherwise, you may learn the same lesson that too many marriages teach — a lifetime can be a long time. (See the nearby sidebar for more on testing your partnership chemistry.)
The number one rule of a partnership is this: Don’t enter into one without first consulting an experienced small-business lawyer. Have the attorney advise you and your prospective partner about the many obstacles that lie in the path of a successful partnership. Then ask the lawyer to assist you in drawing up an ironclad, airtight, cast-in-stone, buy-sell Partnership Agreement to overcome those obstacles — a Partnership Agreement, by the way, that will be tested many times throughout the life of your business. (For more on partnerships and Partnership Agreements, see Chapter 5. For more on legal issues, head to Chapter 18.)
Join a Trade Association
Thousands of trade associations exist in the United States, and we wholeheartedly recommend that you join one. No matter who you are or what industry you’re in, a trade association is probably available for you. The best trade associations offer a wide range of potential benefits — everything from business contacts to skill-building workshops to industry-specific information to group insurance programs. In addition, most trade associations host industry-wide trade shows at least once a year, during which you can mingle with suppliers and peers.
The two kinds of trade associations are industry-specific trade associations and small-business-specific trade associations. The following list breaks down these options:
Industry-specific trade associations: Consult your local library to find the trade association or organization that caters to your industry. Flip through the National Trade and Professional Associations of the United States (Columbia Books), which lists more than 7,500 associations in the United States today. Your local library should have a copy of this $269 annual publication. Or you can search the web by opening a search engine and keying in the name of the specific industry you’re in, followed by the word association — as in sporting-goods association.
Small-business-specific trade associations: These trade associations include the following:
• National Small Business Association (NSBA): This association watches congressional actions and reports on issues affecting small businesses. Visit the NSBA website at www.nsba.biz or call 202-293-8830 for details.
• National Association for the Self-Employed (NASE): NASE offers resource materials and a monthly magazine. Visit its website at www.nase.org or call 800-232-NASE for details.
• National Association of Women Business Owners (NAWBO): This association brings together women entrepreneurs for support and assistance. Surf its website at www.nawbo.org or call 800-55-NAWBO for more information.
• National Federation of Independent Business (NFIB): The NFIB is the largest lobbying organization for small businesses in the country. Visit its website at www.nfib.com or call 800-NIFB-NOW for details.
Trade associations aren’t without their warts. First, don’t assume that products and services marketed to the association’s members are necessarily the best of what’s out there. Many associations, for example, offer insurance programs to their members — programs that the members could purchase at a lower cost elsewhere. Remember: The programs a trade association offers are only as good as the people who determine what that association will and won’t offer its members.
Don’t limit yourself to providing a product or service only in the manner that people in the trade association recommend. For example, when coauthor Eric began offering personal financial counseling services, he chose to do so exclusively on an hourly basis, even though most other financial advisors worked on commission or managed money for fees. Eric knew that their way wasn’t the only way, and the path he chose reflected his belief that a financial counselor should have no personal financial stake dependent on any of the products or services that he or she recommends. This policy worked well for him.
Find a Business Incubator
Business incubators provide new small-business owners with a friendly location to set up shop. An incubator offers its start-up customers a mixture of the following benefits:
Below-market rent
Free or discounted access to a variety of office services
Discounted administrative services
The opportunity to network with other entrepreneurs who are in the same knee-knocking, start-up boat
Because entrepreneurs are most inclined to trust the advice of their peers, what better place to receive your advice and locate your business than within an incubator?
For more information on incubators, log on to the National Business Incubation Association (NBIA) website at www.nbia.org or call the association at 740-593-4331.
Locate a Small Business Development Center
Small Business Development Centers (SBDCs) are cooperative programs designed to provide current and potential business owners with advice and information on running their businesses. SBDCs are sponsored by a partnership between the Small Business Administration (SBA), a local college or university, and often your state’s Economic Development Department. Every state has a central SBDC, and the United States has nearly 1,000 service centers, most of which are located on college or community college campuses.
As with any type of consultant, the quality of SBDC counseling varies widely from one SBDC office to another. Tread carefully and don’t bet the farm on their advice.
To locate the SBDC nearest you, visit www.sba.gov/sbdc or call 800-8- ASK-SBA.
Give SCORE a Try
The Service Corps of Retired Executives (SCORE) is affiliated with the SBA and offers one-on-one counseling through its 10,000+ experienced counselors across the country. SCORE is a wonderful concept, but its offerings sometimes fall short of its potential. The quality of SCORE’s advice varies widely and depends on the individual counselor. Similar to the SBDCs, proceed cautiously when accepting advice from SCORE volunteers.
SCORE volunteers (usually Fortune 500 graduates) will probably be most helpful to you if you’re trying to determine whether to leave your day job and make the risky leap to business ownership.
SCORE offices are easy to locate. Log on to www.score.org to find the chapter nearest you.
Tap into Small-Business Information
Magazines and books (and associated videos, audiotapes, and CDs) that focus on helping the small-business owner are everywhere. Where small business is concerned, you name it and a book has been written about it — including this one! Read your industry trade publications (which you can often find through your industry’s trade associations, a resource we discuss earlier in this chapter). Also, we suggest that you check out the Small Business Sourcebook (Gale), a huge reference that you can find in most public libraries.
On the technological front, DVDs, podcasts, and webinars are often produced and offered by larger companies that service your industry or by technology vendors that sell products within the small-business sector. Intuit and Microsoft are two examples of companies that offer a wide variety of technology-based informational offerings.
The number of websites and small-business blogs available online have grown to a near-infinite number. We suggest that you put the online medium to work to keep up to speed on new trends and offerings under the small-business category. (See Chapter 12 for our top Internet resource recommendations and check out Chapter 3 for helpful government resources, such as the Small Business Administration.)