Big Talk About Small Business
Hosted by Mark Zweig and Eric Howerton. Our Mission is to inspire, empower, and equip entrepreneurs with the knowledge and insights they need to succeed in their ventures. Through engaging conversations with industry experts, seasoned entrepreneurs, and thought leaders, we aim to provide valuable strategies, actionable advice, and real-world experiences that will enable our listeners to navigate the challenges, seize the opportunities, and build thriving businesses.
Big Talk About Small Business
Ep. 78 - Why Your Small Business Needs Fresh Perspectives
The untapped advantage of outside directors might be the missing piece in your business growth strategy. In this candid conversation, Mark and Eric pull back the curtain on how small businesses can leverage experienced board members to overcome challenges, gain credibility, and accelerate growth.
Drawing from their experiences on over a dozen boards and as business owners themselves, they tackle the common entrepreneur resistance to bringing in outside voices. "I didn't want anybody telling me what to do," Mark admits about his early years running a company – a mindset he now recognizes limited his growth potential. This resistance often stems from fear of losing control, reluctance to expose weaknesses, or simply not understanding the process.
The financial reality proves surprisingly accessible: quality outside directors typically cost between $20,000-$25,000 annually for quarterly meetings and ongoing consultation – a fraction of what hiring someone with equivalent experience would cost. These directors bring industry connections, strategic perspectives, and accountability that entrepreneurs desperately need but rarely seek. They serve as powerful advocates when approaching investors, provide credibility with clients, and offer guidance through critical business decisions.
Mark and Eric provide practical advice on selecting the right directors (hint: your attorney and accountant aren't automatically the best choices), structuring compensation, and establishing productive board dynamics. They emphasize that effective board relationships focus on building consensus rather than formal voting structures.
Whether you're struggling with current challenges or planning an eventual exit, outside directors who've "already seen the movie and know how it ends" could be your secret weapon. Ready to elevate your business with strategic oversight? This episode delivers the roadmap you've been missing.
good morning. Good morning, it's bright and early.
Speaker 2:It is man what time did you get up today? Uh, five something maybe. Yeah, 5, 45 for me pretty late.
Speaker 1:Yeah, pretty late, little draggy we had my birthday dinner last night at the country club with my family. Well, very nice. Yeah, it was fun, it was, it's great. So is your birthday? Yeah, it was march 4th, hey was that tuesday yeah, happy birthday, bro, thank you. 60 7 hell yeah, my god, that's old. It's like I can't believe it. You know it's a little surreal. Yeah it is, but you know what I'm a little surreal? Yeah it is, but you know what? I'm still going strong.
Speaker 2:Dude, you're freaking, you're doing better than.
Speaker 1:I am man, I don't know about that, but I worked all day Monday. I worked all day Tuesday. You worked Sunday too. You were just talking about it, I was. I was working all day Sunday. I just got back from work. But yesterday morning, man, I got up at six o'clock and I hammered it. I got so much done yesterday it was mind boggling. Yeah, it really was. Yeah, it's good. So checking those things off buddy.
Speaker 2:Yeah, man, just a big checkbox, life's just one big list.
Speaker 1:I can't tell you how many times I have thought about what you kept saying. He said it multiple times in this show Business is just one problem after another. It's so true Over and over.
Speaker 2:You can't be discouraged by that, though, because you just have to expect that, yeah you do, and then you have to let things just kind of shake out on its own. Sometimes you do, man, I mean there's a lot of things like like I'll get pretty angst stuff about some stuff, and it's just like, man, it's going to be like I know you love these things. It's going to be what it's going to be. In a way, there's always so much you can control, you know, and you can't get all worried about competitors. What is going to happen?
Speaker 1:well, when you're another 20 years older like me, you won't worry about stuff nearly as much. I mean it's the only blessing. Well, not the only blessing of age, but it is one.
Speaker 2:Well, I remember when we first started working together, I was like 33 or something and I remember sitting down with you and Ed Friedrichs over dinner one night and I told you guys how old I was. You're like, oh man, you know if I could only go back to that age or whatever. But then y'all are both talking about how you know, the one thing you wouldn't want is to go back there and worry like you used to. Yes, exactly, it's like you. Just don't worry about stuff as much.
Speaker 1:You've survived it. You know you can survive it.
Speaker 2:Yeah, you know the outcome. As long as you just keep doing the right thing, you keep working, you keep just solving the problems, it usually pans out pretty good.
Speaker 1:Well, I'm glad you brought up Ed Friedrichs, because he was an outside director. That's the topic of our discussion today, but before we get started, this is another episode of that big talk about their small business.
Speaker 1:We're getting a little better at that anyway so, yeah, um, it's great to be back, but, um, yeah, we're going to talk about outside directors today. Ed was an outside director when we first bought the company back or well, we hadn't even bought it back, I had a piece of it. He gave me a piece of it, the lender to start with, and then I put some cash in and I bought a little bit more, but we had Ed. Ed was a very experienced guy. Unfortunately, he's not with us any longer, but he was the president and CEO of Gensler, the largest architecture firm in the world, and we serve architecture and engineering clients. Yep, okay.
Speaker 2:It was a good outside director to have on the team.
Speaker 1:Man Right, and that's one of the reasons to get outside directors is you bring somebody in who either worked in a client or in the industry that you serve, yeah, who can give you some insight and maybe has some connections that would benefit your business.
Speaker 2:Yeah, a lot of credibility. Yeah, I mean the PR part to it, you know, is substantial. Yes, you know, just to you know in involved in the speaking engagements or whatever it might be. You know, and I think, like on that, like you can even it's even more accelerated today, if you do it appropriately, like what we're doing right now, having conversations right, if you have an outside director, you bring them on a talk show. I mean you can just have those, those those long conversations that help your audience out it. It just gives you so much credibility.
Speaker 1:It does. It shows that you've got some insight into when their issues are and all are good, but yeah, that's kind of funny. Another thing I've discovered I've been an outside director. Probably. I say outside director Sometimes I got paid in ownership but I still wasn't an employee. Yeah, I'm doing one right now where I get paid in ownership, but I still wasn't an employee. Yeah, I'm doing one right now where I get paid in stock. Okay, um, but um, you know, it's interesting, um, if the company has a plan to exit at some point or raise new equity capital, the right outside directors can really give you credibility. Like one situation I'm in right now where we're talking to a potential investor. He only wanted to talk to me, which I think is kind of interesting, because he thought I had more experience and knowledge, thought I had more experience and knowledge. So, you know, I think sometimes and sometimes it does help I mean to get that capital if you have somebody that the investor feels is like a credible influence on things.
Speaker 2:Absolutely Right, yeah, and there, there, probably, there's a, you know, as an investor. You know, by the way, one of the best analogies I've ever heard in my life this is great for entrepreneurs. I can't remember where I heard it, but investors are like horses. They got eyes on the two sides of their head and they're looking for whatever it is to come and take what they have. Yeah, Right, they're basically prey. Entrepreneurs are like wolves eyes on the front of their face, like going out and hunting. Yeah, you right, yeah. And so there's this tension between them that there's always that, which is great.
Speaker 2:You know, I like the the wolf analogy. But I mean I can also understand on the investor side. You know, you're looking, I mean people will spend money, I'm sure, you know, real quick, without you know worrying about the. But as an investor coming to an outside director, you know, I would think that there's going to be more of a non-biased, non-wolf approach, exactly Like this director has is kind of has a higher is at a higher level, protecting the organization, the outcome of the business. From that experience they've had.
Speaker 1:That's, yeah, that's the idea I mean. I think too I don't want to get too far off topic but a lot of times when companies are out looking for outside capital, the management is overly optimistic oh yeah, okay, yeah, and the investor, as you said, is very skeptical, right. So if you put somebody who's overly optimistic with somebody who's very skeptical, um, the skeptical person may feel that they don't have the management, doesn't have the credibility. That's right, okay, yeah. So I think sometimes the outside director has to kind of bridge the gap, yeah, and go yeah, this is where things are, you know, let's be honest about where we are, but this is what we're going to know. Let's be honest about where we are, but this is what we're going to do to get it to the next level.
Speaker 2:Yeah, and as a director, you've spent the time with the management. You've kind of already gone through a lot of these conversations and now you're able to. Yeah, eric over there. He is pretty goofy and bullheaded.
Speaker 1:However, like we've been talking for six, months, yeah, and it's here's his track record too, in the end, okay, yeah eventually made you.
Speaker 2:It's kind of like probably my director now that I think about it but so anyway, um, but, but, um.
Speaker 1:I think a lot of small privately held companies don't realize the benefits of bringing on outside directors, not just just from the client base. But let's say, your plan is to build up and sell the private equity. Have you got somebody out there you can bring on who's done this more than once? Right, that could be very helpful to you because they understand how the whole thing works. Or, if you work in a heavily regulated industry, can you get somebody who comes out of that regulatory body who can act as an intermediary between you and the regulators? Yep, that can be huge. Okay, they're like a lobbyist almost for your company. Absolutely, absolutely. And you know, in general, I think, if you've got a young management that doesn't have the experience, sometimes bring in some gray-haired people in who've grown a business and been through all the. You know the travails of that.
Speaker 2:You know, there's one thing, too, that I've been noticing, you know, with a couple of entities I've been working with, is when you have directors, there's another level of accountability for the management team. Absolutely, you know. I mean, it's one thing for you know the internal management team to have a report to deliver to their peers in management.
Speaker 2:It's another thing when they have to go see the directors. Right, they've got a bunch of experienced people in there with a lot of credibility. It's a good point. They probably triple-checked their numbers this time, thought about it a whole bunch and it makes them better, so much better Well it's the same thing too.
Speaker 1:The CEO has some accountability Absolutely, because in your case or mine, let's say, we had a big chunk or we owned 100% of the business. Having somebody else to question you and who's got nothing riding on it other than trying to help you Right, that's a big deal that can be very valuable Dude, I'll admit right now I need a lot of accountability.
Speaker 2:Just with a couple of entities I have that. I just need to check in Right and say man, what are you doing, eric? Yeah, you need to do some changes within the organization.
Speaker 1:Yeah. Then you say you don't understand what I'm doing here.
Speaker 2:You don't get it, man, you don't get it. Understand what I'm doing here? You don't get it. You don't get it, you're removed. But then I get out of the conversation. Then a week or two go by, I'm like, damn it, man, mark was right, it's the same stuff, right? Yeah, it's like. It's like we're all kids, you know, it's like going back to childhood. You know your folks tell you they give you the wisdom, they care about you, right, they want your best interest, don't do this, don't eat that, you know, like whatever. And then you realize later on oh man, I should have listened, right that's that famous mark twain quote.
Speaker 1:It's like you couldn't believe how dumb his dad was when he was 17 or whatever, yeah, and then by the time he was 25, he was he couldn't believe how much his dad had learned over the last eight years. That's so true, man.
Speaker 2:That is so funny. You know one thing about, like this whole director thing that I think that maybe entrepreneurs are a little it's a little bit of a mystery and I mean to be honest with you, it's in some parts still mystery to me. What are the mechanics of getting them onboarded, like the details? Do you have to pay them all? Does it have to come with equity? Does it have to come with a mixture? I mean, do they legitimately have voting stock? That's a great type of stuff?
Speaker 1:Yeah a vote. Yeah, I think that's a great stuff. Yeah, vote a vote. Um, yeah, I think that's a great question. I mean, the answer is there's no hard and fast rules. Okay, sometimes there there are people that are just want to help you out. Yeah, um, you know, I've never been an outside director where I didn't get paid. Okay, um, and it's very wildly, um, and it sort of depends on the company and what they can afford and how big they are and how much time it's going to take.
Speaker 2:All right, so let's take it from this standpoint. I got a new business. I started Mm-hmm, and, mark, I really respect your credibility and your experience. I need your help, right? I mean, will you help me out and I don't have any money to pay you? Yeah, and I own 100% of this. I'm really nervous about giving any equity up.
Speaker 1:I might not be able to help you. I mean seriously, there's only so much time to go around. No, no, no, I get it.
Speaker 2:But that's a lot of times the position that the entrepreneur is stuck in.
Speaker 1:Yeah, it could be. I mean, you know, so on that though.
Speaker 2:So let's say, okay, I can't help you, yeah, but then as an entrepreneur I'm like okay, well, I definitely can't pay you. But now I'm talking about equity.
Speaker 1:Here's another way to look at it, though. Okay, yeah, you said you didn't want to give up any equity. Yeah, all right. I mean that may not be smart, because a very small chunk of equity voting rights are not. I mean, I'm never a big fan of devaluing any ownership interest by not having voting rights. I'm just not in favor of that. I don't like it philosophically. What did you mean by that? It doesn't feel like real ownership if you don't have voting rights for the stock. So what do I care? If I own 99.5% and somebody has 0.5% but they have voting rights, it doesn't mean anything. Okay. And somebody has 0.5% but they have voting rights, it doesn't mean anything, okay.
Speaker 2:So if you were to come on the board, you'd want equity with voting stock.
Speaker 1:Yeah, I would want equity, absolutely, I mean. But if you don't want to do it and I would expect that equity to be undervalued, whether it's an internal formula, or you're giving me more than what my time would cost. In other words, if what I'm doing for you should cost $20,000 and you're going to pay me in equity, I might need $30,000 or $40,000 worth of real value in equity. I mean, I'm just throwing that out there. Okay, it's not liquid.
Speaker 2:Yeah yeah, yeah, you can't cash it in.
Speaker 1:Yeah, exactly, it's a lot riskier.
Speaker 2:But how would you be convinced, as a director, to know that, whatever my synopsis is and the valuation at that point, oh, I'd have to get myself familiar with the company.
Speaker 1:You'd have to get in the numbers, wouldn't you? Yeah, I mean I'm not going to join any company forward if I don't know what the numbers are, and I'm also going to insist they have DNO insurance, by the way. Okay, because directors and officers insurance is critical. It's not that expensive. You don't want to end up getting sued by something the company does that you had absolutely no involvement with. I mean, that can happen. But let's go back to this for a minute.
Speaker 1:So, a lot of small companies, they're growing. Let's say they got 10 people, they got 30 people, whatever, and they're growing and they say we want some outside directors. We're going to hire two or three outside directors. I mean, generally, sort of a good place to start, in my opinion, is if you're going to have four meetings and you're going to have communication in between the meetings, you need to pay like $20,000 or $25,000 at a minimum. All right, four meetings for each of those people Per year, once a quarter. Yeah, you need to pay $20,000 to $25,000 minimum for those people.
Speaker 1:Okay, if you're hiring the right people for this, these people make money. Okay, they're making 400,000. If you hired him, you wouldn't be able to afford to hire Right, okay, right, and make 300, 400, 500,000 million dollars a year, whatever. So you're getting their expertise? Yeah, for 20 or 25,000. And you can call them anytime you want. That's a bargain. So if I bring three of those experienced people on, maybe I've made 60 to 75,000 for a year. How in the world could I hire anybody who brings all that to the business?
Speaker 2:Yeah, that's the way you need to look at it, that's the entrepreneur's perspective outside the board of directors. Yeah, and it's cheap. It's cheap for what you're getting. And would you say that, like, a good entrepreneur would have this kind of written down as to what they have expectations for, right, say, hey, you know we're going to have one meeting per oh, absolutely yeah, and the meeting's going to be an hour and a half, right, right. Or four hours, or four a day, okay, all right. Well, that's good clarity, yeah, right, and then, by the way, I'd need to be able to call you basically any time and your responsibility is to get back with me.
Speaker 1:Yeah, I mean you don't have to say it quite that ugly. But Now hopefully you'll be available if I have questions along the way or we need to talk.
Speaker 2:Okay, yeah, and we'll pay you $25,000 a year. Yeah, and how do the terms of payment work out? I don't know.
Speaker 1:You can pay them once a quarter or you can pay them every month or whatever works for your system. But that's sort of typical. Now, again, that's sort of a minimum. Yeah, if I'm talking about joining a company that's got 300 employees in it and it's doing $50 million a year in revenue, I'm probably not going to be working for $20,000 or $25,000. I mean seriously, in those cases, a lot of times you'll either get paid in stock and there's going to be so much stock and hopefully again you're there's going to be so much stock and hopefully again it's you're getting paid in undervalued stock that if you grow this company or if you sell this company you're going to get some kind of a premium on it. Okay, or you're just getting paid more to do what you do.
Speaker 2:Yeah, how do you, as a board director in that situation, value what your compensation is?
Speaker 1:It depends. I mean, it's all subjective, yeah, and a lot of it is like how much do you like the people yeah, I hate to say it as a director the people you're working with, yeah, and yeah, and how much work is it going to be? And you know where? Where does it fit into your scope of all the things you're doing? Because sometimes you know your time is more um less available than others. Yeah, because we're starting stuff right. Yeah, you know we all got. That's just one thing we're doing. We all get like 10 other things we're doing right, right, so sometimes it's timing is better. But I mean, I think the most I ever got paid was a hundred thousand um, and and that was no stock in that situation. In other cases I got paid 20 or 25 000. I could buy stock like. One situation was you could buy stock at last year's price this year, so if it went up, you knew you had an immediate gain on it. Yeah, it's just see what I mean, um.
Speaker 2:So that was kind of a motivator and I think the thing that can be a little bit intimidating for entrepreneurs is is like, pay special attention, what we're talking about here, about there's the difference between a startup company looking for board of directors and how a board of director true perceivesives that versus a mid-sized growing organization. Yeah, because this discussion here's here's the thing I'm trying to get at. The discussion of stocks, you know, premium stock, all this type of stuff is. It's complicated, right? And the second you're into that realm now. You got to talk to attorneys. That costs money. You know all. Talk to attorneys. That costs money. In the mind of an entrepreneur, all this stuff is complicated and costs me money when I should just be making freaking phone calls and doing sales. That's my mindset.
Speaker 3:It's like why am I going?
Speaker 2:to mess with all this for some soft return versus. I know I can make calls and go dog it out and get some sales in and that's real money to me. That's where. That's where a lot of times my conflict has happened in my life. Yeah, but, but I'm but a lot of, because some I would say most of the messaging we would hear about board of directors. It is complicated because you see, what you see in the news or what you see, I guess, just in general in school, is a little bit more of a complicated board of directors profile, stock, all these legalities and things, and it becomes Well, it doesn't have to be like that.
Speaker 1:No, I know, that's what.
Speaker 2:I'm expressing, though Right To a new entrepreneur Like you don't have to make it this complex thing.
Speaker 1:You could just make him a non-voting advisory board member. Okay, I, you could just make him a non-voting advisory board member, okay.
Speaker 2:I'm in one of those right now, but that's not a director, that is an advisor.
Speaker 1:Yeah, you're just an advisor to the board, but basically you function exactly the same way. Okay, so let's talk about you, just don't vote and second things. But at a board of directors level it's not like everything. Hopefully nothing comes to a vote ever. You go for consensus, yeah. Yeah, it's not like four against three, the Supreme Court or whatever. I'm the company. You know what.
Speaker 2:I mean, and so for clarity for the audience, right and look, mark, a lot of times, like you're so smart, like I don't think you understand, like you know, people may not know what you're talking about sometimes because you're just so incredibly smart.
Speaker 1:I don't know about that. Maybe, I'm just a poor communicator.
Speaker 2:Maybe that's it. No, but I mean, I'm just trying to put myself in the shoes of a new starter Sure. Doesn't know what they're doing or doesn't know a lot about this is a different criteria and area and purpose than an advisor to the company, technically speaking, Because a director most likely has voting stock on the board.
Speaker 1:to make decisions. They don't necessarily have to have stock, but they have voting rights as a board member, so they come to the.
Speaker 2:There are official board meetings that they attend there. Yes, sir, if you're an entrepreneur and you have 100% equity in this company and then you release, but then you offer voting rights and a board director, you have a board meeting that you, as a CEO of that company, you have to abide by what that board is voting. At the end of the day, that's where it can get to.
Speaker 1:Right Now, of course, you've got 100% of the stock, so you elect the directors. Sure, shoulder's elect the directors. So if you don't like them, you could just get rid of them. Yeah, and vote them out Sorry.
Speaker 2:Right, right, but that's a tangled ass mess as well.
Speaker 1:Right.
Speaker 2:If it comes down to that, yeah, yeah. I just think that there's something to discuss, like what you're getting yourself involved in if you're going to go for a board of directors. Now, I think the value to that is is that there's a much more deep engagement with your board of directors than you would have with a board of advisors.
Speaker 1:Okay, again, don't get confused about this. Okay, yeah, there is a board of directors and there's a board of advisors. That's not what I was saying, though. I'm saying I'm an advisor on the board of directors, I'm just like a board member, but I'm not officially a board member. Okay, so let's say there's seven people on the board, I'm the eighth. Yeah, okay, it's not like we have a separate board of advisors that sits over here that nobody has to listen to, right? You understand? Yeah, yeah, yeah. So so I don't.
Speaker 1:I'm not gonna just work as an advisor for the company for that kind of money they want to do that. They're gonna pay us 500 bucks an hour. Yeah, yeah, yeah, yeah, yeah, that's a different deal. This is. That's good clarity. This is board of directors, okay, but whether you're official or not, like one case of a firm in new york, they have a requirement due to licensing laws in the state of new york that 80 of the directors, or 75, have to be licensed architects. You see what I mean. So if more, if there's two of us on there and the and that drives it below 75, I don't need to be a voting member. But for all practical purposes, I am okay. Okay, does that make sense?
Speaker 2:yeah, yeah, yeah and so. So what you're articulating earlier, you can. If you're looking for just an advisor, yeah, you might just pay a high consulting fee for some advising for one hour or two here and there yeah, or an ongoing arrangement where you meet with them every month or whatever.
Speaker 1:But yeah, that's a different deal that's a whole different deal.
Speaker 2:right, we're talking about board of directors, where you are. If you're bringing somebody on like it'd say, formalized and because part of the value here, I think, as a board of director is it does help give you credibility back as a board of director Exactly, right. I mean, you sit on the board with these four companies and this is really part of your income, it's part of your career. Yeah, you know, at that point I think entrepreneurs need to understand that too. Right, like you build and sell exit companies, you become on boards. You're at this level to where you're advising as a board of director across multiple companies. That is my career path.
Speaker 1:Yes, yes, I think it's a lot for a lot of people who retire from their business or their high level job. They become directors. Yeah yeah, that's sort of a normal career path for people who don't want to just be done. Yeah, right, you know.
Speaker 2:Yeah, they still want to be engaged. Yeah, they get energy from it. Exactly, they're giving back, they're activated, their mind's engaged Right.
Speaker 1:That is a big part of it, it's not just the money. I'm glad you said giving back, yeah, yeah, because that's why the company that the outside director is joining and the management of that company and the relationship with those people is so critical. If they suck your energy and they don't listen to you, it's like a bad mentoring situation.
Speaker 1:It's like Eric situation. It's like eric I want you to be my mentor, meet with me once a month, you do, and then I never do what you suggest. Okay, forget that. Yes, all right, so there is a giving back element to it, that you have to feel like you're valued or it's not worth it and it's no matter what you get paid that's right and I think that's what's you know.
Speaker 2:To get back to the original, like what we're trying to express here to a small business owner, the value of having a board of director, it's that. It's that if you can find a board of director that is wanting like you, have a relationship. They want to give back to you. They have a. They haven't there's out relationship. They want to give back to you. They have a. They haven't. There's out. Of all the people you deal with in your business, right, they're your advocate. Yes, yeah, they want to help you.
Speaker 2:They want to help you. They don't have a different incentive. They're not trying to make money off of you. They're just trying to be compensated for their time because they have to be. Yeah Right, exactly, that's it. But then they're engaged and invested with you to see you personally win and successful.
Speaker 1:That's the ideal scenario, right there, right, that's the ideal scenario. So let's just step back for a minute and go back. I'm a small company. I'm growing okay.
Speaker 1:I feel like I don't know everything Right and I could have other tentacles out into the marketplace to help me win work or business. Yeah, why not bring one, two, three people on that? Maybe they cost me $20,000 or $25,000 a piece per year. Yeah, but I get the benefit of their advice. I get them. I can publish that. I can publicize. They're on my board. They can help me sell the company later. They can help me attract investors. They can give me credibility with my bank. Give me advice that I need on an ongoing basis because they're experienced. I couldn't hire any one person for 60 or 75 000.
Speaker 1:Where he's going to do that, that's right, okay, that's where people need to, in my mind, need to be thinking voting, not voting. Who gives a shit got it doesn't really matter. Yeah, it's going to function the same way. Words we always go for consensus. We're not voting on things, right, okay, right, I Right. I mean, if we are, it's down to the disaster point, right, do we pull the plug or not? I mean, it's like I was reading just last night an article on KTM, largest European motorcycle maker, is going bankrupt. Their board voted to close down the company. Okay, that's a different deal. You know where there was opposition? There were two factions. So, yeah, I think that's the way you need to think about it and it can be extremely beneficial to the small business owner. Most don't do it Right. They don't want anybody telling them what to do, or they're fearful, or they don't want to expose their weaknesses and deficiencies.
Speaker 2:I would say it's ego. And I would say a third reason is they don't understand the process. They don't know what this means. Yeah, you know. I mean like it's, it's, it's a uh, it's something that's not really clarified no, it's not.
Speaker 1:It's hard to go find a book on this that tells you what to do. Yeah, what the yes it is, it is man.
Speaker 2:Yeah, it really is. And you know, I mean for the audience's sake, like what I've. You know, as we're talking about this, like the credibility of your conversation on this point is really high. How many boards have you sat on over the years?
Speaker 1:At least 13 or 15. Some of them I was an owner on and some I wasn't yeah, but they weren't like my business per se.
Speaker 2:Yeah, because you used to travel around, you'd be going to board meetings all the time, right?
Speaker 1:I still am on some boards. I'm on two nonprofits and one, two, three, four, four profits right now.
Speaker 2:Do they have to? So okay, if you get this board, is there an expected formality about how these board meetings are to be handled?
Speaker 1:Well, I mean, part of it depends on whether it's a corporation or it's an LLC. Okay, llcs don't have they have a board of managers. They don't have a board of directors. I'm a big fan of corporations. I hate LLCs generally. Unless I'm not going to change ownership, then it's fine, then I don't mind it. But so, yeah, there's legalities. You've got to keep minutes. You report this to the Secretary of State in whatever state you're incorporated. Generally speaking, though, again, I'm going to have a business attorney that we're going to send the minutes to them. They're going to file all the stuff that we need to file the annual report, the election of officers. They'll take care of all that. It's not a big cost. You've got to have an experienced business attorney. They just do this as a matter of course. It's not a big cost at all. Right? So yeah, you do. You know is a legal sort of structure for the thing, but it's not that big of a deal.
Speaker 2:Just talk to your attorney. Yeah, yeah, and it's paperwork, basically, exactly, yeah, that's it. It's not something that, as an entrepreneur, you need to be concerned with and feel overwhelmed with.
Speaker 1:Yeah.
Speaker 2:Yeah, exactly, thank you and feel overwhelmed with yeah, exactly, thank you. Well, I mean to be honest with you, like my career path it's been like that has been a, you know, a kind of a friction point for me to feel more free to have, because I can see the, I totally see the value of board directors, right, you know, and having folks like yourself and others that are around my business invest, you know, a little bit.
Speaker 1:And you and I are on one board together. I mean, you see what the interaction is.
Speaker 2:No, it's fantastic.
Speaker 1:But they value what you have to say Absolutely. I mean, you either motivate them or demotivate them, or you give them ideas that they hadn't thought of.
Speaker 2:Mm-hmm, mm-hmm, you thought of you know, yeah, but there's a lot of work that goes behind that, behind the scenes, right. I mean, like you know, that team, the management team, is doing a lot of work to prepare for those meetings to you know Exactly, and then to follow up from those meetings and I would say that it's been very impressive. I actually told the folks the other day in the last board meeting we were in and I think you had to jump off, but I was like guys, you are doing a really good job communicating. We're trying to From a board side. Yeah, I mean, it feels like there is activity, they're taking it seriously and so I feel appreciated, right, you should because, they appreciate you, but I mean, I think that that's a big deal right.
Speaker 2:It is Because if you're an entrepreneur and you start this board, here's the last thing that you want to do. You don't want to get this board together and then not follow through. You will make things worse than better. Yep, because now you've lost your credibility with the board. You know you haven't solved any problem, you haven't moved forward Like it's. You know to that point, as in this discussion, the board is highly valuable, but take it very seriously. This is not paying for an advisor.
Speaker 1:Right. Pick your board members wisely, though. By the way, I mean, I was on a board of a company once where they brought a guy in as an outside director and we all could not stand him, and the ceo, as soon as his term was up, sent the guy packing, because all he did he had worked at one company and, no matter what problem came up, it was like well at abc, blah, blah, blah, and we just got every single meeting. You'd hear that 10 times and we're all like we don't give a shit about ABC. They sucked, okay. That's why you got forced out of ABC, because you're incompetent, yeah. And now we've got to listen to you tell us how ABC did it. And ABC is not doing well, so let's just be quiet over there. Yeah, all right.
Speaker 2:So how do you pick board members outside board members wisely?
Speaker 1:Well, I mean it's, you know, it's good to have a choice. I mean you got to think about your network. You got to think about your clients. You got to think about your regular. What are the things that are really driving your business? Yeah, and develop a slate of candidates and talk with them, you know, interview them, find out what their orientation is, do a little due diligence on them.
Speaker 2:Yeah, you know, like you just don't say, hey man, I'd really like to have Mark Zweig on my board, because he's Mark Zweig Right. Like I need to talk with them, build a relationship and then, you know, really investigate that, because you make that decision and you can be causing quite a bit of problems if you don't make that decision wisely. And then I would also say, like, what are the? I would actually approach it, what are my weaknesses? Right, when I think about a board business, I'm like you know these things are I'm not good at Right, and if I had a board member that could help coach me, give me some like, give me the three bullet points.
Speaker 1:I need to go back to the team and get them to Right. I think that's a really good point. Yeah, yeah, bolster your your weaknesses with some of this outside input. I think the biggest thing, though you know, like when I think, when I was young and I had my business, I started at 30. It was only toward the end of the first generation that we had any outside board members for maybe the last two to three years and the business had been in business at that time, probably 13 years.
Speaker 1:Oh, ok, ok, ok. And we brought in one outsider. I was always reluctant to Okay. I was probably the biggest opposing force to the outsiders. I didn't want anybody telling me what to do. I didn't think everybody understood my approach to things and I just didn't want any more. You could say, oh, you don't want to hear any, you want all yes men. No, I don't want all yes men, but I also don't want to argue with somebody every freaking time about direction Okay, especially if they're not as entrepreneurial as I am. That's right, and so that was. I was resistant. I think in retrospect I wasn't't smart. I should have been more open. I should have felt like I had the finesse to pick the best of what they had and the and and not the the worst, or to be able to convince them of our strategy, if, if it was critical to do so to gain their support.
Speaker 2:So it's kind of a discussion of you feared of losing control or you didn't want to deal with that, but the reality is, what you're saying is that you don't. It's not like you bring on the board of directors and you've lost control, right, and they're going to outvote everything that you do. Yeah, exactly you really.
Speaker 1:Is it rational?
Speaker 2:fear, you take the nuggets that they have and you go apply, you know, and you don't have to do everything. That's being said Exactly.
Speaker 1:Yeah, yeah, I mean, I think that's you know, you've got it. It's not like you never listen to them or they don't want to be involved, but you also pick and choose, yeah, and you try to gain consensus. It's always about consensus, okay, consensus. It's always about consensus, okay. You want them to understand where you're going and you want to get their input though. Yes, it's going to be helpful to. You've got to be open to it. Yeah, you got to know that you need help yeah you've got.
Speaker 1:I mean you know, but I, but I, but again, I mean today I think I would approach it a lot differently. I'd be a lot more open to bringing this and the other thing, though, back on how you pick people. A lot of times, when I see firms go down this path, the first two people they add to their board as outside directors is their outside accountant and their outside attorney. I don't recommend that. Okay, that's good advice.
Speaker 1:That's the first place they go. Well, I've been working with Bob over there for 30 years my accountant, and so Bob's going to be the first guy we bring on. Bob may not know shit about the business and growing it. Yeah, he's had his 10 person accounting firm for the last 30 years, and I'd also argue you're already paying him Bingo.
Speaker 1:That was my second point. I've already got his input. Yeah, okay, he didn't pay for that, right? And then the third point is this If my business represents a big chunk of Bob's business, is Bob going to be honest with me? No, he doesn't want to cut off his nose to spite his face. No, so a lot of times where it's like, let's say, it's the outside attorney, yeah, and it's a small attorney, and you're paying them 150 grand a year and they're billing 400 grand a year okay, yeah, they're gonna let that thing drag out as long as they can for that retainer baby.
Speaker 2:You got it.
Speaker 1:We now have an opportunity to sell our company. There's 57 reasons why you don't want to do that. Because I don't want to lose, like you know, 40% of my income here.
Speaker 2:Whoever buys you, they already have a term Right.
Speaker 1:I've seen that more than once, really, yeah, where they become very, very negative and they tell you all the reasons why things won't work.
Speaker 2:Well, we're unfortunately out of time. This went by really quick, man, wow, geez, I can't believe we're already out of time. Well, I think that here's what I would encourage the audience, the listeners, to do Like for real, get on the site, throw in some more questions. You want to hear more about this. I think that this is a good dialogue because it's something to demystify a little bit and it's so valuable. And I agree with you, we're both kind of saying the same thing we wish that we would have done this a lot earlier. Yeah, exactly, you know. I mean, like day one I'm starting a business, I need to probably figure out three board of advisors or board of directors out of the gate. What are my terms? When am I willing to give up? Who is it I'm going to choose? What are the formalities, the legalities, like all that type of stuff, and then take it super seriously and it will be highly valuable for you, exactly.
Speaker 1:I mean, you know, I always like to go back to the example of Miyamoto International, kit Miyamoto. He works for this firm as a young engineer. It's an old firm. It's got like three owners they're all old, they eventually decide they're going to retire and they sell them the business for $250,000, but it's only got like six people or whatever.
Speaker 1:Yeah, okay. So the first thing he does is he puts together an outside board. The first guy he puts on that is a guy who took his company from zero to seven or 800 people and sold it in the same business he was in. He met him at a conference, he liked him and he asked him if he'd do it and the guy said, sure, okay, yeah, perfect, okay, perfect, okay, and and and so and then he got that guy's number two. Then he got another guy who sold to stuff to the same industry and then he got me, okay, so we got eight or nine people and there's four of us on this freaking board as outside directors, but they're all people who've already done it.
Speaker 1:Okay, they grew that company to three or four hundred people. Yeah, that's awesome. Okay, the first guy he hired basically laid out the roadmap to grow that company Because he'd done it. He had the blueprint. Yeah, the blueprint is wherever there's a disaster in the world, you go there and you help out. Yeah, and you will get work and it worked. Wow, I'm just saying that's how pivotal it was, but that's how early on he did it.
Speaker 1:Yeah, smart move man. He's a very smart guy, yeah, and open to learn from other people.
Speaker 2:That's the big thing and that's the hard thing for entrepreneurs. Man Boy, it is, it's hard for me sometimes.
Speaker 1:Oh, me too. It just gets easier the older I get, yeah, yeah, my more secure. My ego is not so tied up in being right. You know what I mean. You're not trying to prove much anymore, right, yeah, and you wouldn't have to either. But yeah, yeah, right, yeah, and you, you wouldn't have to either, but but yeah that's, that's the truth of it.
Speaker 2:That's good stuff, man. Good chat Been fun. Yeah, it has. Y'all submit your questions. We want to this this. Actually, this whole question came from one of our audience members about this discussion. If you want to hear more about it, we'll do part two, three, four or five and whatever it takes to kind of get this out because it's, it's very valuable. This, along with a whole other million things about business and what we're doing.
Speaker 1:So all right.
Speaker 2:Well, until next week this has been another episode of big talk about small business y'all be good, bye-bye.
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