As I’ve said in the past and will continue to state, a good management team is crucial to building a company and attracting investors. You can NOT build a company with a 1-person management team. If your company is young, you may not have the financial wherewithal or the book of business to bring in management. But as your company grows to the $1 million and higher mark, it becomes important. If you plan to keep your business as a small lifestyle business, then you can disregard my comments on a good management team.
A lifestyle business is one that provides you with the income and resources to live the lifestyle you want. Your goal is not to grow a sustainable business that could be sold, taken public, etc. Instead your goal is to grow the business just large enough where you can pull a decent salary, run many of your expenses through the business, and take distributions when you need them to finance other investments or pursuits. There is absolutely NOTHING wrong with having a lifestyle business and wanting to maintain as such. A business such as this is a great thing to have and is what the vast majority of small businesses are. If, however, you’d like to grow your business much larger and help others (investors) grow their assets, then read on.
To reiterate, a high quality management team is key to the successful growth of any business. Yes, a strong CEO/owner/founder is usually the driver. But a driver needs a team to help accomplish the goals. As the business grows, the driver needs viewpoints different from his or her own and skill sets that augment and complement. For example, the CEO may have stellar sales skill and be great at building the customer base. However, much of the delivery of the service is operations, not sales. When the CEO is great at sales, s/he is usually only so so at operations. Without a good operational/service delivery person in charge of that area, the customers may begin to depart due to poor service or follow-up. As the company grows and the number of customers increase and the amount or level or complexity of service and product delivery increases, the need for additional management beyond the owner/founder also rises.
If you do not have the resources to hire additional management, there are options. One is to build a Strategic Advisory Board. The members of this board should be experienced members of the business community who excel in areas you do not. When you have a problem or concern or just need to talk things through, you can contact one of them to get their insight and guidance. The other good thing about a Strategic Advisory Board is that they do not convene regularly but are available for a phone call or coffee meeting (or a meal) when you need them. If you want everyone’s input at once, you can schedule a conference call. This board provides you with additional management expertise and flexibility.
Another way to augment your company’s management team is to hire interim management. You can hire a CEO, COO, or CFO for a year or two or for a few months. Sometimes you can hire a C-level executive for a few weeks or for a day or two on a monthly basis. You may be familiar with the plethora of “rent-a-CFO” organizations springing up. Some of the CFO organizations are really more controller-oriented, meaning they help with historical financials but are not adept at financing. However, most small businesses don’t need the services of a true finance-oriented Chief Financial Officer. A CPA/controller focus will suffice.
If your company is encountering difficulties and needs to restrucutre, then an interim CEO or COO can step in and take the reins and install or change the infrastructure necessary to move the company into good profitability and growth. If you have an immediate growth opportunity (innovation, partnership, etc.) that you need to exploit but don’t know how, an interim C-level executive can get you well on your way. Good interim management view your business as their business and know they succeed when you do. Some of the benefits of utilizing interim management is rapid deployment. It doesn’t take 6 months to recruit and interview an interim CEO who may only be hired for 6 months or a year. It takes a month at most. Because interim C-level executives have relatively short stints at companies, they are highly results oriented. They have significant experience yet bring an objective, new viewpoint.
In summary, a good management team is crucial to growing your business beyond the “lifestyle business” phase. Options such as strategic advisory boards and interim executive management help you bridge the gap until your company has the revenues and/or profitability to hire management full-time. Even for medium-sized companies, boards and interim management are useful in navigating uncharted territory. For companies with outside investors, strategic advisory boards morph into Boards of Directors.