Essential Planning: Management, Directors and Advisors

Proverbs 24.3-6 says this:

3By wisdom a house is built, and through understanding it is established;

through knowledge its rooms are filled with rare and beautiful treasures.

The wise prevail through great power, and those who have knowledge muster their strength.

Surely you need guidance to wage war, and victory is won through many advisers.

If these verses are applied to running a small, family-owned business, it is clear that a business (just like a “house” literally, a place or dwelling for one or more families) is built through wisdom, understanding, knowledge, guidance and advice. It is by knowledge that the rooms are filled with “rare and beautiful treasures”.

You might recall that when Peyton Manning was a two-time Super Bowl winner and was the MVP of the NFL several times. Peyton never lost sight of his need to be coached and to learn from those who were willing to pour into him their knowledge and wisdom. If only small business owners could grasp how important it is to be always learning, growing and improving – not just their technical skills – but their business skills as well.

This is why I recommend that small business owners realize and accept that as their business grows, they will need to develop and invest time with three different groups.

Management Team

The first group small business owners need to invest in is a management team. The management team runs the day-to-day operations of the business and the folks paid to lay awake at night and worry about the business. If you don’t have a management team, then most decisions will route through the owner and the business will only scale to a certain size, then stagnate. When your business is $250K/year, that’s not a big deal. But it will be rather difficult to run a $5M or $10M business without a management team. The largest I’ve ever seen is $23M – but they were paying the price in people leaving the company for better environments.

How you management team is comprised is up to you, but there are two basic ways: Organizational Chart and the Value Process. Most business owners will build their management team off of standard organization charts: managers for sales, operations, supply chain, finance and so forth. They departmentalize their company and then appoint people to manage parts of their company. It’s very common to see this. How well it works all depends on how well the business owner is able to build a team.


This is usually the second group that most small business owners put together, but they do so grudgingly and really don’t like it because the cost of engaging and building a team of trusted advisors. Many take the position that advisors – consultants – are just there to take their money and not offer much of anything in the way of value. And while it is possible to waste money with trusted advisors, my experience is that most business owners end up paying more in other costs when they don’t properly build and engage their team of trusted advisors. Good trusted advisors will save you money, even though they have up-front costs.

Most small business owners are really good at what they do, but they are not good at accounting, contracts, compliance, hiring, firing, benefits, financial reports, banking and so forth, so it really is a good idea for them to have a team of trusted advisors who can help them work better “on” their business. And they will offer real expertise at a fraction of the cost of having the business owner him/herself read and learn the same information on their own.

Your trusted advisors should include:

  • Law firm – look for those who can help with contracts, policies, shareholder disputes (if you have a partner(s)) and HR/employment law.
  • Accounting firm – Have them do your quarterly and annual filings. Be sure to ask them about things you can do to lower taxes. And they should help you with your personal will, since that will be highly affected by the size and profitability of your business
  • Banking – look for a bank that can scale with your projected sales and size for the next five years
  • Financial Planner – be sure to pull out value out of your company on a regular basis and invest it personally for your retirement
  • HR/Benefits – you *will* need someone to help you with human resource elements such as payroll, policy manuals, job descriptions, benefits and so forth
  • Executive coach – believe it or not, an EC is become more and more common as small business owners look to sell or transition their business to their children. While most second or third generations know how to run the business, they often don’t know how to lead or how to think outside of what they have seen in their mom and dad. And often, the coaching has to help mitigate the family’s dysfunction so that the business can survive.

Board of Directors

As a business grows, so does the need for accountability and outside perspectives. A small business – even if completely owned by family members – will need outside perspectives both at the management and at the governance layers. While this is usually the last of the three groups to form, it is an important one for ensuring that proper governance is followed. Why is this important? Well, for family businesses, it is important for the family members to have a place where they can put their owner hat on and express themselves on matters pertaining to their role as an owner. What should not be happening is family members acting as owners during the day when their employee position doesn’t require it and, in fact, would negate that role for them during the day. For example, if one of the family members is an owner of 20% of the business but is employed as the Vice President of Sales, they s/he shouldn’t be talking or acting as an owner during the day.

Be aware the “outsiders” should be on your board – not just family and friends. You may want to include some trusted advisors on your board, but the board is there mainly to hold you – the business owner – accountable to accomplish certain things that you wouldn’t normally do yourself but you know you need to do. It’s a form of self-discipline. If your business is owned by your family, we highly recommend having non-family members on your board in order to get outside perspectives at the Board layer.


As your business grows, you will need to build and engage these three groups. And you, as a small business owner, will need to value what they bring to your business. Yes, it will cost you some money, but in the long run, these groups will save you money as they help you grow, become more profitable, streamline your operations and mitigate risk.

One caveat – as your business grows and you groups are formed, remember that your role will necessarily change and through delegation, you will need to know how to get more done through people than doing it yourself. This is where many entrepreneurs flinch and just say that they’ll stop growing the business so they can stay in control. That’s a legitimate business decision. But if you want to grow and sell for millions in the future, you’ll need to recognize that your role will change and you will be surprised as little you actually control after these three groups are formed. Your focus will be working “on” the business more than “in” the business, so reserving the things to yourself that allow you to work within your strengths will be very important.

Bill English

Friday Five for March 24 2017

Being a Christian in many parts of the world is very dangerous. While the bravery of Pastors like this is rarely reported in American news, it doesn’t make his and his family’s sacrifice any less brave or sacrificial.

Ravi Zacharias has a four-part series on Faith Under Fire: Ethics in the Workplace. Christians from all walks of life would do well to listen to this series.

Part I

Part II

Part III

Part IV

Our total Federal debt for March 23, 2017 stands at $19,846,049,205,261.81. I continue to hear crickets – nothing – from either political party about the dangers we are facing because of this debt. No one seems to care.

The snowflake test has become something capturing other CEO’s attention. Take a look and decide for yourself.

Finally, if you’re looking to attend law school, be sure to consider a nationally-ranked school where the faculty have first-hand knowledge of how criminal law really works!

Christian Business Owners and the Politically Powerful

What does the Bible have to say about Christian Business Owners interacting with those who hold political power?

One passage that speaks directly to this interaction is Proverbs 23.1-3:

1When you sit to dine with a ruler,

note well what is before you,

and put a knife to your throat

if you are given to gluttony.

Do not crave his delicacies,

for that food is deceptive.

These first three verses occur in a larger passage (1-8) where strong warnings against courting favor of the powerful, greed and intercourse with the envious are instructed. This warning is specifically about courting favor with the powerful. Even though in the preceeding verses (22.29) that those highly skilled in their professions would serve before the politically powerful, we are now instructed about the dangers of developing a relationship that is so close – so confidential – that we lose our respect and proper decorum to the point where they observe us immoderate, intemperate way.

Several thoughts from this passage. First, the ruler is not your equal and you are not his – at least from a civil, political perspective. Keep this in mind, the author is saying. Even if you do become good friends with the ruler, remember that you are sitting down to dine with a ruler more than a good friend.

Secondly, we are to note well what is before us. Rulers tend to eat well using fine cutlery with servants and chefs and so forth. Note well what is given to you. Most people don’t get this opportunity to eat such culinary delights, so take note of this. The trappings of power are intoxicating – note well what all this represents – an opportunity to have your deepest desires changed in an instant to what he has by virtue of his position. In essence, the temptation is that of coveting – wanting what he has when your station in life doesn’t afford you the same access to wealth and its’ perks.

Hence, thirdly, we are to put a knife to our throats if we are given to gluttony. The Hebrew word for “gluttony” literally means life, people, soul, breath. What the author is saying is that if you are mastered by your urges and appetites instead of being one with self-discipline and submission to God – if you are one given to satisfying your deepest needs even at the cost of giving up your core values and trading them for that which is fleeting – the delicacies and perks of the politically powerful – then put a knife to your throat and, metaphorically, kill yourself right now. Why? Because all of the ruler’s perks and wealth is nothing compared to what we have from God – righteousness, instruction, wisdom and so forth. And if we allow ourselves to be ruled by our appetites, our desires, our urges, then we’ll end up destroying ourselves, so the remedy must be strong: put a knife to your throat. Don’t give into the temptation to be taken in by the power and materialism of the ruling class.

Lastly, we are not to crave his delicacies, for that food is deceptive. “Food is deceptive” is literally translated “bread of lies”. What is the lie? Well, two parts.

First, that dining with a ruler and receiving his favor today means that he won’t crush you tomorrow. Don’t be deceived. Rulers always act in their own self-interest and if you get in the way – even after long stretches of good relations with the ruler – he’ll crush you if needed to maintain his power and wealth. The second aspect of the lie is that you – not being equal to a ruler – can have all that he has through intimate association with him. Don’t give into this desire. In the end, you will be destroyed.

The reality is that Christian Business Owners do interact with the politically powerful from time to time. Some interact more frequently and intimately than others. The warning here is not that we should abstain from those interactions, but that we should recognize the inherent temptations to sin during those interactions. We should remember that our real home is not on this earth and that we should have an eternal perspective which gives us the basis for self-control and a reason to desire eternal, not temporal, things.

Bill English

Paying Close Attention

One of the characteristics of a failing business is that the leadership doesn’t really understand their numbers. They think they do – but they really don’t.

For example, one owner whose business grosses ~ $6M/year and manages to net less than $100K/year told me that he doesn’t need an accountant, a review or an audit. Why should he be told what happened over 3 months ago? When I looked at the information he gets on a weekly basis from his bookkeeper, it’s clear why he’s essentially breaking even: he doesn’t know:

  • His cash position
  • His account profits or losses
  • His break-even point
  • His profit/loss on operations
  • And more….

Yet, he’s managed to be in business for nearly 40 years.

Christian Business Owners will pay much more attention to their numbers than our friend who is barely breaking even. Not only is this good stewardship, but we are also commanded to do so. Consider Proverbs 27.23: “Be sure you know the condition of your flocks, give careful attention to your herds.” In this verse, we have a direct command to give close attention to the condition of that which provides economic resources for us. When we are business owners, we are without excuse if we don’t pay close attention to the business which God has entrusted to us. “It is only be care and diligence that the most solid possessions can be perpetuated.” (Jamison, Roberts and Brown commentary)

Consider also Proverbs 23.5: “Cast but a glance at riches and they are gone, for they will surely sprout wings and fly off to the sky like an eagle.” If we know that riches are fleeting and can be lost swiftly, why should we hasten this by not paying close attention to our businesses?

If you’re a Christian Business Owner, you have an obligation before the Lord – as part of your stewardship responsibilities – to know the numbers in your business. If you don’t know how to read an income statement, a balance sheet, calculate your break-even and so forth, then go get some training. There’s no excuse for not having intimate detailed knowledge about the numbers in your business.

Bill English

Excessive Loyalty in Business

Can loyalty in business be taken too far? You bet it can. We call it excessive loyalty.

Many small businesses – especially those run by Christians – view loyalty as a core value. Loyalty to family, vendors, partners, customers and even competitors can be found in most businesses today. But loyalty can be taken too far. Here’s an example:

Jim had been with his bank for 12 years. They had always been good to him and he was clearly loyal to his bank, believing he was receiving better service and outside-the-contract-flexibility on his Line of Credit (LOC) when he needed it. On a $32M business, he had a $4M LOC which capped the inventory valuation portion of the borrowing base at $2.5M, even thought, at times, his current inventory (which would turn in 90 days) could go as high as $7M. Jim’s business fell on hard times through no fault if his own and he found he needed a temporary increase in his LOC to $6.5M. His plan to profitability was both realistic and achievable. It was a good plan. He presented it to his bank. Not only did his bank refuse his request, they asked him to find financing elsewhere and informed him that his line would be called after six months. Jim was surprised. How could they treat him like this after 12 years of loyalty? He had never missed a payment (though his line had not rested in over 8 years) on either his LOC, his business mortgage or his personal mortgage. Jim was taken aback.

So Jim contacted some other banks who valued his inventory differently. They also were willing to give me 80% on his current A/R in his borrowing based where as his current bank was giving him credit for only 60%. Within week, Jim had several offers from other banks with lower rates, higher availability and lower personal guarantees than what he currently enjoyed with his bank. Clearly, Jim needed to change banks.

But Jim didn’t want to change banks. He felt that doing so would violate his core value of loyalty, so he got on the phone with his current bank and talked through a new deal which gave him $4.5M on his LOC at 3% higher than what the other banks were offering. He also agreed to sign personal guarantees that were 5x the amount the other banks were offering. But Jim was able to stay with his current bank and he felt good about his decision because he felt he had lived out his core value of loyalty.

What Jim doesn’t understand is that he was excessively loyal and that there would have been no value violation in changing banks.

Signs of Excessive Loyalty

What can we learn about excessive loyalty from Jim’s (true) story? What are the signs of excessive loyalty?

An Unexplainable Emotional Attachment

Jim wasn’t thinking with his head – he was thinking with his emotions. For some unexplainable reason, Jim needed to stay with his bank, so he willingly, knowingly took a deal that would cost him nearly $90K/year more in interest with the highest exposure to personal liability. This kind of behavior indicates that emotions are running the decision-making process, which rarely renders positive results. You’ll know you’ve hit this point when those outside your business look at the situation and simply ask “Why?”

Relationship Value is tilted in Favor of the Other Party

The deal that Jim struck was clearly in favor of the bank. The bank offered what it felt it could do given the increased risk they observed in Jim’s business. We think they were reading Jim’s business wrong as evidenced by other banks offering Jim much better terms. But whether they were right or wrong, they offered what was clearly in their favor. And they got the deal they wanted. They did not try to strike a “win-win” deal – they struck a “we-win-you-lose” deal. They knowingly did this.

Loyalty is a One-Way Street

When the bank thought that Jim’s business was deteriorating, they didn’t hesitate to restrict his LOC and ask him to find another bank. When a bank does this, it’s not about loyalty – it’s about the bank acting in their best interest. All this marketing today by banks about how they love your business and will be there with you through thick and thin is bogus. They will be with you and your business as long as you’re profitable and represent a low risk to them. Once your business represents a moderate or high risk to them, they will jettison you pretty quick. It’s not personal on their part – its’ just business.

The Way Out

The way out of Excessive Loyalty is to end the relationship. If, in the future, the relationship can be re-established on an even playing field, then fine. But given that Excessive Loyalty is primarily an emotional issue where one’s emotions have become out of balance with critical thinking, we think it best to simply end the relationship and move on.

Bill English

Cravings and Desires

As Christian Business Owners and as healthy human beings, we have certain cravings and desires. We want things to be a certain way and we often like to get our way.

Proverbs 10.3 says this: “The LORD does not let the righteous go hungry but He thwarts the craving of the wicked.”

The Hebrew word for craving really refers to an evil desire – any desire that comes from evil motives or feelings. The wicked will have evil desires and the Lord will ensure their cravings are not satisfied.

You see, for the righteous, the Lord does not let us “go hungry” – not just that He ensure we have food to eat, but more that our deepest desires are satisfied. When we enter into a personal relationship with Christ and then submit to His will, allowing the Holy Spirit to transform us from the inside, our desires change. We learn to desire His presence beyond nearly everything else. We still enjoy running our business and turning a profit, but we don’t need it as much as we need other things in life – things that money cannot buy.

Today, as you run your business – as you develop your plans – as you look to fulfill the four purposes of business which God has given to us – remember that when you walk with the Lord, your deepest desires and cravings will be satisfied. In this, you can rejoice because unlike your competitor who may not know the Lord, you will have a stability, calmness and focus that only God can provide as He first changes what we really desire and then satisfies the deep desires that He has placed within us.

Bill English