Board (or Bored) Meetings

“Hedley Lamarr: ‘Meeting adjourned. Oh, I am sorry, sir, I didn’t mean to overstep my bounds. You say that.’
Governor Lepetomane: ‘What?’
Hedley Lamarr: ‘Meeting is adjourned.’
Governor Lepetomane: ‘It is?’
Hedley Lamarr: ‘No, you say that, Governor.’
Governor Lepetomane: ‘What?’
Hedley Lamarr: ‘Meeting is adjourned.’
Governor Lepetomane: ‘It is?’”
Dialogue from Blazing Saddles by Mel Brooks

You would laugh if I told you how many board meetings I have attended where the disorganization and lack of discipline reminded me of this scene from one of my favorite movies. I am amazed when entrepreneurs really go out of their way to recruit qualified people to join their board (regular or advisory) only to subject them to a dysfunctional meeting which in essence, negates the benefit these valuable resources can bring to the table. I cringe when I see them roll their eyes.

But all is not lost. There are three things I would suggest you focus on to convert these wasted opportunities into meaningful events.

First, bifurcate the formal “approval” portion of the meeting. Instead of interspersing required approvals with topics which might result in robust exchanges, have all the standard approval agenda items covered in a succinct manner. Now I do not mean to imply that you should give short shrift to key items that require discussion, but those that have been fully discussed and vetted should be the subject of brief motions and approvals so proper time can be spent on more significant issues.

Second, distribute information on key topics in advance. I once watched a pretty successful owner get dressed down by a Board for distributing a 20-page budget at a meeting and asking for immediate approval. The more he tried to limit discussion, the worse it became. A simple rule of thumb; if it is more than 2 pages, send it in advance.

Finally, don’t forget to discuss “future state.” So many of the meetings seem to spend a disproportionate amount of time discussing current state that there is either no time (or participants are too exhausted) to cover developments like pending paradigm shifts. This usually happens with financial statements which though distributed in advance, seem to be destined to be discussed on a line-by-line basis. If you find this happening to you, take notes at two meetings noting common questions (and they will be apparent) and then use that information to prepare a summary that will accompany the financials distributed in advance. Surprising how that may help.

One side note. Good entrepreneurs are in contact with their board members in between meetings to get their temperature on various hot issues. It is always worthwhile knowing what the “judges” will find important before presenting a case.

So the simple advice is to spend a little time managing your board in this manner and you will turn those “bored” meetings into memorable gatherings of these valued advisors.


Team Building: Ideas to Keep in Mind

“There is no I in TEAM.” – attribution unknown

The importance of a management team to the success of any venture is a well-known business fact. I have blogged about this in the past and it has been the key focal point of investors for years. So given the fact that no man is an island and one needs a team to succeed, a great question for an early stage entrepreneur is where do you start?

I have had the chance to build a number of successful teams in my career but more importantly, I have watched some truly accomplished entrepreneurs build them on a greater scale and with much better results. So when I reflect on what seemed to work for all of us, I kept coming back to five ideas I would suggest you keep in mind as you start the most important task you have as a leader – – building the right team:

1. Think leaders and creators. One of my favorite clients would often remark that an idea of mine was “counterintuitive” and that is what you might be thinking here. You may feel that you are the leader, so maybe these traits are not as important for team members. The point is most businesses successfully build to scale by having a series of teams who use their creative capabilities to solve problems. If you need any proof of that, just read about NASA and the race to land on the moon.

2. Look for the same culture but different skill sets. My advice is culture trumps economics every time. So if you want to build a real team, make sure your key members share a common culture – that comfortable work environment, transparency and a sense of what is right and what is wrong that can overcome the absence of short-term financial rewards.

3. Those who share your vision are good; those that share your passion are great. I have mentioned in the past my client who used the phrase “I always admired a man who can stand up and say, you said it chief.” Everyone will see through someone who is a blind supporter of your vision or worse yet, overly passionate about it. Do not force this; spend the time to make sure each key team member is on the same page. I would prefer serious and dedicated strong silent support over the shallow cheerleader any day.

4. Seek those who seek challenges. The shortest and easiest road is not always the best. The odds of having to pivot at least once along the way is high and that means change, and change is a challenge many do not like to face. While being supportive is important, it is better to have members on the team who have the inner strength to help correct the ship versus fight a required change in direction.

5. Share the pie. How you do this is up to you. Whether you choose to reward every team member (I call it the chicken in every pot approach) or those leaders and drivers having the most impact, make sure you think of and reward those most responsible for helping you on your journey.

So there they are – – hopefully, some helpful ideas you can use as you build your team. And please try to avoid that self-centered promoting type even if they have a skill set that you need. That person never gets the point that there is no I in team.

My Partner(s) and I Can’t Work Together; What Do We Do?

Quote: Disputes happen (my sanitized version of the often used phrase of unknown origin.)

It is tough to be in the business of serving entrepreneurs and not encounter a dispute or two between owners. I am not referring to the garden variety disagreements that happen on a daily basis, but major differences that lead to paradigm change. The most common form of this conundrum is one owner firmly believing that the glass is half empty and one adamant about the glass being half full. In this scenario, the more optimistic owner dreams of the future and touts expansion, investing and new hires; the pessimist blocks him at every step setting up an unworkable situation. So what do you do?

One of the techniques I have seen employed is to bring in outside consultants to set up processes to both help clarify the true nature of the differences as well as resolve them. One of my clients often used the phrase “says easy; does hard” and that is what I usually found with this technique. When people really have different business philosophies, it is difficult at best to identify all of the differences and just when you think you have, new ones seem to surface. Obviously, if you can’t fully identify the problem, you can’t resolve it. The stark reality is that in some business relationships, there exists what is referred to in many divorce filings as “unreconcilable differences” and when they are deep seated, attempts to resolve them almost always lead to failure.

Unfortunately, in this situation the only viable solution is the difficult separation / buyout / settlement approach. Now those that have followed my blog know that I am not a fan of liquidity provisions in shareholder agreements. Even if a price is set in advance, getting the appropriate financing can be a major hurdle. For some reasons, banks are not interested in loaning you money that is going to an important “former” partner and out the door leaving the debt behind to be serviced by the survivor. However, when this type of situation arises, in many cases the future of the enterprise is at stake so it is imperative that a separation be negotiated.

These transactions are very emotion packed and much like a married couples’ divorce, value seems to manifest itself not in the true worth of the item being negotiated but in the perception one owner has as to the importance of the item to the other owner. So terms and conditions as well as price suddenly carry with them a level of unreasonableness fueled by the years of feeling underappreciated or maligned and getting a deal done takes on a whole new level of difficulty.
So my advice here is first, to start a separation process if it is clear there are major business approach differences and engage advisors who are used to dealing with this type of situation. Qualified lawyers and advisors who have not dealt with this before tend to treat this as a normal sale which only delays the process. And be prepared to be patient because emotions add to the timeline, but do not place your business at risk by avoiding the issue. Unfortunately as we all know, disputes happen.


Is There Such a Thing as Dumb Money?

“Dopus. I already had the money in my hand.” – Comicus quote from “History of the World” by Mel Brooks

At times, an entrepreneur is so focused on closing the deal for financing that they forget some of the long-term ramifications. In this scene from History of the World, Comicus is willing to say almost anything to get his weekly stipend. But is this approach dangerous for a business owner seeking financing? After all, money is money and it doesn’t come with a personality — or does it?

We have all heard the expression “smart money”. When one is discussing a successfully funded venture, it is common to hear the phrase “that’s where the smart money is.” Investment advice is often laced with terms such as “that is what the smart money is doing.” While I think you get the point, the question has to be raised: “Is there such a thing as dumb money?” I submit to you that there definitely is. The real question is how to avoid it.

Most owners seeking financing have this uniform image of an investor — serious, numbers-oriented, like Jack Webb (there’s a dated reference for you) they just want the facts. But smart owners do some diligence on their potential partners, and the wise ones know those traits that can come back to haunt you. So here are some warning flags.

Watch out for self-promoters. There is nothing wrong with having some pride in what you have accomplished, but the potential investor who goes on and on about their value proposition, including name dropping like they are some gossip columnist, has to be vetted with a cautious eye. When the next words you expect to hear are “enough of me talking about me; why don’t you talk about me for a while,” it is time to put your private eye glasses on.

The over-promiser is another type to take with a grain of salt. I have been in many meetings where investors are making their pitch and they mention connections they have that can really help the business grow. I can’t count the number of times these conversations resulted in companies accepting these investors, only to find that the two or three contacts they mentioned at that key meeting are in fact the only contacts they have. This is what I call the “big hat; no cattle” approach.

Finally, be careful when confronted by the smartest person in the room. This type tends to look down on the entrepreneur as if they are not worthy to be on the same planet. Without really analyzing the facts, they are quick to point out how something should be done differently and how they will add value by their vast knowledge.

The one common element is: if an investor is really going to help you (besides funding you), they have to understand you. As Stephen Covey advises, “Seek first to understand; then to be understood.” The types noted above may be past the point of being able to listen and understand. And by the way, it is not so much that they are dumb as it is they are not capable of using their smarts effectively. So make sure when you seek investment, you do not get stuck with dumb money because, in the long run, it will be a very painful step in your journey.


Leadership – Five Easy Steps

“They are my people! I am their sovereign! I LOVE them. Pull!” – King Louis quote from “History of the World” by Mel Brooks

For many Brooks’ fans, this classic scene epitomizes what it is like not to be a leader; turning one’s subjects into human clay pigeons for sheer pleasure. Fortunately for all of us, there are many great leaders – – some of whom we encounter in our everyday lives and some who just seem to step up when a situation or opportunity presents itself. It is much more than just staying positive and checking your happiness quotient. I, and others, have blogged in the past about traits and characteristics that are common to both respected and poor leaders. But what about some simple, practical advice you can use every day to become more effective in a leadership role?

Here are five easy leadership steps to consider:

    • Know thyself – One of the best tools I ever employed was the Myers-Briggs test. Finding out my “personality” type allowed me to better understand why I acted and reacted in certain ways and helped me to modify my style. But more importantly, it allowed me to better understand my peers, colleagues and fellow team members and how to more effectively work and communicate with them.
    • Read, read, read – Delve into the case studies and books of those who were great leaders. Learn effective habits and traits to help you negotiate through difficult issues and roadblocks. You do not have to become a disciple of Covey, but understanding concepts such as his will make you stronger.
    • Have a style – You have to work in a manner which makes you comfortable. You may be more of a taskmaster or perhaps a cheerleader, but being consistent allows others to better understand you and builds their confidence in you. There is no need to drastically change to a style that is not you; others will see right through it and your effectiveness as a leader will suffer.
    • Hold others accountable – They say leadership is hard to define, but you know it when you see it. Holding people accountable for their actions and responsibilities is one way of demonstrating this. You do not need to micro-manage or constantly be on your team’s “case,” but a firm, periodic assessment of status goes a long way toward showing you are an effective leader.
    • Admit and address mistakes; celebrate success – Balance here is the answer. Too often, the person in charge spends too much time on one and too little on the other. Perhaps the most difficult but endearing trait is admitting you made a mistake. The typical excuse (usually self- imposed) is you will appear to be a less effective leader if you do something wrong. Keep in mind the famous saying, “That’s why they put erasers on pencils.” And celebrate the “wins”; everyone takes pride in an accomplishment.

So there you have it. Not exactly the complete recipe for being an effective leader but some simple, practical steps you can take each day on your journey to success.


Is That Dashboard Enough?

“You’ve got to be very careful if you don’t know where you are going because you might not get there.” – Yogi Berra

Over the years, I have been amazed as to the number of entrepreneurs I encounter that use shortcut methods to get a feel for how their business is doing financially. Many today explain they have a “dashboard”. I believe a well-designed dashboard can be an invaluable tool for an owner but it should not be an excuse for not having timely, complete and accurate information. Without that, you can end up like Yogi said. A quick story.

Years ago, I was auditing a small but well known public company. The chairman was a sharp businessman, but the market had gotten away from his company and for the first time in years, they lost money and were in debt. I had my typical closing meeting with him and was told in no uncertain terms, the numbers were wrong. He asked, “If we lost $1 million, why do we have cash in the bank?” Though taken aback, I quickly showed him the balance sheet with $2 million of debt. He looked at it, thanked me and gave his “blessing” to the numbers.

Recently, I had the same experience where an owner of a business I knew asked me to visit because his numbers did not seem right. He had cash but his CFO indicated he was losing money. I quickly looked at his financials and did a back of the envelope calculation showing how the changes in receivables, inventory and payables had actually generated cash though he was in fact losing money.

Both had used a version of dashboard reporting (in this case, cash on hand) to assess their financial results. These shortcuts have their drawbacks. The other issue is that in an early-stage company today, there are non-financial type measures that an owner must manage. Unique visitors to a site, return visitors and costs to acquire customers are not in the financial records but can be a solid indicator of the health or future health of an enterprise.

So some simple advice. You should work with your internal or external financial staff to determine what data works best for you to run your business. If you are a more mature business, you need a balance sheet and cash flow statement (they are easy to create) to go along with your income statement to better understand your financial workings. Just using cash balances or average order size (another client used this) is not enough and can be short sighted.

If you are emerging and pre- or early-revenue, develop those metrics that provide the right insight into your business. Those who are in this space can help you and while that data is important, keeping track of how your cash is used (your “burn rate”) is also a critical piece of information.

You may hear from colleagues that they do not waste time on such mundane matters and getting a “quick read” on your results is the path you should follow. While I agree that timely information is paramount, insufficient information is not acceptable. And if your competitor is doing a better job of obtaining and acting on solid information, you may lose in the end. So don’t just settle for dashboard reporting because it is fast and easy; make sure it really can tell you what road you are on.


The Perfect Pitch Works

“He cared; more than Harvey Ramos” – quote from this blog’s author.

I know what you are thinking – he has run out of quotes so now he is quoting himself. So before you get the wrong impression, let me explain.

As part of instructor training at EY, we were told at cocktails when we arrived that the next day, we would be asked to introduce ourselves with the proviso that our presentation had to end with what we wanted scripted on our tombstone. (BTW I suggest you try this sometime.) Well I tossed and turned that night and after trying what I felt were thousands of iterations, I finally settled on “he cared.”

The next day we are going through our presentations and preceding me is Harvey. He comes to the end and announces that his tombstone will read “he cared.” The instructor thanks Harvey and immediately calls on me. My readers are pretty smart so you know how this concluded. So why the long lead in?

If nothing else, this exercise caused me to reflect deeply on what I really wanted to say about my life in simple terms and owners do the same for their company each time they make a pitch for investment. Lately, I have been through a couple of failed funding attempts and I wanted to better understand why investors said “no.” I reached out to some of the investors that passed and also saw a couple of recent articles on the subject. Always searching for a new angle, I gathered about a dozen or so different reasons but was disappointed to find they really had not changed in the last four decades. Some common culprits:

  • Barriers to entry not highlighted
  • KPI failure – either don’t know them, they are poorly defined or poorly measured
  • Shallow knowledge of competition – and the always fatal “we have no competition”
  • Economics – not clear how investment will be used or no “paying” sales channel presented
  • All OPM – where was founders’ buy-in?

I then looked at our “Perfect Pitch” guidelines (available @ and realized all these points would have been addressed had the founders done a deep dive into what they were presenting. To draw the analogy, had they invested the same level of thought into what their pitch “said” as I had in doing the simple tombstone exercise, all of these points would have been addressed.

Your “pitch” is your chance to show your best. I really do not care if you use what has worked for us over the years or another guide, when you are preparing it, invest the time to completely address what is suggested – – there is a reason for it. This is not the same as being at a New Jersey diner and spending the time figuring out what you want from the hundreds of items on the menu. This is not a checklist; it is a starting point for you to shape the future of the economic life of your company.

So please when you put the meat on the bones of your pitch, think about what it says about you and your company; what it stands for and what it represents. Don’t get turned down just because you did not do your homework. Think about how an investor sees it, because properly prepared, the Perfect Pitch does work. Good luck.