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Getting Started

Knowing when to take advice

An entrepreneur's passion is perfect for launching a business but as it grows you do need advice and professional support

Knowing when to take advice

When electric car specialist Tesla recently posted a record loss of $710m (The Guardian, 3 May), boss Elon Musk appeared to make light of it in a media link with Wall Street analysts. But his flippant dismissal of analysts for asking “boring”, “bonehead” and “dry” questions, saw Tesla's share price drop by seven per cent, wiping $3bn off its value (The Guardian, 3 May. Perhaps things might have been different if Musk had received better advice. As a visionary entrepreneur he has few equals but the damaging misjudgement highlights why business owners need people around them who can keep them on the right track as their companies grow.

Taking advice

“There can be a tendency for founders of successful start-ups and SMEs to become isolated and believe that they need to know all and what's best for the business,” says Martin Brown of SME growth adviser Elephant's Child. “However, enlightened entrepreneurs know when it's wise to seek and take advice.” As well as the obvious accountancy and legal firms, to succeed in business you ultimately need a range of business advisers.

“The fundamental first step is to have a long-term 'strategic' adviser in place, or even a non-executive director, sitting on the board, who can bring to bear broad and relevant knowledge and experience.

“They will support you in everything you need for your growth journey. For example, ensuring you meet your obligations as a director, hold you to account on business performance and strategy but also around HR, technology and IT and all of the other necessary requirements to lead and grow a business. He adds: “You don't have to reinvent the wheel every time you make a decision, but it's good to have people around you who can give you answers quickly. They will help to steer the business at a very senior level from the top down, guiding the board through their overall strategy as well as their operating plan.”

“Your strategic advisers will tell you when you need to get further expert advice and what you can expect from those giving it,” says Martin. “Importantly they will give you a balanced and different view which will add value and breadth to any decision and its impact but also protect you from any cognitive bias, blinkered or haloed view." 

These might include functional advisers, appointed to work on specific projects covering areas such as sales, marketing, operations and finance. They can be expected to scope a project, work out the deliverables and bring them into focus.

Additionally, task-based advisers can be appointed to implement a very specific project within say, a manufacturing programme, such as a lean programme. A further range of specialist advisers might be brought in to advise on say R&D tax credits or intellectual property issues, for example. Unlike strategic advisers, functional, task-based and specialist advisers are most likely to be used on a discrete project-by-project basis.

Avoid mistakes

“At every level, it's sensible to take advantage of the expertise you've paid for,” argues Martin. “You don't have to always act on the advice but it makes sense to listen, before you ultimately make the call.”

For example, he refers to a travel sector client that chose to take in private equity investment against advice. “They cited numbers to justify the investment but weren't able to perform to those figures. So, the private equity company removed the director involved and took over the business.”

In another case, a leisure business was sold for £4.8m to a willing buyer that would pay 50 per cent up front and the balance in loan notes and equity in the acquiring company on conclusion.

“However, the seller did not take advice on how to manage its people through the sales process. Consequently, post acquisition, employees made claims against the business, negatively impacting on finances and causing a relationship breakdown between seller and buyer. The balance was never paid."

While it's great to be the mover and shaker, it often pays to listen to the experts first.

​Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.