Changing
Directions
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.
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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.
Titles
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.
Originally published in the July 2002 issue of HomeOfficeMag.com