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WPI Venture Forum
Interviews Jay Fialkow
Jay
Fialkow, partner at RossFialkow Capital Partners, was
recently interviewed on WTAG, AM 580, on the WPI Venture
Forum’s weekly business radio program. This is part 2
of Jay's interview; in the first installment, he
discussed aspects of the business of advising and
counseling the leaders of commerce. In this
installment, Jay discusses the nuts and bolts of
assembling an advisory board, and what transpires when
the board meets.
How
do you assemble an advisory board?
JF:
A company president came to us – he had just taken over
his business from his dad, and there were a lot of
things about the business world that he didn’t know. He
heard that we were doing this, and we put together a
board of advisors. We put together an ex-banker, a
financial man, one of the more successful men in his
community, and we put together someone in his industry.
You don’t want everyone from the same industry because
they’ll all come up with the same ideas. So you want to
get some outsiders.
They
meet four times a year, with an agenda; my partner Jeff
is the secretary of the board. They have an agenda,
they discuss finances, and they ask all kinds of very,
very difficult questions that no one in this company
would ask because his accountant and lawyer generally
don’t get involved in that area. This person has
learned more about his business from his board, and the
relationships with them, and as a result, he has a
better business.
A
typical advisory board meeting might go like this:
either Jeff or I will be something in the nature of the
interlocutor, and we provide the agenda. The first item
of business is typically the financials. How have we
done last month or last quarter or last year? The board
then asks a lot of questions about that. We will have
talked to the president about certain problems they’ve
had. They’re going to have a new line; they’re not
going to have a new line; they’ve lost a line; they’ve
changed the thing. We’ll have four or five different
subjects that are specifically troubling to the
president. And then there’s the general welfare –
what’s happening to the economy, what’s happening to the
industry, do you know about this? These meetings
generally last three to four hours; beyond that, people
get tired.
Are
advisory board meetings typically as confrontation in
nature as board of directors meetings often are?
JF:
I wouldn’t say it’s either. They’re advisors; they’re
not looking to win or lose anything by way of an
argument, but to be helpful by way of their
suggestions. So to that extent, it’s not like it can’t
be confrontational, but in my experience, it hasn’t
been.
But,
the reverse side of the coin is, they’re not afraid to
ask the difficult questions. “How come your son is on
the payroll – what’s he do here?” Would the lawyer ask
that question? Would the accountant ask that question?
No, he would not. But a member of the advisory board
would. Which then opens up a whole question – let’s
talk about the family in this business. “How are you
handling the family?”
There’s a whole specialty that I handled as a lawyer,
and that’s the family business and its problems.
They’re horrendous! You know, the father has worked
hard and created a business. And the son’s now
graduated from Worcester Poly Institute and he’s looking
for a job, and the father says “Come in with me, that’s
why I worked so hard to create this business.”
Can
you help small businesses that can’t afford an advisory
board?
JF:
We have an alternative to the advisory board. It’s all
wrapped up in one person. In other words, Jeff and I
can spend a day per month at mid-sized companies and
perform many of the same services that an advisory board
would do – not quite as formal, obviously, but we get
into problems in a great deal of depth.
For
example, Comfort Corner. I go there once a month, and
we spend the whole day together, and it’s unbelievable
the areas that I get involved in that they haven’t
thought about. Because I come to them with lots of
questions about why are you doing this or that? I’m
able to put them together with other companies that sell
products that they would like to buy. I’m able to work
with them on their bank finances; I’m able to contact
the banks, because I know all the banks, because I dealt
with them as a lawyer. And I make suggestions on public
relations from a business standpoint because I’ve done
all this, as opposed to many lawyers that haven’t been
as involved in the business as I have.
And at
the end of the day, they say WOW, and they have all
kinds of things they have to do for the next meeting. I
sharpen up their interest in the numbers. Most
companies will say, hey, we’re making a profit. I say,
“Let’s look at your sales – are they strong in some
areas and soft in others? Why are they soft in this
area?” We explore by asking questions. So, to a large
extent, those companies that can’t afford the advisory
board, Jeff and I are available on an individual basis.
They’d get an “advisory person.”
And,
for example, one thing I do with all my new clients is
spend a day and ask them what do they want to do when
they grow up? What’s their goal with the business?
What do they really want to do with their business? If
you ask most businesspeople what do they want to do –
“Oh, I want to make more money!” But is that really
what you want to do? Do you want to pay the price for
making more money? How do you want to make more
money? Do you want to make acquisitions? Can you grow
this business? Do you want to preserve the business for
your family? These are tough questions. How many
people have really thought through the answers to these
questions?
What is the biggest mistake you’ve seen companies make?
JF:
In a general sense, not paying attention to the future –
not planning. It’s a funny thing, I practiced law – I
would come into the office at 8:30 in the morning and
the whole day was spent in reaction to phone calls or
letters or something that came across my desk. The
amount of planning that I did for my firm was very, very
limited. And I kind of thought about that when I
thought about businesspeople. And the same thing – I
wonder how many of them plan out where they want to be a
year from now. All of a sudden, their lease is up. Oh
my God! We need a larger space, a smaller space, do I
want to stay where I am? And they live with crises
because most businesspeople I know react and most
businesspeople I know do the same thing this year that
they did last year, without a change. And we ask them
questions – why are you doing it this way? And
oftentimes, the answer we get is a humorous one. “We’ve
always done it this way!” But does that make it right?
<<Back to Part I
© 2003
RossFialkow Capital Partners, LLC
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