Driving Business Success with an Advisory Board
Driving Business Success with an Advisory Board
In this episode of The Faces of Business, Damon Pistulka, Steve Rice, and John Lamy will talk about driving business success with an advisory board. Steve Rice is the founder of Dotcomjungle helping manufacturers make and implement wise technology choices. John Lamy is a Principal Consultant at Lamy Consulting helping CEOs and GMs make sense of people and their organizations. We are talking about the benefits of and why small businesses may want to consider setting up an advisory board.
Damon Pistulka questioned both John and Steve about the significance of having an advisory board. They must consider where their company stands today. Is it required in sales? Or how about technology or human capital? Or the industry in which they work? It correctly assembled its board.
Steve expresses his thoughts that an advisory board should be a living entity. You may require an ESG specialist today, but you may not require them in six months. And I would argue that you need someone who understands manufacturing, accounting, and not just accounting. If you have someone who can give you a different perspective on your finances, sales, and contributed margins you deliver every week or month through your manufacturing process, you have information that 95 percent of manufacturers don’t have.
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According to John Lamy, sustainability is a serious issue that is looming on the horizon. Response to the global imperative for sustainability. That, and the idea of forming an advisory board to assist with this. Our entire electric grid in Oregon will be renewable by 2035, I believe.
He continues, On conversation, there are two and a third one that comes to mind is some of the stuff that I did with this fellow, and that is just how to set the organization out.
Damon asked Steve if he believes the board advantage and opportunities for boards revolve primarily around things like if you’re going to go into an extreme growth mode, or if you have another industry that you’re going to target that brings in the expertise of how do we do this?
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Steve had finished explaining his point of view by the end of the conversation. A $60 million company requires an executive who provides direction while not micromanaging. The Advisory Board empowers employees to take ownership and exercise agency within their departments. Many companies in the six-to-twenty-million-dollar range end up with an advisory board when they reach 90 million.
Damon ends this episode by thanking his guests for their interesting information.
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Damon Pistulka, Steve Rice, John Lamy
Damon Pistulka 00:05
All right, everyone, welcome once again to the faces of business. I’m your host, Damon Pistulka. And man, do we have a special show for you today, I’ve got none other than Steve rice from.com jungle, up to I don’t know, he’s up in the upper corner, the one that I’m not in. And then John, lay me down at the bottom from Lamy consulting. And today we’re going to be talking about driving business success with an advisory board. So we’re gonna be talking about a few things.
And we were scheduled to have Scott Shumway here, but he had a family thing that he needed to take care of. So we’re gonna go it alone, the three of us, but we’ve got some people in the Oh, we got some people as axing Ray Stevens want Richards wondering if this is the right place? Yes. We started five minutes after the hour, and that throws people off once in a while. But when you look at the meeting schedules that everybody runs today, it’s, you can’t start on the top of the hour, usually. So well. It’s awesome. Awesome to get you guys on here. And we’ve worked on advisory boards before together.
And it really is going to be fun for us to talk today a little bit about the benefits of advisory boards, because I think, you know, there’s, as Steve, you can talk about two is the difference between the different kinds of boards. And then we’re going to talk a little bit about through the constituents or the people that you really want to get on board and why the small businesses might small to midsize businesses might really want to consider setting up an advisory board or, or some sites. So, Steve, tell us a little bit. First of all, let’s do some introductions. Steve, tell us a little bit about you.com jungle and you got your hair good. Yeah. Okay, hair Great. Yeah, I got a call mine. That’s about all.
Steve Rice 01:58
Well, thanks for having me on. Dana. Good to see you. John started, Scott could make it. My name is Steve rice actually have three companies. I’ve got the.com Jungle which we’re a technology company we help manufacturers make and implement wise technology choices. And that often includes integrations with ERPs integration with HubSpot, maybe development of websites or optimizing user experiences for many stakeholders could be from the sales, salespeople answering the phone all the way through to the dealer support team and dealers themselves. Then also this SDR consulting, which is where I do the advisory board stuff.
And then John, I have organizations globally just lead that we’re getting off the ground. And we’re trying to connect, experienced, manufacture, manufacturing and supply chain, folks with young up and coming, aspiring leaders, you know, as mentors. So that’s actually been very rewarding. It’s more of a passion piece, trying to bring some leadership and understanding of circular economy thinking to small manufacturers from larger manufacturers. Should we let John introduce himself? And then we’ll go Yeah,
Damon Pistulka 03:07
yeah, go ahead. So John, tell us a bit about yourself.
John Lamy 03:10
Okay. John Lamy. I was trained as an engineer, and I worked in Silicon Valley for 25 years as an engineering manager. I went back and got an MBA somewhere along the way, and changed hats to be a consultant. And I’ve been doing that now for about 15 years. I love it. Let’s see, I have a wife and a kid and a grandkid. And I we had we just came off of an experience with Advisory Board, the three of us plus Scott Shumway. And so I’m eager to talk about what I think the benefit to the company was and could be. So I’m excited about that. Yeah, that’s enough for me for right now.
Damon Pistulka 03:59
Well, I always like John, John is so so mild-mannered, because he’s gonna correct me if I’m wrong. You got an electrical engineering degree and an MBA from MIT or something like that. And Cornell Cornell EMBA
Damon Pistulka 04:19
yeah, at Cornell, and then you’re the only person that I’ve ever talked to in my life that that met Hewlett and Packard I mean, I still think that that is cool as heck ran
John Lamy 04:32
somebody else. Yesterday we were I brought that up and they were like amazed and I told a story. I may wind up telling the story again here on the interchange with Bill Hewlett one time, those remarkable guys. absolutely remarkable guys.
Damon Pistulka 04:48
Yeah. But then Steve, Steve off, up in the upper corner there. I mean, you with your father and then yourself, virtually grew up at the house. Your industry first with your father and him doing that really starting to correct me if I’m wrong publishing videos and TV production in the US and then you continuing on your outdoors. I mean you were a fishing guide in Alaska, you’re a climbing guide, you’re still an active climber you’ve been in the outdoor clothing industry for a number of years until you started calm jungle and your SSR consulting and the other things you’re doing now. So talk a little bit about that.
Steve Rice 05:35
Well, yeah, so while I was fortunate, my dad didn’t invent bass fishing. And you know, he didn’t even TV shows but he was a sports fishing writer for large publications on the west coast for fishing in bass fishing, and he was one of the people who helped invent bass fishing is a sport as we know it. So I grew up driving across the United States, going bass fishing, and sitting in the back of the boat with some of the best bass fishermen in the world, literally. Ones that ended up, you know, actually having their own fishing shows in the 70s and 80s, things like that. That’s pretty fun.
And like you said, ended up being a fishing guide in Alaska rock climbing mountaineering instructor, I had been in the outdoor industry, my whole life, even including, with with.com jungle, you know, we’ve been working with specialty outdoor retailers on the manufacturing optimization side, you know, and as well as retailers, I actually owned the same outdoor store that I worked for, and then I owned in the beans.
While super passionate about the outdoors, super passionate about that sector. Super proud about, you know, where that industry is going in terms of being leaders in circular economy thinking and, another ESG kind of things. And so, yeah, so my background comes from there, but then I end up in this technology area, which just kind of suits me. So, yeah,
Damon Pistulka 07:07
that’s, that’s cool. I could get distracted on that for quite a while because I think it’s interesting as exome your stories about the people that you met and the situations that you’re just in as a kid going across the US and you know, as your father was inventing the sport of bass fishing, rather than the hobby of bass fishing.
Steve Rice 07:30
Yeah. A little bit much to say the who invented it. He was there at the beginning.
Damon Pistulka 07:35
Is there? Yeah. Helped help to help to foster it. I’ll say that.
John Lamy 07:41
Yeah. So Daymond John, tell us, someone. Story two we told little stories. You tell us one little thing mil. Nobody else has ever heard before that what is your show?
Damon Pistulka 07:51
Damon Pistulka 07:53
Some cool. Ah, well, I’ve, I’ve put over 100,000 miles on motorcycles. I’ve driven a fair amount up and down the West Coast pretty much. I’d haven’t done the Four Corners United States. I haven’t driven to Alaska yet. But those are the kinds of things I do. But they’re like you got right now what’s your right I don’t have one right now actually, I’m getting one. I’m in the process of getting another one. But I had a K 1200 BMW that I put the most miles on because it’s just easy to put miles on with them.
But when you talk about the places where we live, and especially down where you guys live, you know, you go up to Crater Lake, you go in Northern California, and there’s a road from Redding, California, that goes to the coast, the 101 in southern Oregon and go down that aways, you know, and then you get into the So Western Oregon, Idaho, you know, you can go to Hell’s Canyon, you can go through Yellowstone, you can go into Wyoming, and that’s where I’ve done a lot of riding and up in northern Montana and in Idaho and stuff.
So it’s just this is a great part of the United States to really be in and it’s, you know, when you can go up to the backside of Mount St. Helens and look in there, you know, I don’t know if you either of you has been up that road before but it’s, it’s an incredible drive when you can just to get up there. And then it’s just awe-inspiring when you see there are no trees there yet. And the fact that they’re still logged in the lake.
Steve Rice 09:33
Yeah, it’s been 40 years.
Damon Pistulka 09:35
It’s been 40 years. Yeah, it’s I just, I just feel blessed that I’ve been able to ride a motorcycle like that and really have fun with it. But, you know, my, my, my escapades were, you know, really more in the manufacturing space and being able to you know, from my from a younger age, I was fortunate to be in a fast-growing injection molding company, and I was I think I was still in college. The first time I helped to design and design the build-out for an injection molding facility. And then by the time I was in my late 20s, I was able to build a greenfield site in Tennessee and go down and run that for a number of years. And, and that was my, my way into manufacturing.
And really, I’ve always had a love for building, building manufacturing businesses, and, and, and taking a huge manufacturing facility and in looking at like a puzzle and figuring out how stuff flows through it easier. It’s fun, I don’t do it a lot anymore. But I think that’s fun. So that’s me. But now with exit your way we get to, I get to help business owners grow their businesses, get them running, right, you know, from a strategic level.
And then when they’re ready, we help them seller succeed their business, whatever they want to do at that point but get it to the value they need and run it like they need it to be. So today we’re going to be it’s good today because we’re going to get to talk about advisory boards. And I think advisory boards are an often overlooked potential advantage for small to midsize businesses. So Steve, can you kind of in a few words for a few minutes, talk a little bit about your thoughts in the situations where you’ve been Where you’ve seen advisory boards effectively help the ownership and executive teams to run the businesses better?
Steve Rice 11:31
Sure. I think you know, part of the story that I tell is that as I’ve worked with manufacturers of you know, varying sizes, there’s often this preconceived notion that third-party vendors are outside your company, and you’re inside, and you’ve got a brain trust. And I think as I’ve watched businesses become a little more sophisticated. What my experiences, I’ve watched them actually invite me and my teams in more as advisory as advisors, as well as people who do the work, you know, initially we were just people who did the work. But you can’t do the work, the good work for very long, without actually knowing why you’re doing. Yeah, and
Damon Pistulka 12:17
good point. That’s a good point.
Steve Rice 12:19
Yeah. So. So I think a lot of a lot of companies, you know, you can look at big, big corporations, they have boards of directors, which are, you know, large or not large, but they’re complicated legal governing bodies. And there’s a lot of laws around being a board of directors, and there’s a lot of reasons why a company would want one. And a lot, a lot of smaller companies think Well, that’s not us that’s beyond us. That’s what other people do. And in reality, having an advisory board or an advisory council that’s outside your company, can dramatically increase the shoot,
Damon Pistulka 13:05
like the knowledge base that?
Steve Rice 13:07
Yes, yes, but creativity is what I was looking for, like inside the building, you know, if you’re, if you’re looking for people to collaborate, and come up with new ideas, you need ideas from the outside. And, you know, having people from the outside on an advisory board or an advisory council gives you types of views into your business that you’re not going to get from the inside. And it doesn’t matter how smart the people are.
So and then I’ve also found that having an advisory council helps you identify gaps in your corporation. You know, we one of the organizations that we currently worked with, you know, they were sort of missing an entire management team. So, an advisory council can actually also act as, you know, fractional replacement for people when they come and go, you might have a CTO leave for a while. And having an advisory board in place actually provides that some continuity.
And I think the conventional wisdom in historically is that if you want to have institutional knowledge, stay with your company, you need to have employees that stick around. And I think what’s actually true is a lot of institutional knowledge these days, is actually stored by third-party vendors who stick around when employees come and go and retrain people when they come and go Viborg the exact same thing, but you can do it all the way up to the executive level. No,
Damon Pistulka 14:41
that is a great dad, though. Those are great points. So John, what are your thoughts on this?
John Lamy 14:47
Well, let me just kind of fill in a little bit. I think Steve pretty much covered it there. But I worked for a couple of years out of my MBA program when I was done there for a boutique consulting firm back in New York. And we would have long engagements. But we would not allow them to go more than a year. And I was leaving the company, I said, What the heck, why not? Because you go native was you go Navy, even as a consultant, an outside guy, meaning that the value we brought was definitely as an outsider, that’s kind of point Steve making here, I’ll just use another term that I’m pretty sure applies.
There are blind spots, even the very smartest of C suite folks has a bias has things that they just don’t perceive that are going on, that don’t frame the questions quite right. They will pose something as an either or that is actually not that kind of thing. So it’s the framing in the big picture stuff as much as also the detail. And then I watched in this last engagement we do I watched Daymond bring a dashboard. Everybody worked on it, but Damon kind of drove that, that enabled them to make quick, but accurate and insightful decisions and inferences. They wouldn’t have thought of that I don’t think they might have.
But the actual structure of it the way it went together. No, sorry. So that outside look is really critical. And then I’ll throw in one other dimension, you say, Okay, fine, I’ll bring, I’ll bring in a consultant. Well, by having like a four of us on this last engagement, we also triggered each other, I like to think it was like a nuclear reaction, we had these particles bounce around, and Steve would say something that would hit my brain. And I’d go, oh, let’s try that. And so we had a little creativity thing going and we were pretty intimate with the CEO. So he was part of that whole deal. That creativity from having it be more than one person claim? I, I was really impressed with that.
Damon Pistulka 17:17
I think you’re bringing up some good points that both you hear in that. The outside ideas and identifying gaps. I mean, that’s definitely something that that is is part of the board is you just don’t know what you don’t know. And really in, in most ownership and executive teams, they know what they know they got in this that’s really that’s to be honest, they unless you somehow professionally decided you are going to be a business owner and you went to school to be a business owner and you went off and do it.
And you have all this education in an experience in something you really, that’s a one out of a very few percentage of business owners do it usually they got in business because it was either forced or they just saw an opportunity and jumped into something and now I’m doing this whereas I wasn’t doing something else before and they don’t understand all the things that the boards can board can help you to, to understand, because when you look at the board and the constituents that you really wanted an advisory board, I mean, you have kind of have to look at where your company is today. And go, do I need it in sales? Do I need advisory help in technology or human capital?
Or the industry I’m in? Do I need to understand my industry better, or in operations or finance and really put that together?
It put your board together appropriately, around where your business is today and where you want it to go? So back again to that what are your guys thoughts on really understanding that because I agree 100%? With what you’re saying, Steve and John, about the third party perspective, and how consultants now, and coaches are used? I think they’re used much differently than they were before. But they can be even more valuable if you’re bringing them in at that advisory level as well. So what are your thoughts around adjusting it the board’s to really what your company needs at this point in time rather than I’m going to get somebody from these areas and doing that.
Steve Rice 19:23
Yeah, I think you sort of answered the question by asking the question. I think it’s hard to back up and just say like an advisory board is really just a structured and collaborative method for organizations to engage with external advisors. And you know what I would like to point out to companies out there, whether your manufacturer or not, your advisory board should be a fluid and dynamic entity. And because you might need an ESG person today, but you might not need them in six months, likely as you’d need them. Most of the time, and but, but you don’t also you don’t have to have everybody there or all the time, you know.
So yeah, it lowers the risk in your mind, I think if you think I gotta have, you know, these eight, you know, categories, and I have to have them filled with somebody all the time, when that’s just not true, because advisors can come in, there’s something at any time, there’s something to be said for continuity. And I suspect that there’s certain types of advisors that will be more continuous than others, especially in manufacturing, you’re going to want to understand one piece flow and throughput accounting and the constraints of lean manufacturing, you know, because they’re going to be invaluable all the time.
And I would make the case to, that you need someone with an understanding of manufacturing, accounting, and not just accounting. And like the dashboards you mentioned, you know, I don’t want to keep plugging, Damon, but those kinds of dashboards, but maybe I do want to keep plugging, Damon, but it’s not really the conversation, not really about what we do, but what you can accomplish.
Yeah, if you have someone who’s providing you a different view into your finances and into your sales, into your contributed margin that you’re delivering every week or every month through your manufacturing process, you have a piece of information that I’m going to say that 95% of manufacturers don’t have that. And because they’re kind of just like working on an almost like a FIFO cash. Yeah, Grant, you know, do I have enough to do it?
I’ll do it. If not, we’re gonna, we’re gonna cut marketing, because we didn’t sell enough. And that’s, that’s not how you run a business. So if we back up, you know, once again, I want to say the main responsibility of an advisory board is really to its strategic guidance, and monitoring, and accountability. And from that, and that that’s just counselor stuff. Yep. From that comes actual actions that have to be taken by somebody, which would be like defining reporting needs, possibly some one-on-one executive mentoring, because usually, there’s cultural issues.
Yeah. You know, so team development and cultural development come from that with and I’ll say, like, the outcomes that you’re really looking for are one, you know, more profitability. But you want to you’re trying to break the walls of color, the accidental No at all, you know, that the internal echo chambers, that can sort of lead to a statement work environment in a corporate culture that keep in that sort of lacks vision, you know, accidentally. So those are the main things I would say about an advisory board, sort of from the top down and a couple different layers.
John Lamy 22:52
Yeah, John? Yeah, I’m gonna keep just kind of keep going down that road. Recently, within the last month or so Steve and I have run across are there Steve dog going out the door? Hunter. Something that’s looming up on the horizon very seriously. And larger companies seem to know about this. And some smaller companies know about it. Sustainability response to the global imperative.
That, and the idea of having an advisory board that can help with that, to get you started, because many folks don’t have a clue about that. But before you know it, you’re going to be facing regulations, requirements, laws that are going to say, you can’t extract fossil fuels anymore. Do you happen to be an oil company? Something along those lines, it may just be a market driven thing. But like here in Oregon, our entire electric grid will be renewable by I think 2035. Right now it’s at about 40%. So that affects a lot of people. So how are you going to respond to that?
Well, if you have an advisory board, like the four of us that we had on this last one that we just finished not too long ago, we would be able to cobble something together that would almost be the equivalent of a Chief Sustainability Officer, pro tem, you know, just for a while and at least start getting a carbon footprint measured, getting some kind of accountability in place. Figuring out things to do that were going to improve the carbon footprint, all that kind of thing that I think it’s pretty hard to do. So just thinking about the experts that you have, that that’d be another one that make that in there.
Damon Pistulka 24:56
What and you bring up a great point and it’s And this is that’s a specific example, I think in a small midsize business that your advisory board should be able to do. And, Steve, I believe you mentioned this earlier, it’s like, if you need a Chief Security Officer, Chief Revenue Officer or an operation CEO, for a moment, until you, you bring somebody else or somebody leaves or whatever happens, you can, you can a, maybe someone on your advisory board can help fractionally for a little bit and help that and, and really keep you going when you need to keep going.
And the other thing I think that is often overlooked is the power of the advisory boards to be able to draw upon their network, the people that are within their circle, that are outside of the circles of the business owners and the executive teams themselves. Because, as I saw on the last time that we were working together, I mean, it was an industry thing where Steve had knowledge in the industry, and you were able to really draw upon a lot of things outside of the business, from the industry to help that business. You know, when it came to industry knowledge when it came to potential people to hire, and just a lot of things like that, that your advisory board can bring.
So, for example, if you needed someone, you know, you needed other leadership resources, John, you may have some really good sources for the company that would fit their exact need by because of your experience in helping companies with organizational leadership. And that’s a that’s one of the things that I think about a lot when I think of boards, and I think of the boards that I’ve been involved in in the past is, there’s some of these people that are sitting on the boards, and you have some really tough challenges in your company.
And they go, Well, I know somebody that can help with that, or I’ve been in that situation before. And that kind of value is is really, you really can’t calculate it in a lot of sense. Because when it’s right there already, you can make things happen faster. So Steve, as you consider these advisory boards, you mentioned this a little bit, there are differences. Now some people think that advisory board, they may think of Board of Directors, another Can you just so we understand this a little bit the difference between an advisory board and a board of directors.
Steve Rice 27:24
Yeah, a board of directors is actually a legal entity. And members of Board of Directors have a fiduciary responsibility to the company. And they actually have to disclose legally disclose conflicts of interest and things like that. There’s a lot of responsibility from a legal standpoint that comes with both for the members of the board and for the company that has boards of directors.
So it’s a legal thing that is often very difficult to set up and it can be expensive, and that it puts that out of the reach of most small to medium businesses. SMBs Yeah, so yeah. But you know, an advisory board is just a group of consultants essentially, call I would prefer experts, because you have subject matter experts, SMEs have another acronym, everything’s got to have three letter acronyms.
Fake, you can start calling me this SFR. For there, that’s my new there, we got a anyway. So, so if, if you’re working on an advisory board with a company, you’re the subject matter expert for something, or some things, in my case, I have this little overarching technical architecture experience, that allows me to look across a business at all the different pieces of technology and how humans interact with it. But I also have, you know, project management experience and leadership training experience that sort of allows me to be sort of the subject matter expert for both the board team management and, and what the projects are that come out of that, right.
And so, with inside a board of directors, there’s usually for something more legal, like a board, you have boards of directors for corporations. And you know, they can’t be involved in the day to day workings of that corporation. And if you’re on a nonprofit, you have several different types of board members. And oftentimes, you either have board members on there because you want their money in their connections, which is one way of having a nonprofit board, or you actually want your constituents on the board.
For instance, if you’re a nonprofit that works in, you know, fieldwork for AIDS patients, you know, and you want, you want a lot of money, so you can do that. You might actually have a board of directors that has people Who can fundraise and who are going to donate a lot of money, they’ll get paid to do it. But you might also decide to have a board of directors that actually has field workers, nurses, and doctors, and even patients that are, you know, on the street, so to speak, as board members to give you feedback on what you’re actually doing, because you’re creating community outreach programs. So those are two different types of boards as well.
With the Advisory Board, the nice thing about that, there’s none of that the legal obligation, and what you’re looking for is the right kind of mix, York, that’s what I’m looking for. I get hired to advise executives on how to run their business. And oftentimes, some of the things that we come up with is actually, you know, you need someone who is really good at strategic planning. And that’s not actually my forte, but happens to be John laybys forte. And if you need financial planning, that’s also not my forte, that’s why I called you, Damon in that one particular instance.
And, but my forte, I worked really well with companies who have a really good strategic plan, and understand what their finances are. Because I have teams of people who can actually execute. And I understand what that execution looks like, and how it relates to the human interaction, the stakeholder interaction with all the systems, you know, the whole people, processes and systems that you hear on TV, when you I don’t know, it was a Shark Tank, or one of those TV shows. So, so I think I described the difference between a board, you know, board of directors and an advisory board.
And I think there’s different types of advisory boards. I mentioned that, you know, there are councils that, you know, it’s one, it’s one thing to be a counselor, which I think is the main purpose of an advisory board, you’re a counselor, yeah, sometimes you’re a therapist, too. But you’re looking to guide the company in its overall overarching strategy. If work needs to be done, in those upper management levels, around organization systems, that’s an additional piece that can happen. But that can also work its way down to actually having an advisor right on the floor.
You know, if you, you know, talk about experts, we mentioned Scott Shumway, who couldn’t be here today. Yeah, you know, if you are trying to figure out how to set up a factory in Mexico, to sew garments, or you’re having a problem switching from one garment to another on your production floor, and you don’t understand one bow and Stearns is going to be a great advisor, but you also want him standing on your sewing floor for at least a week, if not longer talking to people and showing them how to do it. Right. So the advisory board can have a lot more reach into your company and be a lot more effective.
Damon Pistulka 32:53
Yes, and that’s the thing that you can keep it with the advisory board, it’s like you have an extra set of eyes you set like you’re saying earlier, that brings outside perspective to help identify those gaps that you may not even know are the blind spots as John was talking about to, I mean, when you look at it, you know what, you know, that’s really the thing that we talk about in a lot of small midsize businesses is you know, what you know, and you don’t know what you don’t know.
And those blind spots are the things that can over time, it can really cause the downfall of the business. And I think, as you look at it, the Advisory Board, part of it is something where if you put the pieces together, right, you can continue to drive long term success with your business, because you do have those resources available to you. So as your Tommy, go ahead,
John Lamy 33:50
did the steel toed the dirty advisory board and Board of Directors, there’s another thing that happens? It’s not really excluded from what a board of directors can do, but it’s just not kosher, not typically done. And it’s this that almost every company, at least everyone I’ve ever worked with, frankly, there are people problems. You know, there are you mentioned the word psychologist or therapist, I don’t know.
There just are. And I think it’s a little awkward for the directors to intervene on that. But I think it feels so natural to have an advisory board. Try very gingerly and very carefully and cautiously to get into that and to help the C suite or the CEO. See how much that’s hurting them. Because it can be hurting them pretty bad. And they kind of know it but help verbalize it. And this is where facilitation more than dictation from comes in, you’d say, Well, David, how’s your relationship with Steve? Do you guys ever go out and get a beer together?
Well, no, I, you know, we just don’t click, or you don’t click, why do you say don’t quit? And then you kind of go from there. I think, now, we didn’t actually have that in this last room. But I think that’s something where there can be a huge amount of help. And I say we didn’t, we actually had some of that, and people got moved around a little bit based on it. So I think that’s another difference between the two. And another real plus for doing something like this, because those things are just taught.
Damon Pistulka 35:45
On I think you brought up one thing, and you’re sitting here thinking about what you’re saying, and the approach to this. And really, I think that if you’re setting your board up, right, you are essentially going to be able to get some mentorship from board members. Because you know, advisory boards aren’t here to dictate by any means. And that’s they’re not here to tell you, you know, how to do what to do.
They’re really to help the people within the company, the ownership and the executive teams to find their way, based on the guidance that you’re helping, you know, the questions you’re asking, helping them to find the solutions themselves by helping guide them there. And that’s, that’s a big point, because I don’t think that you should high ever expect that your advisory board is going to fix systematic things that you as a owner, executive team need to take care of.
John Lamy 36:47
Yep. For sure. That’s where the Advisory Board has to just learn to ask questions. Be sincerely interested, to be sincerely curious. And then, and then just provide some guidance on the questions. And yeah, you weigh in occasionally, because you do have a lot of experience, but or the ability to ask questions and to have people kind of emerge their own insight is just, it’s critical.
Steve Rice 37:13
Yeah, I was gonna say that, you know, the advisory board is more likely to uncover those systematic things and bring them to light. Other people may be aware of them, usually, the employees are fully aware of them. And the upper management might not because they, you know, intentionally or what, however, that works, don’t want to know about it, or they think that’s just the way the dynamic is.
And since they’re in a position of power, and don’t have a reason to change, they don’t. But, you know, an advisory council Advisory Board provides that objective, look all the way up to the executive level. And I think it’s really important that there they be given the authority to speak, or take the authority to speak plainly to executives who might be causing their own problems, you know, the best executives, when something goes wrong, ask themselves what did I do to help create this problem? And what could I have done better? And they also allow, their employees at all levels to make mistakes and learn from them. So
Damon Pistulka 38:28
go ahead. Go ahead. Sorry.
Steve Rice 38:29
Well, you know, I was gonna change the topic a little bit if that’s okay. And yeah, just a dress. There’s two, there’s two things. I think I hear from folks about why they don’t want a board, you know, and whatever, is usually about cost, you know, yeah. You know, that costs a lot of money. Yeah, yeah, it does cost money. The other one is that, like, go through too many people. And it just gets difficult make decisions. And that’s all true. Ah, great points.
Yeah. And I think what’s really true that we tend to forget, is that diversity of thought on matters of importance, usually makes it more difficult to come to a consensus. And, you know, the flip side to that is, when you when a decision is reached, it’s far more likely to be well informed to be a better decision for the company. So I would caution people to be worried about how difficult something is, and have them think about it in this other respect that like, yeah, actually, if we get people that don’t agree with me, then that’s going to be more challenging, and I’m going to get something out of it. That’s better and my company is going to get something out of it.
That’s better than if I had that echo chamber. Because that’s the other side of that not getting that diversity is echo chamber and stagnancy, I think and then when it tends to cost. You know, C suite executives are expensive, you can’t get a C suite executive for under six figures. And depending on the size of your company, you might be paying even a small company, you know, 14 16 million you might be paying $250,000 for oh, yeah, CEO, you know, and you’d be lucky to find any cmo who even wants to work for you for under 100, a quarter or 150.
Just ballpark numbers, you know, yeah. And what I like to tell companies is, is, you know, whatever your base range is your average range for the C suite, folks, you can get really an advisory board with four to six people on it, who meet once a month and provide high level direction and mentoring for everybody, for roughly half the cost of whatever your average executive pay is. And when you think about it like that, it’s kind of a steal, you know, like, you get a brain trust of four to six individuals who have probably a combined 240 years of experience for half the cost of an executive. Yeah, when you budget that in, it’s a no brainer.
Damon Pistulka 41:14
Yeah, that is a great, great points, because I think you’re right, a lot of people look at and look at cost, because it’s going to cost, but you do get this brain trust, you do have this the these experience, people that can provide you, you know, multiple read amounts of return on that, but I and not and my My thing is, is I don’t think if you’ve got a business that’s just limping along and you’re not trying to grow, or you don’t have things that you really want to do, I think advisory boards for you.
I mean, you do it to do it for the sake of doing it. Yeah, don’t waste your time. But if you’re out there and you want your business, you know, you want to turn around the results of your business, you want to really, you know, take over a new market, you have some initiatives that you really want to do or aggressive growth plans. That’s where this pays off in, you know, exponentially almost because of what you said that experience level you get, and the guidance and mentorship that comes from that actually, yeah,
Steve Rice 42:22
if you want cross fertilization between your silos and disciplines that leads to more innovation, you know, in technology and management that you need, you need to hire new people, right? Yeah, you can invite board as a way to do that. But having to actually hire six people at $120,000 a year, you can get six people for $65,000 a year, 70,000 a year and advisory capacity. And if you just want to optimize like 5% of your business inside your manufacturing facility, like by all means just go talk to your operations guy and, you know, implement a little bit of Lean stuff or something.
But if you really want to have an innovative interesting company, you need to have an innovative and interesting brain trust that’s helping you move in the direction that you want to go and providing feedback, and allowing people to be super innovative and fail, you know, you’re gonna fail five times out of six, which probably conservative, maybe it’s nine out of 10. Yes, people need to do that they need to be able to fail, they need to be able to learn, they need to be able to grow. And you need to be able to identify the failures fast and capitalize on the successes fast?
Damon Pistulka 43:35
Definitely. Definitely. I think that explains it very well, Steve, because it is this thing where you get this experience level, this guidance and mentorship that you for a fraction of the cost that you’re or you will never, I mean, let’s face it, in most businesses, you’re not going to go out and do that anytime, really, and get the kind of business boosts you can from having those people on that once a month basis to be able to really go through if you’re preparing right and you’re ready for those board meetings, and you’re giving them the right information and asking as the business executive team, you’re asking the right questions of your board.
That’s how you really extract the most value from them. Exactly. And so as you’re thinking about this, what are some of the areas where situations where you think that someone might really want to take a step back and really think about how board could help them like I’ve been talking
John Lamy 44:50
Yeah, jump in with some kind of low hanging fruit that way. And from having watched our friend Scott, someone that’s not here, right? No, I would start with Lean, I would start with manufacturing process. Theory of Constraints. Now, it could be that the company has that already. And if they do great, they don’t need it at all. But to get that in there is a pretty big deal. To get that, right. It’s non trivial, I was a quality manager at HP for three years. And it, there’s a lot to it, you know, and they talk about six sigma, all that kind of thing. And then just watching the sky with this last coin, and how you have to be there, you have to be on the floor, and watch what’s going on.
Huge, huge area. That’s one another one is the thing I mentioned moons ago, but the dashboard that the CEO uses to run the business, which variables are going to go into it, which metrics are going to pop out of it. That was a huge benefit for this client. So this is called the Financial Dashboard. But the thing we learned there is you can have a CPA, most small companies don’t have a real high horsepower, finance person, they usually hire out a contract with CPA. That person is gonna be great for FASB type reporting, and getting the taxes done.
But for management, accounting for actually making decisions, it’s a different deal. It’s a different deal. It’s not it’s not FASB. It’s not it’s not kind of government oriented at all. So that was a huge thing. So there’s, there’s two and a third one that comes to mind is some of the stuff that I did with this fellow, and that that is how to just set the organization out. He had about 50 people in his company, I think, and we said, well, what can we take a look at your org chart? And he said, What?
A lot of people, I’ve seen this almost as often as not. They say, Well, we see each other every day. We don’t need to have staff meetings. We don’t need an order. Yes. Why don’t you know Why complicate life? And you find out that a people don’t really know who their bosses be, they don’t know exactly what they’re supposed to do. And when they’re doing a good job at it. And, or maybe they’re not supposed to do it, somebody else is and they run around like crazy or hair on fire. It’s just amazing how that works. And you’ll say, or another company I work with, do you have an org chart?
Yeah, yeah, yeah, we got one. And the other guy in the room said, Heather, we don’t? Well, she Yeah. She said, we were on the blackboard in there, you know? Well, yeah. No, they think they do, but they don’t. So to get that, right, just the end here. I am an engineer. I’m used to work with wires and transistors. And they, I do that kind of work. And I, I facilitate it in that I say, Well, what work needs doing here? What are the tasks that we have to do? Who’s supposed to do that? And then blah, blah, blah, how do you get that set up? And it’s a very, very interesting exercise. And I think it has an enormous amount of value.
Damon Pistulka 48:42
Well, you’re helping to define you’re defining the roles in the organization. And I think this is, it comes back again, what you’re explaining is exactly, you know, the overall, what we’re talking about today is how these boards can really help you bring up these blind spots. Because you if you’re in this every day, you don’t understand that you’ve got a blind spot and that I don’t know what Susan is doing over here. Susan really doesn’t know what she’s doing. She can doesn’t know what to measure of success.
She doesn’t have a good measure of success. She doesn’t, you know, she’s been doing what she think is right. But is it really what the organization needs, because we haven’t taken the time to really understand all the roles that we need filled, and then fill them with the people that that are in our organization, or that we need to get in the organization. Yep. And when you look at this, I think the board advantage and the opportunities for boards are really around things like if you’re going to go into an extreme growth mode, or you have another industry that you’re going to target that bring in the expertise of how do we do this?
And you’re talking about what I like to just do I call it like the organizational development or cultural development of the, of the business is really to go, Okay, our culture is, is not what we want it to be. That’s something that’s really hard for internally for people to fix, or to see you or even see, even to see. And then and then when you look at Steve, and the kind of things that you do with technology, it’s like, technology is so slippery and multidimensional, that it’s, it’s one of these things that there are so many options to do it do a certain way or run your business, what are some of the best ways what really is the best for this application?
And when you’re talking about and even back, again, what you’re talking about with Scott and operations, you know, how should we how can we be more efficient, because we’ve, and these are words that I, I just did chalkboard fingernails on a chalkboard, we’ve always done it this way. And they don’t know the other ways to do it, you know, with these, the board, these advisory boards, this kind of talent you can bring in, can really leverage their knowledge and move these situations forward. And I look at it from the ownership perspective. And I think that, you know, culture, you know, your efficiencies, things like technology.
And then Steve, the lot of things that you do is really helping the CEO slash owners understand their role. And do that, because that’s, that’s the time as these businesses go through the stages, the ownership role, or the executive roles have to change with it. And then and you know, when business is small, the owner can do this, when it’s a little bit bigger, they have to change, when this gets even bigger, they have to change again, and the help that strategic advisor you’re providing to that highest level, executive in the business, keeps their keeps her sanity a little bit more, hopefully. But gives them a roadmap, because it’s a place they haven’t been.
Steve Rice 52:06
Yeah, exactly. Think about the way most manufacturers start is, there’s a, you know, a gal who made something with her hands, and thought it was really cool. And then thought, hey, if I make 10 of these, I can make money. If I make 100, I can make more. And if I make 1000, I can make more. Five years later, she’s not making things with her hands anymore. She’s the president of a company that’s doing just save a modest $2 million pay.
In, you know, 80 employees, baby was a, I don’t know, Psychology major university and never thought that she’d be doing this might have some leadership skills that the, you know, death does, they always do, but don’t have them all, then certainly probably doesn’t understand business the way that she should. And, you know, there’s, I remember years ago, one of the people that I had the good fortune of being an employee of was himself employee number 49, at Microsoft, and he retired when he was 41, moved to the Rogue Valley when I was like 20, or something and opened an outdoor store.
And that’s where I worked. But one of the things he says is, every time it was just an aside to every time a company doubles in size, it has to change how it does everything. Yep. And I don’t know why that particularly stuck. But I’ve found it to be true, you know. And when you’re 3 million, you do stuff different than when you’re six, and you do something different at 13 million, as well. And you won’t find a lot of companies that are, you know, three to 6 million that have a suite of C suite executives.
And at 8 million, you might, they might have a few but mostly maybe they’ll have a president of operations. And a CEO and a CMO. And it’s, you know, I realized these are like rules that can be broken because there’s no, you know, static rule that can be applied here. But you know, definitely like $60 million company needs an executive that provides direction, doesn’t micromanage supports a culture, a sustainable culture of accountability and honesty, which is very difficult to do. And lets people take ownership and have agency inside their departments in a 3 billion you don’t have to have that at all.
Yeah. So the other founders aren’t necessarily always the best people to be executives and like you said they have to grow. Yeah, it advisory board is the way to do that. It’s an I think it’s it’s it’s not used enough. Yeah, there’s a lot of companies, you know, in that six $20 million range, who end up having an advisory board when they’re 90 million, but if they don’t had it when they were 12, they would have saved themselves a lot of pain and suffering, and there would have been a lot more learning, there would have been a lot more collaboration, the company would have been a lot more fun to work for that have been less turnover.
There’s a lot of, you know, all those sort of frustrating things that you know, about if you’ve ever run a business or been in business, was it? Well, yeah, you can mitigate a lot of that we’re just talking about mitigating risk, you know, the risk of running a business is that you don’t know what you don’t know. Man,
Damon Pistulka 55:33
there you go. That’s it. That’s right, Mike. Yeah, we just dropped the mic right there. Because you know, and in the work that I’m doing at the, when owners get their business to the size they want, you know, one of the key things that they have to have is, if I want to exit my business, I can’t be the value in the business, you know, I can’t be the brains in the business.
So what you’re talking about, and, and it really helps us because what we try to do with owners, when the business gets, as you get closer to the time that your business is going to sell, you need to be more and more of an advisory board member, you don’t need to be you can’t be a direct part of that business, if you really want to maximize the value of the sale your business.
Because you just you know, if you’re going to sell your business and you’re all the value, you’re not going to get nearly as much money as if you have a team that can do it. And when you talked about the different size in business, when you have a business that’s got say it’s a million dollars in EBITDA, or profit, whatever you wanna call it, your management team, for a buyer has to look much different than if that’s five or $10 million in profit. And once it gets up there to a certain point, and that, you know, it’s around the $5 million mark, you must have, well, not must.
But if you want to get the money, you really should, you want to have a CEO and executive management team that can develop and execute a five year strategy, if you don’t have that, you’re likely going to drop the value of your business by 30 to 50%. And that’s millions and millions of dollars. And I’ve seen it in the 10s of millions of dollars. And it’s something that you really need to understand. And this is another thing that the advisory board members can bring that as the business owner, it was you know, Janet, she was making this stuff with her hands. And now she’s got other people making this stuff.
And now she’s got, you know, 100 people making this stuff. Jen is still thinking, Janice, still, you know, in her mind, she’s been able to lead enough people to get up there. But now Jana just at the point that Janet wants to capitalize and really generate the wealth that she wants to generate from this business. And leave it and sell it and do something else. That’s a significant inhibitor to it. And these boards, there’s multifaceted approach that they can help all the way through the lifecycle of an owner being in it, to make the to maximize this, but I just want to say, we’ve gone on here for a while now.
And it seems like this and it’s a shame that we couldn’t have Scott here because his operational perspective would have been really helpful. And we’ll have to have him come back and talk about that with us again later. But I want to thank you guys for being here today. And just really talk about some of the ways you can drive your business successful Advisory Board, some of the situations where that advisory board might be applicable. And then some of the ways that the advisory boards can help. So Steve, always good to have you on.
Steve Rice 58:38
Thanks for having us. It’s been a great conversation today.
Damon Pistulka 58:41
Yeah. And John, awesome to see you again and love the knowledge that you share. So thanks so much, guys. I want to thank everyone else listening today too. We will be back again next week with more guests sharing interesting information. And we’re out for now. Thanks, everyone.
John Lamy 58:58
Hey Damon, thank you so much.
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