How Do I Know It Is Time To Get Out?

“Well come on an’ let me know

Should I stay or should I go” . . .  lyrics from The Clash

Many established owners in mature businesses confront this dilemma at least once in their business lives.  In many cases, they are hoping that others will make the decision for them but unlike this classic Clash song, usually there is nobody to tell them; it is a question they have to answer for themselves.

“Getting out” has a different meaning depending on circumstances.  If you are the owner of a successful business and have a functioning management team in place to take over, that is one scenario.  If that is not the case and you are just at the start of this decision cycle, that is a whole different ballgame.  I will leave the former case to another time; let’s talk about someone considering an exit and cover the more common reason for doing so.

In his 2000-Year-Old-Man character, Mel Brooks pointed out countless times how fear motivated individuals.  In fact, he attributed the origin of dance to fear.  What better way to neutralize a potential enemy; grab the hand so they can’t hold a weapon and keep their feet occupied so they do not kick you.  Mel may have been on to something as fear is what has driven many of my clients to “get out.”  Just a few examples:

  • Disruption – a new “kid on the block” who has a more effective and economical product.  I had an industrial products client who was a specialist in transistors until they heard of something known as solid state and sold out before the new technology came to dominate the marketplace.
  • Paradigm change – while I only saw a small portion of the impact, how do you think Borders and Barnes & Noble felt when this upstart called Amazon began to rear its ugly head in their market?
  • Succession plan failure – I have had the chance to nurse more than one client through the painful process of realizing they had no successor – – no family member or management leader who wanted to take over the business or worse yet, family members who the owner was convinced would lead their legacy right into bankruptcy. In many cases, those owners took an “offer they couldn’t refuse.”
  • Not fun anymore – many of my owners truly enjoyed the daily challenges and rewards of “working” their business and making those tough decisions. But when the fun went out of it and it became constantly stressful – – maybe even to the point of impacting their health, they made the call that it was time to do something different.

Let’s face it; this is not an easy decision.  If there is one tried and true piece of advice I would give, it would be to develop some outside interest (golf, grandkids, volunteer work, travel, etc.) that will give you something to “go to.”  The reason for this is simple; if you do not have something to “go to” you will never leave because “going from” something can feel like failure and as we all know, entrepreneurs do not fail.

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Success Through Failure

Wayne Campbell: No way !

Garth Algar: Way !

From the movie Wayne’s World

 

As difficult as it may be to understand, many believe that the way to success is to experience failure.  So, by design, if you have a fear of failure, it is probably not a good idea to become an entrepreneur.  Many inventors and creative types were not concerned with failure.  Thomas Edison basically considered every failure an experiment and to master a technique or process, you had to do it 10,000 times to reach that level of competence.  Trying anything that many times has to be an exercise fraught with failure, so one view is to consider failure as part of the rocky road to success.

 

But, how does an entrepreneur harness the power of failure and turn it into success?  There are probably five rules to consider in order to accomplish this difficult goal:

 

1. Be honest about admitting to mistakes (failures).  Sincerity trumps most traits when it comes to dealing with your team, potential investors and customers.  Others want to know you considered alternative approaches and perhaps they all did not work. Somewhat appropriately, it is considered as thinking outside the box in order to get the optimal answer.

 

2. If at first you do not fail, try, try again.  The old saying “nothing ventured; nothing gained” comes to mind. Trying new approaches and embracing whatever the results of those efforts are become part of the process when you seek success.

 

3. Understand what went wrong.  You start on this journey knowing something will go wrong, so set up your process so you understand what it is.  Why didn’t prospective customers take to your product?  Why didn’t the product deliver what you expected?  Seek feedback so you understand the “why.”

 

4. Learn from your mistakes.  The mirror to point #3 is using what you understand went wrong to modify your approach.  You have suffered the pain of loss; learn from it.

 

5. Maintain your resilience.  A positive attitude that leads you to understand that this is a process and failure is a teacher and not an enemy, will allow you to put your failure in perspective and see it as just one more step in accomplishing your goal.

 

So yes… “way.”  Failure can be an important part of your road to success.  Learn to embrace it and learn from it.  You, too, can turn lemons into lemonade.

Advisory Board / Board of Directors – Is There a Difference?

Woodstock: ”What’s the password?”original
Ace Ventura: ”New England clam chowder.”
Woodstock: “Is that the red or the white?”
Ace Ventura: “Ah, I can never remember that.  White.”
[Door opens]
Ace Ventura: “Yes.”  – Ace Ventura – Pet Detective

So, I was at an advisory board meeting at one of my growth companies, recently, when certain previously omitted items appeared on the agenda.  The items included approval on capital improvements, a key decision on a lease and ratification of compensation for key executives.  I would like to say it seldom happens but as the subjects started to be discussed, all I could think about was this famous scene from Ace Ventura.  I began to realize, again, that despite the sophistication of many of the entrepreneurs that I work with, purpose seems to get blurred between the roles of an advisory board (AB) versus a Board of Directors (BD).  So, I thought I would provide a little refresher.  Please note; this is not a legal analysis but just pure practical experience.

An advisory board consists of a group of experienced and knowledgeable mentors that has no official capacity and no fiduciary responsibility.  While members do their best to help provide guidance on the problems at hand, their role is to serve as a sounding board for ideas and solutions and not to be either a problem solver for an entrepreneur or an “approver” of corporate actions.  Many entrepreneurs misunderstand this role and believe that the advisory board can serve in a very active almost management capacity and provide all their expertise to the company.  This usually does not happen resulting in frustration for both parties.  That being said, I strongly encourage entrepreneurs (especially the less experienced) to have an AB.

It is the Board of Directors who has ultimate responsibility for corporate governance which includes everything from major decisions to potential sale of the company to removal of key management members including the CEO, if necessary.  It is that fiduciary responsibility (and potential liability) that sets the two apart (thus the famous Directors and Officers insurance for BD members.)

It is important for any entrepreneur to know the difference between an advisory board and Board of Directors, and if necessary, to seek help and guidance in establishing the roles and in recruiting members.  I know a number of experienced board members who do not take AB roles but only join a BD.  They believe they need to have skin in the game for their advice to matter; many BD members invest and most are granted incentives such as fees to attend meetings, stock-options and the like.  They believe they need the authority that allows them to function as “board members.”

While both are extremely important, not having a Board of Directors to handle key fiduciary responsibilities can put the owner at risk, so strongly consider having one.  Having said that, if you keep your expectations in check, any entrepreneur will find an advisory board can also be a very valuable asset.