March 19, 2025 • 44 mins
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.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
good morning.
Good morning, it's bright andearly.
Speaker 2 (00:07):
It is man what time did you get up today?
Uh, five something maybe.
Yeah, 5, 45 for me pretty late.
Speaker 1 (00:15):
Yeah, pretty late, little draggy we had my birthday
dinner last night at thecountry club with my family.
Well, very nice.
Yeah, it was fun, it was, it'sgreat.
So is your birthday?
Yeah, it was march 4th, hey wasthat tuesday yeah, happy
birthday, bro, thank you.
60 7 hell yeah, my god, that'sold.
(00:39):
It's like I can't believe it.
You know it's a little surreal.
Yeah it is, but you know whatI'm a little surreal?
Yeah it is, but you know what?
I'm still going strong.
Speaker 2 (00:46):
Dude, you're freaking , you're doing better than.
Speaker 1 (00:49):
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, Igot up at six o'clock and I
hammered it.
I got so much done yesterday itwas mind boggling.
(01:11):
Yeah, it really was.
Yeah, it's good.
So checking those things offbuddy.
Speaker 2 (01:16):
Yeah, man, just a big checkbox, life's just one big
list.
Speaker 1 (01:21):
I can't tell you how many times I have thought about
what you kept saying.
He said it multiple times inthis show Business is just one
problem after another.
It's so true Over and over.
Speaker 2 (01:32):
You can't be discouraged by that, though,
because you just have to expectthat, yeah you do, and then you
have to let things just kind ofshake out on its own.
Sometimes you do, man, I meanthere's a lot of things like
like I'll get pretty angst stuffabout some stuff, and it's just
like, man, it's going to belike I know you love these
things.
It's going to be what it'sgoing to be.
In a way, there's always somuch you can control, you know,
(01:54):
and you can't get all worriedabout competitors.
What is going to happen?
Speaker 1 (02:00):
well, when you're another 20 years older like me,
you won't worry about stuffnearly as much.
I mean it's the only blessing.
Well, not the only blessing ofage, but it is one.
Speaker 2 (02:11):
Well, I remember when we first started working
together, I was like 33 orsomething and I remember sitting
down with you and Ed Friedrichsover dinner one night and I
told you guys how old I was.
You're like, oh man, you knowif I could only go back to that
age or whatever.
But then y'all are both talkingabout how you know, the one
(02:32):
thing you wouldn't want is to goback there and worry like you
used to.
Yes, exactly, it's like you.
Just don't worry about stuff asmuch.
Speaker 1 (02:40):
You've survived it.
You know you can survive it.
Speaker 2 (02:42):
Yeah, you know the outcome.
As long as you just keep doingthe right thing, you keep
working, you keep just solvingthe problems, it usually pans
out pretty good.
Speaker 1 (02:52):
Well, I'm glad you brought up Ed Friedrichs,
because he was an outsidedirector.
That's the topic of ourdiscussion today, but before we
get started, this is anotherepisode of that big talk about
their small business.
We're getting a little better atthat anyway so, yeah, um, it's
(03:14):
great to be back, but, um, yeah,we're going to talk about
outside directors today.
Ed was an outside director whenwe first bought the company
back or well, we hadn't evenbought it back, I had a piece of
it.
He gave me a piece of it, thelender to start with, and then I
put some cash in and I bought alittle bit more, but we had Ed.
Ed was a very experienced guy.
Unfortunately, he's not with usany longer, but he was the
(03:41):
president and CEO of Gensler,the largest architecture firm in
the world, and we servearchitecture and engineering
clients.
Yep, okay.
Speaker 2 (03:51):
It was a good outside director to have on the team.
Speaker 1 (03:55):
Man Right, and that's one of the reasons to get
outside directors is you bringsomebody in who either worked in
a client or in the industrythat you serve, yeah, who can
give you some insight and maybehas some connections that would
benefit your business.
Speaker 2 (04:15):
Yeah, a lot of credibility.
Yeah, I mean the PR part to it,you know, is substantial.
Yes, you know, just to you knowin involved in the speaking
engagements or whatever it mightbe.
You know, and I think, like onthat, like you can even it's
even more accelerated today, ifyou 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.
(04:38):
I mean you can just have those,those those long conversations
that help your audience out it.
It just gives you so muchcredibility.
Speaker 1 (04:45):
It does.
It shows that you've got someinsight into when their issues
are and all are good, but yeah,that's kind of funny.
Another thing I've discoveredI've been an outside director.
Probably.
I say outside directorSometimes I got paid in
ownership but I still wasn't anemployee.
Yeah, I'm doing one right nowwhere I get paid in ownership,
but I still wasn't an employee.
Yeah, I'm doing one right nowwhere I get paid in stock.
(05:06):
Okay, um, but um, you know,it's interesting, um, if the
company has a plan to exit atsome point or raise new equity
capital, the right outsidedirectors can really give you
credibility.
Like one situation I'm in rightnow where we're talking to a
(05:30):
potential investor.
He only wanted to talk to me,which I think is kind of
interesting, because he thoughtI had more experience and
knowledge, thought I had moreexperience and knowledge.
So, you know, I think sometimesand sometimes it does help I
(05:50):
mean to get that capital if youhave somebody that the investor
feels is like a credibleinfluence on things.
Speaker 2 (05:57):
Absolutely Right, yeah, and there, there, probably
, there's a, you know, as aninvestor.
You know, by the way, one ofthe best analogies I've ever
heard in my life this is greatfor entrepreneurs.
I can't remember where I heardit, but investors are like
horses.
They got eyes on the two sidesof their head and they're
looking for whatever it is tocome and take what they have.
(06:19):
Yeah, Right, they're basicallyprey.
Entrepreneurs are like wolveseyes on the front of their face,
like going out and hunting.
Yeah, you right, yeah.
And so there's this tensionbetween them that there's always
that, which is great.
You know, I like the the wolfanalogy.
But I mean I can alsounderstand on the investor side.
You know, you're looking, Imean people will spend money,
(06:40):
I'm sure, you know, real quick,without you know worrying about
the.
But as an investor coming to anoutside director, you know, I
would think that there's goingto be more of a non-biased,
non-wolf approach, exactly Likethis director has is kind of has
a higher is at a higher level,protecting the organization, the
(07:00):
outcome of the business.
From that experience they'vehad.
Speaker 1 (07:04):
That's, yeah, that's the idea I mean.
I think too I don't want to gettoo far off topic but a lot of
times when companies are outlooking for outside capital, the
management is overly optimisticoh yeah, okay, yeah, and the
investor, as you said, is veryskeptical, right.
So if you put somebody who'soverly optimistic with somebody
(07:25):
who's very skeptical, um, theskeptical person may feel that
they don't have the management,doesn't have the credibility.
That's right, okay, yeah.
So I think sometimes theoutside director has to kind of
bridge the gap, yeah, and goyeah, this is where things are,
you know, let's be honest aboutwhere we are, but this is what
(07:46):
we're going to know.
Let's be honest about where weare, but this is what we're
going to do to get it to thenext level.
Speaker 2 (07:49):
Yeah, and as a director, you've spent the time
with the management.
You've kind of already gonethrough a lot of these
conversations and now you'reable to.
Yeah, eric over there.
He is pretty goofy andbullheaded.
Speaker 1 (08:04):
However, like we've been talking for six, months,
yeah, and it's here's his trackrecord too, in the end, okay,
yeah eventually made you.
Speaker 2 (08:09):
It's kind of like probably my director now that I
think about it but so anyway, um, but, but, um.
Speaker 1 (08:19):
I think a lot of small privately held companies
don't realize the benefits ofbringing on outside directors,
not just just from the clientbase.
But let's say, your plan is tobuild up and sell the private
equity.
Have you got somebody out thereyou can bring on who's done
this more than once?
Right, that could be veryhelpful to you because they
understand how the whole thingworks.
(08:40):
Or, if you work in a heavilyregulated industry, can you get
somebody who comes out of thatregulatory body who can act as
an intermediary between you andthe regulators?
Yep, that can be huge.
Okay, they're like a lobbyistalmost for your company.
Absolutely, absolutely.
(09:02):
And you know, in general, Ithink, if you've got a young
management that doesn't have theexperience, sometimes bring in
some gray-haired people inwho've grown a business and been
through all the.
You know the travails of that.
Speaker 2 (09:18):
You know, there's one thing, too, that I've been
noticing, you know, with acouple of entities I've been
working with, is when you havedirectors, there's another level
of accountability for themanagement team.
Absolutely, you know.
I mean, it's one thing for youknow the internal management
team to have a report to deliverto their peers in management.
(09:42):
It's another thing when theyhave to go see the directors.
Right, they've got a bunch ofexperienced people in there with
a lot of credibility.
It's a good point.
They probably triple-checkedtheir numbers this time, thought
about it a whole bunch and itmakes them better, so much
better Well it's the same thingtoo.
Speaker 1 (10:01):
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 toquestion you and who's got
nothing riding on it other thantrying to help you Right, that's
a big deal that can be veryvaluable Dude, I'll admit right
(10:23):
now I need a lot ofaccountability.
Speaker 2 (10:27):
Just with a couple of entities I have that.
I just need to check in Rightand say man, what are you doing,
eric?
Yeah, you need to do somechanges within the organization.
Speaker 1 (10:41):
Yeah.
Then you say you don'tunderstand what I'm doing here.
Speaker 2 (10:46):
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'reremoved.
But then I get out of theconversation.
Then a week or two go by, I'mlike, damn it, man, mark was
right, it's the same stuff,right?
Yeah, it's like.
It's like we're all kids, youknow, it's like going back to
childhood.
You know your folks tell youthey give you the wisdom, they
care about you, right, they wantyour best interest, don't do
(11:07):
this, don't eat that, you know,like whatever.
And then you realize later onoh man, I should have listened,
right that's that famous marktwain quote.
Speaker 1 (11:17):
It's like you couldn't believe how dumb his
dad was when he was 17 orwhatever, yeah, and then by the
time he was 25, he was hecouldn't believe how much his
dad had learned over the lasteight years.
That's so true, man.
Speaker 2 (11:31):
That is so funny.
You know one thing about, likethis whole director thing that I
think that maybe entrepreneursare a little it's a little bit
of a mystery and I mean to behonest with you, it's in some
parts still mystery to me.
What are the mechanics ofgetting them onboarded, like the
details?
(11:51):
Do you have to pay them all?
Does it have to come withequity?
Does it have to come with amixture?
I mean, do they legitimatelyhave voting stock?
That's a great type of stuff?
Speaker 1 (12:03):
Yeah a vote.
Yeah, I think that's a greatstuff.
Yeah, vote a vote.
Um, yeah, I think that's agreat question.
I mean, the answer is there'sno hard and fast rules.
Okay, sometimes there there arepeople that are just want to
help you out.
Yeah, um, you know, I've neverbeen an outside director where I
(12:25):
didn't get paid.
Okay, um, and it's very wildly,um, and it sort of depends on
the company and what they canafford and how big they are and
how much time it's going to take.
Speaker 2 (12:30):
All right, so let's take it from this standpoint.
I got a new business.
I started Mm-hmm, and, mark, Ireally respect your credibility
and your experience.
I need your help, right?
I mean, will you help me outand I don't have any money to
pay you?
Yeah, and I own 100% of this.
I'm really nervous about givingany equity up.
Speaker 1 (12:51):
I might not be able to help you.
I mean seriously, there's onlyso much time to go around.
No, no, no, I get it.
Speaker 2 (13:01):
But that's a lot of times the position that the
entrepreneur is stuck in.
Speaker 1 (13:04):
Yeah, it could be.
I mean, you know, so on thatthough.
Speaker 2 (13:10):
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 aboutequity.
Speaker 1 (13:20):
Here's another way to look at it, though.
Okay, yeah, you said you didn'twant 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 ofdevaluing any ownership interest
by not having voting rights.
(13:40):
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 realownership if you don't have
voting rights for the stock.
So what do I care?
If I own 99.5% and somebody has0.5% but they have voting
rights, it doesn't mean anything.
Okay.
And somebody has 0.5% but theyhave voting rights, it doesn't
(14:00):
mean anything, okay.
Speaker 2 (14:03):
So if you were to come on the board, you'd want
equity with voting stock.
Speaker 1 (14:07):
Yeah, I would want equity, absolutely, I mean.
But if you don't want to do itand I would expect that equity
to be undervalued, whether it'san internal formula, or you're
giving me more than what my timewould cost.
(14:28):
In other words, if what I'mdoing for you should cost
$20,000 and you're going to payme in equity, I might need
$30,000 or $40,000 worth of realvalue in equity.
I mean, I'm just throwing thatout there.
Okay, it's not liquid.
Speaker 2 (14:43):
Yeah yeah, yeah, you can't cash it in.
Speaker 1 (14:46):
Yeah, exactly, it's a lot riskier.
Speaker 2 (14:49):
But how would you be convinced, as a director, to
know that, whatever my synopsisis and the valuation at that
point, oh, I'd have to getmyself familiar with the company
.
Speaker 1 (15:01):
You'd have to get in the numbers, wouldn't you?
Yeah, I mean I'm not going tojoin any company forward if I
don't know what the numbers are,and I'm also going to insist
they have DNO insurance, by theway.
Okay, because directors andofficers insurance is critical.
It's not that expensive.
You don't want to end upgetting sued by something the
company does that you hadabsolutely no involvement with.
I mean, that can happen.
(15:22):
But let's go back to this for aminute.
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 saywe want some outside directors.
We're going to hire two orthree outside directors.
I mean, generally, sort of agood place to start, in my
opinion, is if you're going tohave four meetings and you're
(15:44):
going to have communication inbetween the meetings, you need
to pay like $20,000 or $25,000at a minimum.
All right, four meetings foreach of those people Per year,
once a quarter.
Yeah, you need to pay $20,000to $25,000 minimum for those
people.
Okay, if you're hiring the rightpeople for this, these people
make money.
Okay, they're making 400,000.
If you hired him, you wouldn'tbe able to afford to hire Right,
(16:07):
okay, right, and make 300, 400,500,000 million dollars a year,
whatever.
So you're getting theirexpertise?
Yeah, for 20 or 25,000.
And you can call them anytimeyou want.
That's a bargain.
So if I bring three of thoseexperienced people on, maybe
I've made 60 to 75,000 for ayear.
(16:28):
How in the world could I hireanybody who brings all that to
the business?
Speaker 2 (16:32):
Yeah, that's the way you need to look at it, that's
the entrepreneur's perspectiveoutside the board of directors.
Yeah, and it's cheap.
It's cheap for what you'regetting.
And would you say that, like, agood entrepreneur would have
this kind of written down as towhat they have expectations for,
right, say, hey, you know we'regoing to have one meeting per
(16:54):
oh, absolutely yeah, and themeeting'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 youbasically any time and your
responsibility is to get backwith me.
Speaker 1 (17:10):
Yeah, I mean you don't have to say it quite that
ugly.
But Now hopefully you'll beavailable if I have questions
along the way or we need to talk.
Speaker 2 (17:19):
Okay, yeah, and we'll pay you $25,000 a year.
Yeah, and how do the terms ofpayment work out?
I don't know.
Speaker 1 (17:26):
You can pay them once a quarter or you can pay them
every month or whatever worksfor your system.
But that's sort of typical.
Now, again, that's sort of aminimum.
Yeah, if I'm talking aboutjoining 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 beworking for $20,000 or $25,000.
(17:48):
I mean seriously, in thosecases, a lot of times you'll
either get paid in stock andthere's going to be so much
stock and hopefully again you'rethere's going to be so much
stock and hopefully again it'syou're getting paid in
undervalued stock that if yougrow this company or if you sell
this company you're going toget some kind of a premium on it
(18:08):
.
Okay, or you're just gettingpaid more to do what you do.
Speaker 2 (18:11):
Yeah, how do you, as a board director in that
situation, value what yourcompensation is?
Speaker 1 (18:18):
It depends.
I mean, it's all subjective,yeah, and a lot of it is like
how much do you like the peopleyeah, I hate to say it as a
director the people you'reworking with, yeah, and yeah,
and how much work is it going tobe?
And you know where?
Where does it fit into yourscope of all the things you're
(18:39):
doing?
Because sometimes you know yourtime is more um less available
than others.
Yeah, because we're startingstuff right.
Yeah, you know we all got.
That's just one thing we'redoing.
We all get like 10 other thingswe're doing right, right, so
sometimes it's timing is better.
But I mean, I think the most Iever got paid was a hundred
(19:01):
thousand um, and and that was nostock in that situation.
In other cases I got paid 20 or25 000.
I could buy stock like.
One situation was you could buystock at last year's price this
year, so if it went up, youknew you had an immediate gain
on it.
Yeah, it's just see what I mean, um.
Speaker 2 (19:22):
So that was kind of a motivator and I think the thing
that can be a little bitintimidating for entrepreneurs
is is like, pay specialattention, what we're talking
about here, about there's thedifference between a startup
company looking for board ofdirectors and how a board of
director true perceivesives thatversus a mid-sized growing
organization.
(19:43):
Yeah, because this discussionhere's here's the thing I'm
trying to get at.
The discussion of stocks, youknow, premium stock, all this
type of stuff is.
It's complicated, right?
And the second you're into thatrealm 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 shouldjust be making freaking phone
(20:05):
calls and doing sales.
That's my mindset.
Speaker 3 (20:08):
It's like why am I going?
Speaker 2 (20:09):
to mess with all this for some soft return versus.
I know I can make calls and godog it out and get some sales in
and that's real money to me.
That's where.
That's where a lot of times myconflict 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 hearabout board of directors.
(20:32):
It is complicated because yousee, what you see in the news or
what you see, I guess, just ingeneral in school, is a little
bit more of a complicated boardof directors profile, stock, all
these legalities and things,and it becomes Well, it doesn't
have to be like that.
Speaker 1 (20:48):
No, I know, that's what.
Speaker 2 (20:49):
I'm expressing, though Right To a new
entrepreneur Like you don't haveto make it this complex thing.
Speaker 1 (20:54):
You could just make him a non-voting advisory board
member.
Okay, I, you could just makehim a non-voting advisory board
member, okay.
Speaker 2 (21:01):
I'm in one of those right now, but that's not a
director, that is an advisor.
Speaker 1 (21:06):
Yeah, you're just an advisor to the board, but
basically you function exactlythe same way.
Okay, so let's talk about you,just don't vote and second
things.
But at a board of directorslevel it's not like everything.
Hopefully nothing comes to avote ever.
You go for consensus, yeah.
Yeah, it's not like fouragainst three, the Supreme Court
(21:28):
or whatever.
I'm the company.
You know what.
Speaker 2 (21:30):
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, likeyou know, people may not know
what you're talking aboutsometimes because you're just so
incredibly smart.
Speaker 1 (21:45):
I don't know about that.
Maybe, I'm just a poorcommunicator.
Speaker 2 (21:49):
Maybe that's it.
No, but I mean, I'm just tryingto put myself in the shoes of a
new starter Sure.
Doesn't know what they're doingor doesn't know a lot about
this is a different criteria andarea and purpose than an
advisor to the company,technically speaking, Because a
(22:13):
director most likely has votingstock on the board.
Speaker 1 (22:17):
to make decisions.
They don't necessarily have tohave stock, but they have voting
rights as a board member, sothey come to the.
Speaker 2 (22:26):
There are official board meetings that they attend
there.
Yes, sir, if you're anentrepreneur and you have 100%
equity in this company and thenyou release, but then you offer
voting rights and a boarddirector, you have a board
meeting that you, as a CEO ofthat company, you have to abide
by what that board is voting.
At the end of the day, that'swhere it can get to.
Speaker 1 (22:48):
Right Now, of course, you've got 100% of the stock,
so you elect the directors.
Sure, shoulder's elect thedirectors.
So if you don't like them, youcould just get rid of them.
Yeah, and vote them out Sorry.
Speaker 2 (23:00):
Right, right, but that's a tangled ass mess as
well.
Speaker 1 (23:04):
Right.
Speaker 2 (23:13):
If it comes down to that, yeah, yeah.
I just think that there'ssomething to discuss, like what
you're getting yourself involvedin if you're going to go for a
board of directors.
Now, I think the value to thatis is that there's a much more
deep engagement with your boardof directors than you would have
with a board of advisors.
Speaker 1 (23:22):
Okay, again, don't get confused about this.
Okay, yeah, there is a board ofdirectors and there's a board
of advisors.
That's not what I was saying,though.
I'm saying I'm an advisor onthe board of directors, I'm just
like a board member, but I'mnot officially a board member.
Okay, so let's say there'sseven people on the board, I'm
(23:44):
the eighth.
Yeah, okay, it's not like wehave a separate board of
advisors that sits over herethat nobody has to listen to,
right?
You understand?
Yeah, yeah, yeah.
So so I don't.
I'm not gonna just work as anadvisor for the company for that
kind of money they want to dothat.
They're gonna pay us 500 bucksan hour.
Yeah, yeah, yeah, yeah, yeah,that's a different deal.
(24:05):
This is.
That's good clarity.
This is board of directors,okay, but whether you're
official or not, like one caseof a firm in new york, they have
a requirement due to licensinglaws 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 ofus on there and the and that
(24:29):
drives it below 75, I don't needto be a voting member.
But for all practical purposes,I am okay.
Okay, does that make sense?
Speaker 2 (24:39):
yeah, yeah, yeah and so.
So what you're articulatingearlier, you can.
If you're looking for just anadvisor, yeah, you might just
pay a high consulting fee forsome advising for one hour or
two here and there yeah, or anongoing arrangement where you
meet with them every month orwhatever.
Speaker 1 (24:57):
But yeah, that's a different deal that's a whole
different deal.
Speaker 2 (25:00):
right, we're talking about board of directors, where
you are.
If you're bringing somebody onlike it'd say, formalized and
because part of the value here,I think, as a board of director
is it does help give youcredibility back as a board of
director Exactly, right.
I mean, you sit on the boardwith these four companies and
this is really part of yourincome, it's part of your career
(25:23):
.
Yeah, you know, at that point Ithink entrepreneurs need to
understand that too.
Right, like you build and sellexit companies, you become on
boards.
You're at this level to whereyou're advising as a board of
director across multiplecompanies.
That is my career path.
Speaker 1 (25:39):
Yes, yes, I think it's a lot for a lot of people
who retire from their businessor their high level job.
They become directors.
Yeah yeah, that's sort of anormal career path for people
who don't want to just be done.
Yeah, right, you know.
Speaker 2 (25:57):
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 (26:04):
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 outsidedirector is joining and the
management of that company andthe relationship with those
people is so critical.
If they suck your energy andthey don't listen to you, it's
(26:25):
like a bad mentoring situation.
It's like Eric situation.
It's like eric I want you to bemy mentor, meet with me once a
month, you do, and then I neverdo what you suggest.
Okay, forget that.
Yes, all right, so there is agiving back element to it, that
you have to feel like you'revalued or it's not worth it and
it's no matter what you get paidthat's right and I think that's
(26:47):
what's you know.
Speaker 2 (26:48):
To get back to the original, like what we're trying
to express here to a smallbusiness owner, the value of
having a board of director, it'sthat.
It's that if you can find aboard of director that is
wanting like you, have arelationship.
They want to give back to you.
They have a.
They haven't there's outrelationship.
(27:08):
They want to give back to you.
They have a.
They haven't.
There's out.
Of all the people you deal within your business, right,
they're your advocate.
Yes, yeah, they want to helpyou.
They want to help you.
They don't have a differentincentive.
They're not trying to makemoney off of you.
They're just trying to becompensated for their time
because they have to be.
Yeah Right, exactly, that's it.
But then they're engaged andinvested with you to see you
personally win and successful.
Speaker 1 (27:30):
That's the ideal scenario, right there, right,
that's the ideal scenario.
So let's just step back for aminute and go back.
I'm a small company.
I'm growing okay.
I feel like I don't knoweverything Right and I could
have other tentacles out intothe marketplace to help me win
work or business.
(27:51):
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 oftheir advice.
I get them.
I can publish that.
I can publicize.
They're on my board.
They can help me sell thecompany later.
(28:13):
They can help me attractinvestors.
They can give me credibilitywith my bank.
Give me advice that I need onan ongoing basis because they're
experienced.
I couldn't hire any one personfor 60 or 75 000.
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
(28:34):
voting.
Who gives a shit got it doesn'treally matter.
Yeah, it's going to functionthe same way.
Words we always go forconsensus.
We're not voting on things,right, okay, right, I Right.
I mean, if we are, it's down tothe disaster point, right, do
we pull the plug or not?
I mean, it's like I was readingjust last night an article on
(28:54):
KTM, largest European motorcyclemaker, is going bankrupt.
Their board voted to close downthe company.
Okay, that's a different deal.
You know where there wasopposition?
There were two factions.
So, yeah, I think that's theway you need to think about it
(29:14):
and it can be extremelybeneficial to the small business
owner.
Most don't do it Right.
They don't want anybody tellingthem what to do, or they're
fearful, or they don't want toexpose their weaknesses and
deficiencies.
Speaker 2 (29:29):
I would say it's ego.
And I would say a third reasonis 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 auh, it's something that's not
really clarified no, it's not.
Speaker 1 (29:43):
It's hard to go find a book on this that tells you
what to do.
Yeah, what the yes it is, it isman.
Speaker 2 (29:48):
Yeah, it really is.
And you know, I mean for theaudience's sake, like what I've.
You know, as we're talkingabout this, like the credibility
of your conversation on thispoint is really high.
How many boards have you sat onover the years?
Speaker 1 (30:01):
At least 13 or 15.
Some of them I was an owner onand some I wasn't yeah, but they
weren't like my business per se.
Speaker 2 (30:10):
Yeah, because you used to travel around, you'd be
going to board meetings all thetime, right?
Speaker 1 (30:15):
I still am on some boards.
I'm on two nonprofits and one,two, three, four, four profits
right now.
Speaker 2 (30:24):
Do they have to?
So okay, if you get this board,is there an expected formality
about how these board meetingsare to be handled?
Speaker 1 (30:35):
Well, I mean, part of it depends on whether it's a
corporation or it's an LLC.
Okay, llcs don't have they havea board of managers.
They don't have a board ofdirectors.
I'm a big fan of corporations.
I hate LLCs generally.
Unless I'm not going to changeownership, then it's fine, then
I don't mind it.
But so, yeah, there'slegalities.
(30:57):
You've got to keep minutes.
You report this to theSecretary of State in whatever
state you're incorporated.
Generally speaking, though,again, I'm going to have a
business attorney that we'regoing to send the minutes to
them.
They're going to file all thestuff that we need to file the
annual report, the election ofofficers.
They'll take care of all that.
It's not a big cost.
(31:17):
You've got to have anexperienced business attorney.
They just do this as a matterof course.
(31:44):
It's not a big cost at all.
Right?
So yeah, you do.
You know is a legal sort ofstructure for the thing, but
it's not that big of a deal.
Speaker 2 (31:53):
Just talk to your attorney.
Yeah, yeah, and it's paperwork,basically, exactly, yeah,
that's it.
It's not something that, as anentrepreneur, you need to be
concerned with and feeloverwhelmed with.
Speaker 1 (32:03):
Yeah.
Speaker 2 (32:05):
Yeah, exactly, thank you and feel overwhelmed with
yeah, exactly, thank you.
Well, I mean to be honest withyou, like my career path it's
been like that has been a, youknow, a kind of a friction point
for me to feel more free tohave, because I can see the, I
totally see the value of boarddirectors, right, you know, and
(32:25):
having folks like yourself andothers that are around my
business invest, you know, alittle bit.
Speaker 1 (32:30):
And you and I are on one board together.
I mean, you see what theinteraction is.
Speaker 2 (32:34):
No, it's fantastic.
Speaker 1 (32:35):
But they value what you have to say Absolutely.
I mean, you either motivatethem or demotivate them, or you
give them ideas that they hadn'tthought of.
Speaker 2 (32:43):
Mm-hmm, mm-hmm, you thought of you know, yeah, but
there's a lot of work that goesbehind that, behind the scenes,
right.
I mean, like you know, thatteam, the management team, is
doing a lot of work to preparefor those meetings to you know
Exactly, and then to follow upfrom those meetings and I would
say that it's been veryimpressive.
I actually told the folks theother day in the last board
(33:05):
meeting we were in and I thinkyou had to jump off, but I was
like guys, you are doing areally good job communicating.
We're trying to From a boardside.
Yeah, I mean, it feels likethere is activity, they're
taking it seriously and so Ifeel appreciated, right, you
should because, they appreciateyou, but I mean, I think that
(33:26):
that's a big deal right.
It is Because if you're anentrepreneur and you start this
board, here's the last thingthat you want to do.
You don't want to get thisboard together and then not
follow through.
You will make things worse thanbetter.
Yep, because now you've lostyour credibility with the board.
You know you haven't solved anyproblem, you haven't moved
(33:48):
forward Like it's.
You know to that point, as inthis discussion, the board is
highly valuable, but take itvery seriously.
This is not paying for anadvisor.
Speaker 1 (34:00):
Right.
Pick your board members wisely,though.
By the way, I mean, I was on aboard of a company once where
they brought a guy in as anoutside director and we all
could not stand him, and the ceo, as soon as his term was up,
sent the guy packing, becauseall he did he had worked at one
(34:20):
company and, no matter whatproblem came up, it was like
well at abc, blah, blah, blah,and we just got every single
meeting.
You'd hear that 10 times andwe're all like we don't give a
shit about ABC.
They sucked, okay.
That's why you got forced outof ABC, because you're
incompetent, yeah.
And now we've got to listen toyou tell us how ABC did it.
(34:42):
And ABC is not doing well, solet's just be quiet over there.
Yeah, all right.
Speaker 2 (34:49):
So how do you pick board members outside board
members wisely?
Speaker 1 (34:54):
Well, I mean it's, you know, it's good to have a
choice.
I mean you got to think aboutyour network.
You got to think about yourclients.
You got to think about yourregular.
What are the things that arereally driving your business?
Yeah, and develop a slate ofcandidates and talk with them,
you know, interview them, findout what their orientation is,
do a little due diligence onthem.
Speaker 2 (35:14):
Yeah, you know, like you just don't say, hey man, I'd
really like to have Mark Zweigon my board, because he's Mark
Zweig Right.
Like I need to talk with them,build a relationship and then,
you know, really investigatethat, because you make that
decision and you can be causingquite a bit of problems if you
don't make that decision wisely.
And then I would also say, like, what are the?
(35:36):
I would actually approach it,what are my weaknesses?
Right, when I think about aboard business, I'm like you
know these things are I'm notgood at Right, and if I had a
board member that could helpcoach me, give me some like,
give me the three bullet points.
Speaker 1 (35:55):
I need to go back to the team and get them to Right.
I think that's a really goodpoint.
Yeah, yeah, bolster your yourweaknesses with some of this
outside input.
I think the biggest thing,though you know, like when I
think, when I was young and Ihad my business, I started at 30
.
It was only toward the end ofthe first generation that we had
any outside board members formaybe the last two to three
(36:15):
years and the business had beenin business at that time,
probably 13 years.
Oh, ok, ok, ok.
And we brought in one outsider.
I was always reluctant to Okay.
I was probably the biggestopposing force to the outsiders.
(36:36):
I didn't want anybody tellingme what to do.
I didn't think everybodyunderstood my approach to things
and I just didn't want any more.
You could say, oh, you don'twant 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 freakingtime about direction Okay,
(37:00):
especially if they're not asentrepreneurial as I am.
That's right, and so that was.
I was resistant.
I think in retrospect Iwasn't't smart.
I should have been more open.
I should have felt like I hadthe finesse to pick the best of
what they had and the and andnot the the worst, or to be able
to convince them of ourstrategy, if, if it was critical
(37:24):
to do so to gain their support.
Speaker 2 (37:26):
So it's kind of a discussion of you feared of
losing control or you didn'twant to deal with that, but the
reality is, what you're sayingis that you don't.
It's not like you bring on theboard of directors and you've
lost control, right, and they'regoing to outvote everything
that you do.
Yeah, exactly you really.
Speaker 1 (37:41):
Is it rational?
Speaker 2 (37:43):
fear, you take the nuggets that they have and you
go apply, you know, and youdon't have to do everything.
That's being said Exactly.
Speaker 1 (37:51):
Yeah, yeah, I mean, I think that's you know, you've
got it.
It's not like you never listento them or they don't want to be
involved, but you also pick andchoose, yeah, and you try to
gain consensus.
It's always about consensus,okay, consensus.
It's always about consensus,okay.
You want them to understandwhere you're going and you want
(38:12):
to get their input though.
Yes, it's going to be helpfulto.
You've got to be open to it.
Yeah, you got to know that youneed help yeah you've got.
I mean you know, but I, but I,but again, I mean today I think
I would approach it a lotdifferently.
I'd be a lot more open tobringing this and the other
thing, though, back on how youpick people.
A lot of times, when I seefirms go down this path, the
(38:36):
first two people they add totheir board as outside directors
is their outside accountant andtheir outside attorney.
I don't recommend that.
Okay, that's good advice.
That's the first place they go.
Well, I've been working withBob over there for 30 years my
accountant, and so Bob's goingto be the first guy we bring on.
Bob may not know shit about thebusiness and growing it.
(39:01):
Yeah, he's had his 10 personaccounting firm for the last 30
years, and I'd also argue you'realready paying him Bingo.
That was my second point.
I've already got his input.
Yeah, okay, he didn't pay forthat, right?
And then the third point isthis If my business represents a
(39:22):
big chunk of Bob's business, isBob going to be honest with me?
No, he doesn't want to cut offhis nose to spite his face.
No, so a lot of times whereit's like, let's say, it's the
outside attorney, yeah, and it'sa small attorney, and you're
paying them 150 grand a year andthey're billing 400 grand a
year okay, yeah, they're gonnalet that thing drag out as long
(39:45):
as they can for that retainerbaby.
Speaker 2 (39:47):
You got it.
Speaker 1 (39:51):
We now have an opportunity to sell our company.
There's 57 reasons why youdon't want to do that.
Because I don't want to lose,like you know, 40% of my income
here.
Speaker 2 (40:00):
Whoever buys you, they already have a term Right.
Speaker 1 (40:04):
I've seen that more than once, really, yeah, where
they become very, very negativeand they tell you all the
reasons why things won't work.
Speaker 2 (40:14):
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 whatI would encourage the audience,
the listeners, to do Like forreal, get on the site, throw in
some more questions.
You want to hear more aboutthis.
I think that this is a gooddialogue because it's something
to demystify a little bit andit's so valuable.
(40:35):
And I agree with you, we'reboth kind of saying the same
thing we wish that we would havedone this a lot earlier.
Yeah, exactly, you know.
I mean, like day one I'mstarting a business, I need to
probably figure out three boardof 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, thelegalities, like all that type
(40:57):
of stuff, and then take it superseriously and it will be highly
valuable for you, exactly.
Speaker 1 (41:03):
I mean, you know, I always like to go back to the
example of MiyamotoInternational, kit Miyamoto.
He works for this firm as ayoung engineer.
It's an old firm.
It's got like three ownersthey're all old, they eventually
decide they're going to retireand they sell them the business
for $250,000, but it's only gotlike six people or whatever.
(41:24):
Yeah, okay.
So the first thing he does ishe puts together an outside
board.
The first guy he puts on thatis a guy who took his company
from zero to seven or 800 peopleand sold it in the same
business he was in.
He met him at a conference, heliked him and he asked him if
he'd do it and the guy said,sure, okay, yeah, perfect, okay,
(41:48):
perfect, okay, and and and soand then he got that guy's
number two.
Then he got another guy whosold 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 onthis freaking board as outside
directors, but they're allpeople who've already done it.
(42:08):
Okay, they grew that company tothree or four hundred people.
Yeah, that's awesome.
Okay, the first guy he hiredbasically laid out the roadmap
to grow that company Becausehe'd done it.
He had the blueprint.
Yeah, the blueprint is whereverthere's a disaster in the world
, you go there and you help out.
(42:29):
Yeah, and you will get work andit worked.
Wow, I'm just saying that's howpivotal it was, but that's how
early on he did it.
Yeah, smart move man.
He's a very smart guy, yeah,and open to learn from other
people.
Speaker 2 (42:45):
That's the big thing and that's the hard thing for
entrepreneurs.
Man Boy, it is, it's hard forme sometimes.
Speaker 1 (42:51):
Oh, me too.
It just gets easier the older Iget, yeah, yeah, my more secure
.
My ego is not so tied up inbeing right.
You know what I mean.
You're not trying to prove muchanymore, 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 (43:09):
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 questioncame from one of our audience
members about this discussion.
If you want to hear more aboutit, we'll do part two, three,
four or five and whatever ittakes to kind of get this out
because it's, it's very valuable.
This, along with a whole othermillion things about business
(43:32):
and what we're doing.
Speaker 1 (43:34):
So all right.
Speaker 2 (43:36):
Well, until next week this has been another episode
of big talk about small businessy'all be good, bye-bye.
Speaker 3 (43:53):
Thanks for tuning into this episode of Big Talk
about Small Business.
If you have any questions orideas for upcoming shows, be
sure to head over to our website,
wwwbigtalkaboutsmallbusinesscomand click on the Ask the Host
button for the chance to haveyour questions answered on the
show.
Stay connected with us onLinkedIn at Big Talk About Small
(44:14):
Business and be sure to headover to our website to read
articles, browse episodes andask questions about upcoming
shows.
good morning.
Good morning, it's bright andearly.
Speaker 2 (00:07):
It is man what time did you get up today?
Uh, five something maybe.
Yeah, 5, 45 for me pretty late.
Speaker 1 (00:15):
Yeah, pretty late, little draggy we had my birthday
dinner last night at thecountry club with my family.
Well, very nice.
Yeah, it was fun, it was, it'sgreat.
So is your birthday?
Yeah, it was march 4th, hey wasthat tuesday yeah, happy
birthday, bro, thank you.
60 7 hell yeah, my god, that'sold.
(00:39):
It's like I can't believe it.
You know it's a little surreal.
Yeah it is, but you know whatI'm a little surreal?
Yeah it is, but you know what?
I'm still going strong.
Speaker 2 (00:46):
Dude, you're freaking , you're doing better than.
Speaker 1 (00:49):
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, Igot up at six o'clock and I
hammered it.
I got so much done yesterday itwas mind boggling.
(01:11):
Yeah, it really was.
Yeah, it's good.
So checking those things offbuddy.
Speaker 2 (01:16):
Yeah, man, just a big checkbox, life's just one big
list.
Speaker 1 (01:21):
I can't tell you how many times I have thought about
what you kept saying.
He said it multiple times inthis show Business is just one
problem after another.
It's so true Over and over.
Speaker 2 (01:32):
You can't be discouraged by that, though,
because you just have to expectthat, yeah you do, and then you
have to let things just kind ofshake out on its own.
Sometimes you do, man, I meanthere's a lot of things like
like I'll get pretty angst stuffabout some stuff, and it's just
like, man, it's going to belike I know you love these
things.
It's going to be what it'sgoing to be.
In a way, there's always somuch you can control, you know,
(01:54):
and you can't get all worriedabout competitors.
What is going to happen?
Speaker 1 (02:00):
well, when you're another 20 years older like me,
you won't worry about stuffnearly as much.
I mean it's the only blessing.
Well, not the only blessing ofage, but it is one.
Speaker 2 (02:11):
Well, I remember when we first started working
together, I was like 33 orsomething and I remember sitting
down with you and Ed Friedrichsover dinner one night and I
told you guys how old I was.
You're like, oh man, you knowif I could only go back to that
age or whatever.
But then y'all are both talkingabout how you know, the one
(02:32):
thing you wouldn't want is to goback there and worry like you
used to.
Yes, exactly, it's like you.
Just don't worry about stuff asmuch.
Speaker 1 (02:40):
You've survived it.
You know you can survive it.
Speaker 2 (02:42):
Yeah, you know the outcome.
As long as you just keep doingthe right thing, you keep
working, you keep just solvingthe problems, it usually pans
out pretty good.
Speaker 1 (02:52):
Well, I'm glad you brought up Ed Friedrichs,
because he was an outsidedirector.
That's the topic of ourdiscussion today, but before we
get started, this is anotherepisode of that big talk about
their small business.
We're getting a little better atthat anyway so, yeah, um, it's
(03:14):
great to be back, but, um, yeah,we're going to talk about
outside directors today.
Ed was an outside director whenwe first bought the company
back or well, we hadn't evenbought it back, I had a piece of
it.
He gave me a piece of it, thelender to start with, and then I
put some cash in and I bought alittle bit more, but we had Ed.
Ed was a very experienced guy.
Unfortunately, he's not with usany longer, but he was the
(03:41):
president and CEO of Gensler,the largest architecture firm in
the world, and we servearchitecture and engineering
clients.
Yep, okay.
Speaker 2 (03:51):
It was a good outside director to have on the team.
Speaker 1 (03:55):
Man Right, and that's one of the reasons to get
outside directors is you bringsomebody in who either worked in
a client or in the industrythat you serve, yeah, who can
give you some insight and maybehas some connections that would
benefit your business.
Speaker 2 (04:15):
Yeah, a lot of credibility.
Yeah, I mean the PR part to it,you know, is substantial.
Yes, you know, just to you knowin involved in the speaking
engagements or whatever it mightbe.
You know, and I think, like onthat, like you can even it's
even more accelerated today, ifyou 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.
(04:38):
I mean you can just have those,those those long conversations
that help your audience out it.
It just gives you so muchcredibility.
Speaker 1 (04:45):
It does.
It shows that you've got someinsight into when their issues
are and all are good, but yeah,that's kind of funny.
Another thing I've discoveredI've been an outside director.
Probably.
I say outside directorSometimes I got paid in
ownership but I still wasn't anemployee.
Yeah, I'm doing one right nowwhere I get paid in ownership,
but I still wasn't an employee.
Yeah, I'm doing one right nowwhere I get paid in stock.
(05:06):
Okay, um, but um, you know,it's interesting, um, if the
company has a plan to exit atsome point or raise new equity
capital, the right outsidedirectors can really give you
credibility.
Like one situation I'm in rightnow where we're talking to a
(05:30):
potential investor.
He only wanted to talk to me,which I think is kind of
interesting, because he thoughtI had more experience and
knowledge, thought I had moreexperience and knowledge.
So, you know, I think sometimesand sometimes it does help I
(05:50):
mean to get that capital if youhave somebody that the investor
feels is like a credibleinfluence on things.
Speaker 2 (05:57):
Absolutely Right, yeah, and there, there, probably
, there's a, you know, as aninvestor.
You know, by the way, one ofthe best analogies I've ever
heard in my life this is greatfor entrepreneurs.
I can't remember where I heardit, but investors are like
horses.
They got eyes on the two sidesof their head and they're
looking for whatever it is tocome and take what they have.
(06:19):
Yeah, Right, they're basicallyprey.
Entrepreneurs are like wolveseyes on the front of their face,
like going out and hunting.
Yeah, you right, yeah.
And so there's this tensionbetween them that there's always
that, which is great.
You know, I like the the wolfanalogy.
But I mean I can alsounderstand on the investor side.
You know, you're looking, Imean people will spend money,
(06:40):
I'm sure, you know, real quick,without you know worrying about
the.
But as an investor coming to anoutside director, you know, I
would think that there's goingto be more of a non-biased,
non-wolf approach, exactly Likethis director has is kind of has
a higher is at a higher level,protecting the organization, the
(07:00):
outcome of the business.
From that experience they'vehad.
Speaker 1 (07:04):
That's, yeah, that's the idea I mean.
I think too I don't want to gettoo far off topic but a lot of
times when companies are outlooking for outside capital, the
management is overly optimisticoh yeah, okay, yeah, and the
investor, as you said, is veryskeptical, right.
So if you put somebody who'soverly optimistic with somebody
(07:25):
who's very skeptical, um, theskeptical person may feel that
they don't have the management,doesn't have the credibility.
That's right, okay, yeah.
So I think sometimes theoutside director has to kind of
bridge the gap, yeah, and goyeah, this is where things are,
you know, let's be honest aboutwhere we are, but this is what
(07:46):
we're going to know.
Let's be honest about where weare, but this is what we're
going to do to get it to thenext level.
Speaker 2 (07:49):
Yeah, and as a director, you've spent the time
with the management.
You've kind of already gonethrough a lot of these
conversations and now you'reable to.
Yeah, eric over there.
He is pretty goofy andbullheaded.
Speaker 1 (08:04):
However, like we've been talking for six, months,
yeah, and it's here's his trackrecord too, in the end, okay,
yeah eventually made you.
Speaker 2 (08:09):
It's kind of like probably my director now that I
think about it but so anyway, um, but, but, um.
Speaker 1 (08:19):
I think a lot of small privately held companies
don't realize the benefits ofbringing on outside directors,
not just just from the clientbase.
But let's say, your plan is tobuild up and sell the private
equity.
Have you got somebody out thereyou can bring on who's done
this more than once?
Right, that could be veryhelpful to you because they
understand how the whole thingworks.
(08:40):
Or, if you work in a heavilyregulated industry, can you get
somebody who comes out of thatregulatory body who can act as
an intermediary between you andthe regulators?
Yep, that can be huge.
Okay, they're like a lobbyistalmost for your company.
Absolutely, absolutely.
(09:02):
And you know, in general, Ithink, if you've got a young
management that doesn't have theexperience, sometimes bring in
some gray-haired people inwho've grown a business and been
through all the.
You know the travails of that.
Speaker 2 (09:18):
You know, there's one thing, too, that I've been
noticing, you know, with acouple of entities I've been
working with, is when you havedirectors, there's another level
of accountability for themanagement team.
Absolutely, you know.
I mean, it's one thing for youknow the internal management
team to have a report to deliverto their peers in management.
(09:42):
It's another thing when theyhave to go see the directors.
Right, they've got a bunch ofexperienced people in there with
a lot of credibility.
It's a good point.
They probably triple-checkedtheir numbers this time, thought
about it a whole bunch and itmakes them better, so much
better Well it's the same thingtoo.
Speaker 1 (10:01):
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 toquestion you and who's got
nothing riding on it other thantrying to help you Right, that's
a big deal that can be veryvaluable Dude, I'll admit right
(10:23):
now I need a lot ofaccountability.
Speaker 2 (10:27):
Just with a couple of entities I have that.
I just need to check in Rightand say man, what are you doing,
eric?
Yeah, you need to do somechanges within the organization.
Speaker 1 (10:41):
Yeah.
Then you say you don'tunderstand what I'm doing here.
Speaker 2 (10:46):
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'reremoved.
But then I get out of theconversation.
Then a week or two go by, I'mlike, damn it, man, mark was
right, it's the same stuff,right?
Yeah, it's like.
It's like we're all kids, youknow, it's like going back to
childhood.
You know your folks tell youthey give you the wisdom, they
care about you, right, they wantyour best interest, don't do
(11:07):
this, don't eat that, you know,like whatever.
And then you realize later onoh man, I should have listened,
right that's that famous marktwain quote.
Speaker 1 (11:17):
It's like you couldn't believe how dumb his
dad was when he was 17 orwhatever, yeah, and then by the
time he was 25, he was hecouldn't believe how much his
dad had learned over the lasteight years.
That's so true, man.
Speaker 2 (11:31):
That is so funny.
You know one thing about, likethis whole director thing that I
think that maybe entrepreneursare a little it's a little bit
of a mystery and I mean to behonest with you, it's in some
parts still mystery to me.
What are the mechanics ofgetting them onboarded, like the
details?
(11:51):
Do you have to pay them all?
Does it have to come withequity?
Does it have to come with amixture?
I mean, do they legitimatelyhave voting stock?
That's a great type of stuff?
Speaker 1 (12:03):
Yeah a vote.
Yeah, I think that's a greatstuff.
Yeah, vote a vote.
Um, yeah, I think that's agreat question.
I mean, the answer is there'sno hard and fast rules.
Okay, sometimes there there arepeople that are just want to
help you out.
Yeah, um, you know, I've neverbeen an outside director where I
(12:25):
didn't get paid.
Okay, um, and it's very wildly,um, and it sort of depends on
the company and what they canafford and how big they are and
how much time it's going to take.
Speaker 2 (12:30):
All right, so let's take it from this standpoint.
I got a new business.
I started Mm-hmm, and, mark, Ireally respect your credibility
and your experience.
I need your help, right?
I mean, will you help me outand I don't have any money to
pay you?
Yeah, and I own 100% of this.
I'm really nervous about givingany equity up.
Speaker 1 (12:51):
I might not be able to help you.
I mean seriously, there's onlyso much time to go around.
No, no, no, I get it.
Speaker 2 (13:01):
But that's a lot of times the position that the
entrepreneur is stuck in.
Speaker 1 (13:04):
Yeah, it could be.
I mean, you know, so on thatthough.
Speaker 2 (13:10):
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 aboutequity.
Speaker 1 (13:20):
Here's another way to look at it, though.
Okay, yeah, you said you didn'twant 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 ofdevaluing any ownership interest
by not having voting rights.
(13:40):
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 realownership if you don't have
voting rights for the stock.
So what do I care?
If I own 99.5% and somebody has0.5% but they have voting
rights, it doesn't mean anything.
Okay.
And somebody has 0.5% but theyhave voting rights, it doesn't
(14:00):
mean anything, okay.
Speaker 2 (14:03):
So if you were to come on the board, you'd want
equity with voting stock.
Speaker 1 (14:07):
Yeah, I would want equity, absolutely, I mean.
But if you don't want to do itand I would expect that equity
to be undervalued, whether it'san internal formula, or you're
giving me more than what my timewould cost.
(14:28):
In other words, if what I'mdoing for you should cost
$20,000 and you're going to payme in equity, I might need
$30,000 or $40,000 worth of realvalue in equity.
I mean, I'm just throwing thatout there.
Okay, it's not liquid.
Speaker 2 (14:43):
Yeah yeah, yeah, you can't cash it in.
Speaker 1 (14:46):
Yeah, exactly, it's a lot riskier.
Speaker 2 (14:49):
But how would you be convinced, as a director, to
know that, whatever my synopsisis and the valuation at that
point, oh, I'd have to getmyself familiar with the company
.
Speaker 1 (15:01):
You'd have to get in the numbers, wouldn't you?
Yeah, I mean I'm not going tojoin any company forward if I
don't know what the numbers are,and I'm also going to insist
they have DNO insurance, by theway.
Okay, because directors andofficers insurance is critical.
It's not that expensive.
You don't want to end upgetting sued by something the
company does that you hadabsolutely no involvement with.
I mean, that can happen.
(15:22):
But let's go back to this for aminute.
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 saywe want some outside directors.
We're going to hire two orthree outside directors.
I mean, generally, sort of agood place to start, in my
opinion, is if you're going tohave four meetings and you're
(15:44):
going to have communication inbetween the meetings, you need
to pay like $20,000 or $25,000at a minimum.
All right, four meetings foreach of those people Per year,
once a quarter.
Yeah, you need to pay $20,000to $25,000 minimum for those
people.
Okay, if you're hiring the rightpeople for this, these people
make money.
Okay, they're making 400,000.
If you hired him, you wouldn'tbe able to afford to hire Right,
(16:07):
okay, right, and make 300, 400,500,000 million dollars a year,
whatever.
So you're getting theirexpertise?
Yeah, for 20 or 25,000.
And you can call them anytimeyou want.
That's a bargain.
So if I bring three of thoseexperienced people on, maybe
I've made 60 to 75,000 for ayear.
(16:28):
How in the world could I hireanybody who brings all that to
the business?
Speaker 2 (16:32):
Yeah, that's the way you need to look at it, that's
the entrepreneur's perspectiveoutside the board of directors.
Yeah, and it's cheap.
It's cheap for what you'regetting.
And would you say that, like, agood entrepreneur would have
this kind of written down as towhat they have expectations for,
right, say, hey, you know we'regoing to have one meeting per
(16:54):
oh, absolutely yeah, and themeeting'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 youbasically any time and your
responsibility is to get backwith me.
Speaker 1 (17:10):
Yeah, I mean you don't have to say it quite that
ugly.
But Now hopefully you'll beavailable if I have questions
along the way or we need to talk.
Speaker 2 (17:19):
Okay, yeah, and we'll pay you $25,000 a year.
Yeah, and how do the terms ofpayment work out?
I don't know.
Speaker 1 (17:26):
You can pay them once a quarter or you can pay them
every month or whatever worksfor your system.
But that's sort of typical.
Now, again, that's sort of aminimum.
Yeah, if I'm talking aboutjoining 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 beworking for $20,000 or $25,000.
(17:48):
I mean seriously, in thosecases, a lot of times you'll
either get paid in stock andthere's going to be so much
stock and hopefully again you'rethere's going to be so much
stock and hopefully again it'syou're getting paid in
undervalued stock that if yougrow this company or if you sell
this company you're going toget some kind of a premium on it
(18:08):
.
Okay, or you're just gettingpaid more to do what you do.
Speaker 2 (18:11):
Yeah, how do you, as a board director in that
situation, value what yourcompensation is?
Speaker 1 (18:18):
It depends.
I mean, it's all subjective,yeah, and a lot of it is like
how much do you like the peopleyeah, I hate to say it as a
director the people you'reworking with, yeah, and yeah,
and how much work is it going tobe?
And you know where?
Where does it fit into yourscope of all the things you're
(18:39):
doing?
Because sometimes you know yourtime is more um less available
than others.
Yeah, because we're startingstuff right.
Yeah, you know we all got.
That's just one thing we'redoing.
We all get like 10 other thingswe're doing right, right, so
sometimes it's timing is better.
But I mean, I think the most Iever got paid was a hundred
(19:01):
thousand um, and and that was nostock in that situation.
In other cases I got paid 20 or25 000.
I could buy stock like.
One situation was you could buystock at last year's price this
year, so if it went up, youknew you had an immediate gain
on it.
Yeah, it's just see what I mean, um.
Speaker 2 (19:22):
So that was kind of a motivator and I think the thing
that can be a little bitintimidating for entrepreneurs
is is like, pay specialattention, what we're talking
about here, about there's thedifference between a startup
company looking for board ofdirectors and how a board of
director true perceivesives thatversus a mid-sized growing
organization.
(19:43):
Yeah, because this discussionhere's here's the thing I'm
trying to get at.
The discussion of stocks, youknow, premium stock, all this
type of stuff is.
It's complicated, right?
And the second you're into thatrealm 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 shouldjust be making freaking phone
(20:05):
calls and doing sales.
That's my mindset.
Speaker 3 (20:08):
It's like why am I going?
Speaker 2 (20:09):
to mess with all this for some soft return versus.
I know I can make calls and godog it out and get some sales in
and that's real money to me.
That's where.
That's where a lot of times myconflict 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 hearabout board of directors.
(20:32):
It is complicated because yousee, what you see in the news or
what you see, I guess, just ingeneral in school, is a little
bit more of a complicated boardof directors profile, stock, all
these legalities and things,and it becomes Well, it doesn't
have to be like that.
Speaker 1 (20:48):
No, I know, that's what.
Speaker 2 (20:49):
I'm expressing, though Right To a new
entrepreneur Like you don't haveto make it this complex thing.
Speaker 1 (20:54):
You could just make him a non-voting advisory board
member.
Okay, I, you could just makehim a non-voting advisory board
member, okay.
Speaker 2 (21:01):
I'm in one of those right now, but that's not a
director, that is an advisor.
Speaker 1 (21:06):
Yeah, you're just an advisor to the board, but
basically you function exactlythe same way.
Okay, so let's talk about you,just don't vote and second
things.
But at a board of directorslevel it's not like everything.
Hopefully nothing comes to avote ever.
You go for consensus, yeah.
Yeah, it's not like fouragainst three, the Supreme Court
(21:28):
or whatever.
I'm the company.
You know what.
Speaker 2 (21:30):
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, likeyou know, people may not know
what you're talking aboutsometimes because you're just so
incredibly smart.
Speaker 1 (21:45):
I don't know about that.
Maybe, I'm just a poorcommunicator.
Speaker 2 (21:49):
Maybe that's it.
No, but I mean, I'm just tryingto put myself in the shoes of a
new starter Sure.
Doesn't know what they're doingor doesn't know a lot about
this is a different criteria andarea and purpose than an
advisor to the company,technically speaking, Because a
(22:13):
director most likely has votingstock on the board.
Speaker 1 (22:17):
to make decisions.
They don't necessarily have tohave stock, but they have voting
rights as a board member, sothey come to the.
Speaker 2 (22:26):
There are official board meetings that they attend
there.
Yes, sir, if you're anentrepreneur and you have 100%
equity in this company and thenyou release, but then you offer
voting rights and a boarddirector, you have a board
meeting that you, as a CEO ofthat company, you have to abide
by what that board is voting.
At the end of the day, that'swhere it can get to.
Speaker 1 (22:48):
Right Now, of course, you've got 100% of the stock,
so you elect the directors.
Sure, shoulder's elect thedirectors.
So if you don't like them, youcould just get rid of them.
Yeah, and vote them out Sorry.
Speaker 2 (23:00):
Right, right, but that's a tangled ass mess as
well.
Speaker 1 (23:04):
Right.
Speaker 2 (23:13):
If it comes down to that, yeah, yeah.
I just think that there'ssomething to discuss, like what
you're getting yourself involvedin if you're going to go for a
board of directors.
Now, I think the value to thatis is that there's a much more
deep engagement with your boardof directors than you would have
with a board of advisors.
Speaker 1 (23:22):
Okay, again, don't get confused about this.
Okay, yeah, there is a board ofdirectors and there's a board
of advisors.
That's not what I was saying,though.
I'm saying I'm an advisor onthe board of directors, I'm just
like a board member, but I'mnot officially a board member.
Okay, so let's say there'sseven people on the board, I'm
(23:44):
the eighth.
Yeah, okay, it's not like wehave a separate board of
advisors that sits over herethat nobody has to listen to,
right?
You understand?
Yeah, yeah, yeah.
So so I don't.
I'm not gonna just work as anadvisor for the company for that
kind of money they want to dothat.
They're gonna pay us 500 bucksan hour.
Yeah, yeah, yeah, yeah, yeah,that's a different deal.
(24:05):
This is.
That's good clarity.
This is board of directors,okay, but whether you're
official or not, like one caseof a firm in new york, they have
a requirement due to licensinglaws 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 ofus on there and the and that
(24:29):
drives it below 75, I don't needto be a voting member.
But for all practical purposes,I am okay.
Okay, does that make sense?
Speaker 2 (24:39):
yeah, yeah, yeah and so.
So what you're articulatingearlier, you can.
If you're looking for just anadvisor, yeah, you might just
pay a high consulting fee forsome advising for one hour or
two here and there yeah, or anongoing arrangement where you
meet with them every month orwhatever.
Speaker 1 (24:57):
But yeah, that's a different deal that's a whole
different deal.
Speaker 2 (25:00):
right, we're talking about board of directors, where
you are.
If you're bringing somebody onlike it'd say, formalized and
because part of the value here,I think, as a board of director
is it does help give youcredibility back as a board of
director Exactly, right.
I mean, you sit on the boardwith these four companies and
this is really part of yourincome, it's part of your career
(25:23):
.
Yeah, you know, at that point Ithink entrepreneurs need to
understand that too.
Right, like you build and sellexit companies, you become on
boards.
You're at this level to whereyou're advising as a board of
director across multiplecompanies.
That is my career path.
Speaker 1 (25:39):
Yes, yes, I think it's a lot for a lot of people
who retire from their businessor their high level job.
They become directors.
Yeah yeah, that's sort of anormal career path for people
who don't want to just be done.
Yeah, right, you know.
Speaker 2 (25:57):
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 (26:04):
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 outsidedirector is joining and the
management of that company andthe relationship with those
people is so critical.
If they suck your energy andthey don't listen to you, it's
(26:25):
like a bad mentoring situation.
It's like Eric situation.
It's like eric I want you to bemy mentor, meet with me once a
month, you do, and then I neverdo what you suggest.
Okay, forget that.
Yes, all right, so there is agiving back element to it, that
you have to feel like you'revalued or it's not worth it and
it's no matter what you get paidthat's right and I think that's
(26:47):
what's you know.
Speaker 2 (26:48):
To get back to the original, like what we're trying
to express here to a smallbusiness owner, the value of
having a board of director, it'sthat.
It's that if you can find aboard of director that is
wanting like you, have arelationship.
They want to give back to you.
They have a.
They haven't there's outrelationship.
(27:08):
They want to give back to you.
They have a.
They haven't.
There's out.
Of all the people you deal within your business, right,
they're your advocate.
Yes, yeah, they want to helpyou.
They want to help you.
They don't have a differentincentive.
They're not trying to makemoney off of you.
They're just trying to becompensated for their time
because they have to be.
Yeah Right, exactly, that's it.
But then they're engaged andinvested with you to see you
personally win and successful.
Speaker 1 (27:30):
That's the ideal scenario, right there, right,
that's the ideal scenario.
So let's just step back for aminute and go back.
I'm a small company.
I'm growing okay.
I feel like I don't knoweverything Right and I could
have other tentacles out intothe marketplace to help me win
work or business.
(27:51):
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 oftheir advice.
I get them.
I can publish that.
I can publicize.
They're on my board.
They can help me sell thecompany later.
(28:13):
They can help me attractinvestors.
They can give me credibilitywith my bank.
Give me advice that I need onan ongoing basis because they're
experienced.
I couldn't hire any one personfor 60 or 75 000.
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
(28:34):
voting.
Who gives a shit got it doesn'treally matter.
Yeah, it's going to functionthe same way.
Words we always go forconsensus.
We're not voting on things,right, okay, right, I Right.
I mean, if we are, it's down tothe disaster point, right, do
we pull the plug or not?
I mean, it's like I was readingjust last night an article on
(28:54):
KTM, largest European motorcyclemaker, is going bankrupt.
Their board voted to close downthe company.
Okay, that's a different deal.
You know where there wasopposition?
There were two factions.
So, yeah, I think that's theway you need to think about it
(29:14):
and it can be extremelybeneficial to the small business
owner.
Most don't do it Right.
They don't want anybody tellingthem what to do, or they're
fearful, or they don't want toexpose their weaknesses and
deficiencies.
Speaker 2 (29:29):
I would say it's ego.
And I would say a third reasonis 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 auh, it's something that's not
really clarified no, it's not.
Speaker 1 (29:43):
It's hard to go find a book on this that tells you
what to do.
Yeah, what the yes it is, it isman.
Speaker 2 (29:48):
Yeah, it really is.
And you know, I mean for theaudience's sake, like what I've.
You know, as we're talkingabout this, like the credibility
of your conversation on thispoint is really high.
How many boards have you sat onover the years?
Speaker 1 (30:01):
At least 13 or 15.
Some of them I was an owner onand some I wasn't yeah, but they
weren't like my business per se.
Speaker 2 (30:10):
Yeah, because you used to travel around, you'd be
going to board meetings all thetime, right?
Speaker 1 (30:15):
I still am on some boards.
I'm on two nonprofits and one,two, three, four, four profits
right now.
Speaker 2 (30:24):
Do they have to?
So okay, if you get this board,is there an expected formality
about how these board meetingsare to be handled?
Speaker 1 (30:35):
Well, I mean, part of it depends on whether it's a
corporation or it's an LLC.
Okay, llcs don't have they havea board of managers.
They don't have a board ofdirectors.
I'm a big fan of corporations.
I hate LLCs generally.
Unless I'm not going to changeownership, then it's fine, then
I don't mind it.
But so, yeah, there'slegalities.
(30:57):
You've got to keep minutes.
You report this to theSecretary of State in whatever
state you're incorporated.
Generally speaking, though,again, I'm going to have a
business attorney that we'regoing to send the minutes to
them.
They're going to file all thestuff that we need to file the
annual report, the election ofofficers.
They'll take care of all that.
It's not a big cost.
(31:17):
You've got to have anexperienced business attorney.
They just do this as a matterof course.
(31:44):
It's not a big cost at all.
Right?
So yeah, you do.
You know is a legal sort ofstructure for the thing, but
it's not that big of a deal.
Speaker 2 (31:53):
Just talk to your attorney.
Yeah, yeah, and it's paperwork,basically, exactly, yeah,
that's it.
It's not something that, as anentrepreneur, you need to be
concerned with and feeloverwhelmed with.
Speaker 1 (32:03):
Yeah.
Speaker 2 (32:05):
Yeah, exactly, thank you and feel overwhelmed with
yeah, exactly, thank you.
Well, I mean to be honest withyou, like my career path it's
been like that has been a, youknow, a kind of a friction point
for me to feel more free tohave, because I can see the, I
totally see the value of boarddirectors, right, you know, and
(32:25):
having folks like yourself andothers that are around my
business invest, you know, alittle bit.
Speaker 1 (32:30):
And you and I are on one board together.
I mean, you see what theinteraction is.
Speaker 2 (32:34):
No, it's fantastic.
Speaker 1 (32:35):
But they value what you have to say Absolutely.
I mean, you either motivatethem or demotivate them, or you
give them ideas that they hadn'tthought of.
Speaker 2 (32:43):
Mm-hmm, mm-hmm, you thought of you know, yeah, but
there's a lot of work that goesbehind that, behind the scenes,
right.
I mean, like you know, thatteam, the management team, is
doing a lot of work to preparefor those meetings to you know
Exactly, and then to follow upfrom those meetings and I would
say that it's been veryimpressive.
I actually told the folks theother day in the last board
(33:05):
meeting we were in and I thinkyou had to jump off, but I was
like guys, you are doing areally good job communicating.
We're trying to From a boardside.
Yeah, I mean, it feels likethere is activity, they're
taking it seriously and so Ifeel appreciated, right, you
should because, they appreciateyou, but I mean, I think that
(33:26):
that's a big deal right.
It is Because if you're anentrepreneur and you start this
board, here's the last thingthat you want to do.
You don't want to get thisboard together and then not
follow through.
You will make things worse thanbetter.
Yep, because now you've lostyour credibility with the board.
You know you haven't solved anyproblem, you haven't moved
(33:48):
forward Like it's.
You know to that point, as inthis discussion, the board is
highly valuable, but take itvery seriously.
This is not paying for anadvisor.
Speaker 1 (34:00):
Right.
Pick your board members wisely,though.
By the way, I mean, I was on aboard of a company once where
they brought a guy in as anoutside director and we all
could not stand him, and the ceo, as soon as his term was up,
sent the guy packing, becauseall he did he had worked at one
(34:20):
company and, no matter whatproblem came up, it was like
well at abc, blah, blah, blah,and we just got every single
meeting.
You'd hear that 10 times andwe're all like we don't give a
shit about ABC.
They sucked, okay.
That's why you got forced outof ABC, because you're
incompetent, yeah.
And now we've got to listen toyou tell us how ABC did it.
(34:42):
And ABC is not doing well, solet's just be quiet over there.
Yeah, all right.
Speaker 2 (34:49):
So how do you pick board members outside board
members wisely?
Speaker 1 (34:54):
Well, I mean it's, you know, it's good to have a
choice.
I mean you got to think aboutyour network.
You got to think about yourclients.
You got to think about yourregular.
What are the things that arereally driving your business?
Yeah, and develop a slate ofcandidates and talk with them,
you know, interview them, findout what their orientation is,
do a little due diligence onthem.
Speaker 2 (35:14):
Yeah, you know, like you just don't say, hey man, I'd
really like to have Mark Zweigon my board, because he's Mark
Zweig Right.
Like I need to talk with them,build a relationship and then,
you know, really investigatethat, because you make that
decision and you can be causingquite a bit of problems if you
don't make that decision wisely.
And then I would also say, like, what are the?
(35:36):
I would actually approach it,what are my weaknesses?
Right, when I think about aboard business, I'm like you
know these things are I'm notgood at Right, and if I had a
board member that could helpcoach me, give me some like,
give me the three bullet points.
Speaker 1 (35:55):
I need to go back to the team and get them to Right.
I think that's a really goodpoint.
Yeah, yeah, bolster your yourweaknesses with some of this
outside input.
I think the biggest thing,though you know, like when I
think, when I was young and Ihad my business, I started at 30
.
It was only toward the end ofthe first generation that we had
any outside board members formaybe the last two to three
(36:15):
years and the business had beenin business at that time,
probably 13 years.
Oh, ok, ok, ok.
And we brought in one outsider.
I was always reluctant to Okay.
I was probably the biggestopposing force to the outsiders.
(36:36):
I didn't want anybody tellingme what to do.
I didn't think everybodyunderstood my approach to things
and I just didn't want any more.
You could say, oh, you don'twant 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 freakingtime about direction Okay,
(37:00):
especially if they're not asentrepreneurial as I am.
That's right, and so that was.
I was resistant.
I think in retrospect Iwasn't't smart.
I should have been more open.
I should have felt like I hadthe finesse to pick the best of
what they had and the and andnot the the worst, or to be able
to convince them of ourstrategy, if, if it was critical
(37:24):
to do so to gain their support.
Speaker 2 (37:26):
So it's kind of a discussion of you feared of
losing control or you didn'twant to deal with that, but the
reality is, what you're sayingis that you don't.
It's not like you bring on theboard of directors and you've
lost control, right, and they'regoing to outvote everything
that you do.
Yeah, exactly you really.
Speaker 1 (37:41):
Is it rational?
Speaker 2 (37:43):
fear, you take the nuggets that they have and you
go apply, you know, and youdon't have to do everything.
That's being said Exactly.
Speaker 1 (37:51):
Yeah, yeah, I mean, I think that's you know, you've
got it.
It's not like you never listento them or they don't want to be
involved, but you also pick andchoose, yeah, and you try to
gain consensus.
It's always about consensus,okay, consensus.
It's always about consensus,okay.
You want them to understandwhere you're going and you want
(38:12):
to get their input though.
Yes, it's going to be helpfulto.
You've got to be open to it.
Yeah, you got to know that youneed help yeah you've got.
I mean you know, but I, but I,but again, I mean today I think
I would approach it a lotdifferently.
I'd be a lot more open tobringing this and the other
thing, though, back on how youpick people.
A lot of times, when I seefirms go down this path, the
(38:36):
first two people they add totheir board as outside directors
is their outside accountant andtheir outside attorney.
I don't recommend that.
Okay, that's good advice.
That's the first place they go.
Well, I've been working withBob over there for 30 years my
accountant, and so Bob's goingto be the first guy we bring on.
Bob may not know shit about thebusiness and growing it.
(39:01):
Yeah, he's had his 10 personaccounting firm for the last 30
years, and I'd also argue you'realready paying him Bingo.
That was my second point.
I've already got his input.
Yeah, okay, he didn't pay forthat, right?
And then the third point isthis If my business represents a
(39:22):
big chunk of Bob's business, isBob going to be honest with me?
No, he doesn't want to cut offhis nose to spite his face.
No, so a lot of times whereit's like, let's say, it's the
outside attorney, yeah, and it'sa small attorney, and you're
paying them 150 grand a year andthey're billing 400 grand a
year okay, yeah, they're gonnalet that thing drag out as long
(39:45):
as they can for that retainerbaby.
Speaker 2 (39:47):
You got it.
Speaker 1 (39:51):
We now have an opportunity to sell our company.
There's 57 reasons why youdon't want to do that.
Because I don't want to lose,like you know, 40% of my income
here.
Speaker 2 (40:00):
Whoever buys you, they already have a term Right.
Speaker 1 (40:04):
I've seen that more than once, really, yeah, where
they become very, very negativeand they tell you all the
reasons why things won't work.
Speaker 2 (40:14):
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 whatI would encourage the audience,
the listeners, to do Like forreal, get on the site, throw in
some more questions.
You want to hear more aboutthis.
I think that this is a gooddialogue because it's something
to demystify a little bit andit's so valuable.
(40:35):
And I agree with you, we'reboth kind of saying the same
thing we wish that we would havedone this a lot earlier.
Yeah, exactly, you know.
I mean, like day one I'mstarting a business, I need to
probably figure out three boardof 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, thelegalities, like all that type
(40:57):
of stuff, and then take it superseriously and it will be highly
valuable for you, exactly.
Speaker 1 (41:03):
I mean, you know, I always like to go back to the
example of MiyamotoInternational, kit Miyamoto.
He works for this firm as ayoung engineer.
It's an old firm.
It's got like three ownersthey're all old, they eventually
decide they're going to retireand they sell them the business
for $250,000, but it's only gotlike six people or whatever.
(41:24):
Yeah, okay.
So the first thing he does ishe puts together an outside
board.
The first guy he puts on thatis a guy who took his company
from zero to seven or 800 peopleand sold it in the same
business he was in.
He met him at a conference, heliked him and he asked him if
he'd do it and the guy said,sure, okay, yeah, perfect, okay,
(41:48):
perfect, okay, and and and soand then he got that guy's
number two.
Then he got another guy whosold 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 onthis freaking board as outside
directors, but they're allpeople who've already done it.
(42:08):
Okay, they grew that company tothree or four hundred people.
Yeah, that's awesome.
Okay, the first guy he hiredbasically laid out the roadmap
to grow that company Becausehe'd done it.
He had the blueprint.
Yeah, the blueprint is whereverthere's a disaster in the world
, you go there and you help out.
(42:29):
Yeah, and you will get work andit worked.
Wow, I'm just saying that's howpivotal it was, but that's how
early on he did it.
Yeah, smart move man.
He's a very smart guy, yeah,and open to learn from other
people.
Speaker 2 (42:45):
That's the big thing and that's the hard thing for
entrepreneurs.
Man Boy, it is, it's hard forme sometimes.
Speaker 1 (42:51):
Oh, me too.
It just gets easier the older Iget, yeah, yeah, my more secure
.
My ego is not so tied up inbeing right.
You know what I mean.
You're not trying to prove muchanymore, 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 (43:09):
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 questioncame from one of our audience
members about this discussion.
If you want to hear more aboutit, we'll do part two, three,
four or five and whatever ittakes to kind of get this out
because it's, it's very valuable.
This, along with a whole othermillion things about business
(43:32):
and what we're doing.
Speaker 1 (43:34):
So all right.
Speaker 2 (43:36):
Well, until next week this has been another episode
of big talk about small businessy'all be good, bye-bye.
Speaker 3 (43:53):
Thanks for tuning into this episode of Big Talk
about Small Business.
If you have any questions orideas for upcoming shows, be
sure to head over to our website,
wwwbigtalkaboutsmallbusinesscomand click on the Ask the Host
button for the chance to haveyour questions answered on the
show.
Stay connected with us onLinkedIn at Big Talk About Small
(44:14):
Business and be sure to headover to our website to read
articles, browse episodes andask questions about upcoming
shows.
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