How do you decide whether to use an adviser to help with venture capital, M&A, finance raising, or strategy? And if you do - how to choose one? Here's a six point guide.
- The Problem : Do you really have an issue to solve, or a corporate itch that need scratching? Might it be better to get an outside opinion, in an owner managed business it can be lonely as CEO with no-one to talk to about the really crunchy ownership or strategic issues. Alternatively is there an important task - maybe an acquisition - that you could do, but lack the management bandwidth to cope with without hurting your main business?
- Your Agenda : Find an adviser who is genuinely keen to help you work out the nature of the problem, before diving in to solve it. i.e. someone who wants to discover, help define, and work to your agenda. There are plenty of "brush salesmen" in my trade, who have a solution - brokers who only do company sales are a good example - and will try to sell you it come what may. I have met many companies where the question was how to sell, but the answer was either (i) solve what's bugging me about my business and making me want out (ii) find a way to get me some cash out of the company tax efficiently, or (iii) find a way to amicably get one shareholder out of the business.
- Skills & experience: Does the advisory company have people with the right skills and experience? What have they done before? Don't be their first MBO! Talk to their clients.
- Availability : Will they be there when and where you need them? Nothing worse than a firm that takes on too much work, and you cannot get hold of them.
- Fees : Will they give you a fixed and or understandable quote up front for fees? Open ended time billing fees are not good. Time billing can be right for some deals, but you should be able to get an estimate, and transparency as the transaction progresses to let you manage it.
- Incentives : If you can get part of the fee success based then you have better mutuality of objectives. For example on a disposal you can usually get some of the fee linked to the price achieved for the company.
Finally follow your gut instinct. If you don't like the person pitching to you, you are probably right. If you do like them, and they have appropriate credentials you are probably right. In most venture capital, MBO or M&A deals you will spend a lot of time working together - so it's important that that is not a daunting idea at the outset!