Q: My husband and I run a fence business from our home, and we offer financing, but it is done through an outside company. We are interested in opening our own finance company, but we don't know where to start. We would mainly be offering financing for fence jobs and maybe personal loans-it depends on the information I can dig up.
A: Are you interested in doing this because your experience has given you a good feel for which customers are a good risk and which are not? Unless the answer is an absolute yes, I'd think carefully about this. I'm not saying that you don't want to do this, but be sure you fully understand the risk. Outside agencies such as the one you are currently using have spent a lot of time and money developing the risk profiles that let them profitably decide whom to lend to and whom to refuse.
One argument against this is to ask "What kind of business am I really in?" Is it the fence business or the finance business? They are very different, with different risks and different skill sets involved. To me, you have the perfect setup-you can offer financing, but you don't have to manage it or take the risk. I'd be certain that I understood how much extra money I might make before I took on the extra headache.
On the other hand, if your goal is to eventually get out of the fence business and be in the finance business, then this is a good way to ease into it. I'd recommend talking to a banker or two and letting them explain as much of the process as possible. Then do some research on the Web, and also look for some financial consultants who can guide you.
I've had my share of problems trying to do too many things at once, and I've learned that focus is crucial to success. My advice is to pick one of the two businesses and concentrate all your efforts on making it as profitable as possible.
Q: I am considering approaching several individuals to be on my Advisory Board for my start up company. However I don't know what to offer candidates. I am raising money for the company by offering LLC units.
A: I've see different people do this different ways, and my advice is to offer your advisors some small number of LLC units for every advisory meeting they attend, plus some amount to agree to be and advisor in the first place. I think you want these people on your team, you want them to have incentive for the company to succeed, and you want to be generous with them. The number could vary but here's my opinion on a rough amount-if you have 1,000,000 membership units outstanding, I'd consider giving them a few hundred to start, and then after a few months if they are being of value, I'd up that to a few thousand each. For advisors who are adding significant value to the company, even more.
Q: I am starting a consulting company and am working on the logistics of getting the company up and running. I have a simple question regarding job descriptions. What are the major roles and responsibilities for the president of a company vs. the CEO?
A: I've come to see it this way: the president is an inward-facing position, and the CEO is an outward-facing position. The president (often combined with the COO title) is responsible for running the company-managing the consultants, interfacing with the customers when appropriate, managing the sales and marketing staff, making sure the bills get paid and money is being spent wisely, motivating the employees and so on. The CEO is more responsible for dealing with the press, vendors (especially your banker, attorney and accountant) and strategic partners. The CEO spends most of his/her time on the overall strategy of the company-and setting, understanding and communicating (with employees, vendors and customers) that strategy. A CEO's schedule is filled with networking, going to lunches and dinners, attending meetings, and looking for opportunities to tell the company's story. In one sentence, I'd say the CEO is responsible for articulating the vision/strategy, and the president is responsible for executing that vision/strategy.
Note that until a company is a certain size and can support more overhead, one person usually serves as CEO, president and COO (and of course CFO, CTO, IT support, bookkeeper, janitor, etc.).
When I first started out, we had a three-person company, and I spent a lot of time on job descriptions, employee policies, manuals, etc. Much of that was wasted time, because our real need was getting new business and making sure we delivered quality on the business we had. We really didn't need much of that until we had 15 to 20 people. This is not to say that procedures, policies and job descriptions aren't important, because they absolutely are. As you grow, if you've got good procedures in place, you don't have to reorganize the company every time you get a little bigger. But don't spend too much time on this early on-focus on getting new customers and delivering your service, and you'll have plenty of time to develop other things as you go.