Why Most Small Business Owners Resist Good Advice

espite the wealth of knowledge and experience that good advisors possess, small business owners do not always seek their expertise.  In a study conducted by Craig E. Aronoff, PhD, and John L. Ward, PhD, they found that one of the attitudes of small business owners is that professional advisors should be used only as a last resort.  This is indeed the case of a client, Mr. James of Sonic Sprinkler Systems (names changed for confidentiality).  He was ecstatic when his firm landed a $1 million contract to service sprinkler systems in several office buildings.  Additional staff was hired and supplies purchased to service this contract.  Six months into the contract, his business was near bankruptcy.  Why?  The building management firm was not paying him promptly for services; consequently he was unable to pay his bills on time.  His creditors declined to extend further credit.  In desperation, he turned to his bank for assistance; however, the company's financial statements had deteriorated rapidly to the point where no bank was willing to commit funds to the business.

As a last resort, Mr. James approached our consulting firm for help.  With a lot of wheeling and dealing we were able to secure financing from a factoring company, but at a much higher interest rate of than it would have been from a bank.

The above example is not unusual for small business owners, who are hesitant to seek professional advice - even when there is compelling evidence that the advice will help the business. A recent study on small businesses that had businesses advisors versus those that did not, show marked difference in success rates.  According to the study 86% of business owners surveyed confirmed that the professional assistance they received helped them to become successful.  The study also concluded the following:

The study revealed that the average revenue of businesses that received assistance increased by $70,000 per business while these businesses increased their ability to obtain funding by 20%. The results of this study clearly indicate that getting professional advice produced tangible benefits for businesses.

Although most small business owners are smart and possess good business acumen, they resist the opportunity to seek and get good advice.  Many have the tendency to micromanage and busy themselves with the day-to-day operations of the business while insisting that they do not have the time to explain the business to an advisor.  Although they feel strongly that they are in control of operations, at times they are unaware of aspects of the business that are not functioning optimally. 

The following are common attitudes that keep business owners from getting the advice they need:

1."I can solve the problem myself."

Many business owners are used to being in charge and having people look to them for answers.  This pattern can be habit-forming, leading business owners to feel they should have all the answers.  While self-reliance is a virtue that has built some great businesses, it also can be an obstacle to solving complex small-business problems efficiently.  Advisors with experience in many businesses can protect a business owner from reinventing the wheel.  They also can keep problems from mushrooming into crises.

2."I don't want anyone throwing up roadblocks to my plans."

Business owners are action-oriented doers and may not even think of calling an advisor until they have committed to a course of action.  This tendency builds on itself.  The more decisions business owners have made before seeking advice, the more likely they are to be embarrassed by an advisor's reaction.  But however uncomfortable it may be to admit to people who admire you that you need to change your plans, it is sometimes necessary to avert bigger problems.  As tensions rose within the Bingham family of Louisville Courier-Journal fame, Management Planning Inc., a financial appraisal concern, advised the family leader, Barry Bingham Sr., to set aside his carefully laid estate plans long enough to buy out Sally Bingham, the family's chief dissenter, at the stock's publicly traded value.  Removing her from the trust might ease tensions, even though it meant a one-time transaction at a price higher than the one already established, suggested a management-planning advisor.  But Mr. Bingham refused that counsel in fear of disrupting his estate plan, insisting, "I'm not buying her out at a penny more."  What followed, as history shows, was an upheaval led by Sally Bingham that was far more destructive than any change in an estate plan might have been.

3."An outsider could never understand my business."

Some business owners believe "an advisor is someone who borrows your watch to tell you what time it is."  They contend, "By the time I invest enough so that an advisor can understand my situation, I could have solved it myself."  This rationale is a handy excuse to keep the small business a closed system.  All businesses are unique, but all share some similar characteristics as well.  Otherwise there would be no business schools, no movement of executives between businesses, and no useful books on business.  If advisors are well chosen, they will bring relevant experience to a business and will probably be surprisingly quick studies as well.

4."An Advisor will raise a lot of issues I don't have time to bother with right now."

Many business owners fear that confiding in an advisor will open a Pandora's box.  Some believe advisors will raise questions that they can't answer or that threaten their personal confidence or control.  Others sense that an advisor's probing may thrust them into "the planning triangle" - the web of financial, estate and succession issues that must be addressed for a small business to thrive through generations.  Indeed, a good advisor often must understand a business owner's goals in all these areas to help solve problems in any one of them.  The business owner may not want to take that leap, preferring to keep everything quiet.  Left unchecked, problems can worsen until a client reaches "a point of enormous pain," says Kathy Wiseman of Working Systems, a consultant specializing in organizational development.  In closely held small businesses, adds Harry Levinson of the Levinson Institute, a psychologist, consultant and noted author on succession and other management issues, the desire to preserve peace often leads to "perennial conflict and lack of resolution."  Only by addressing issues head-on can these unhealthy symptoms be healed.

5."Professional advisors cost too much."

Nowhere is it more likely true that "you get what you pay for" than with professional advisors.  Yet many business owners assume all advisors are overpriced.  Many also fear they lack control over fees.  In fact, advisory relationships can be managed for cost-effectiveness.  And many business owners undervalue the financial importance of sound decision making.  "To focus solely on (the) cost (of an advisor) is doing yourself a disservice," says Ross Nager, national director, family wealth planning, for Arthur Andersen & Co., a large accounting and management-consulting firm.  "The real cost of advice is not what you pay for it.  It is either the cost that you incur when you take the advice and find out that it's wrong - which obviously can devastate the business.  Or it's the opportunity cost of receiving the advice but not taking it because you don't trust your advisor."  Adds Michael Horvitz, a partner with Jones, Day, Reavis & Pogue, a major law firm, and director of privately owned business for the firm's tax group:  "Any lawyer or advisor who really provides good service will over time pay for himself or herself."

6.I'm unsure of how relationships with professional advisors work."

 The idea of calling a professional advisor sometimes raises so many questions for business owners that they avoid it.  How could advisors help?  What will they expect of me?  How will I explain it to the key employees?  What information will I have to disclose?  Will they press for solutions that don't fit our business?  How can an outsider understand our situation? 

Choosing a Business Advisor

Good advisors to businesses are more than just experts in their field.  They maintain up-to-date technical knowledge and show strong interest in and commitment to their field.  Technical expertise and the discipline and drive to stay abreast of new developments are essential to the business advisor.  The advisors should be so well plugged-in that they can routinely advise the business owner of new developments that affect the business.  An increasing number of advisors are cross-trained in more than one discipline.  Others have a network of other professionals they rely on for breadth of knowledge. "It's a pretty complicated world.  You need an advisor or group of advisors who have a broad wing span," says Michael Horvitz of Horvitz, Jones, Day, Reavis & Pogue.

Good advisors go well beyond responding to client questions or requests for meetings.  They work to understand the business in depth.  They read up on the company, looking at meeting minutes, catalogs, brochures and histories when appropriate.  They volunteer for plant or office visits to see how the business is doing and to meet managers or employees.  They also attend business anniversary or a ceremony.  All of these activities help an advisor gain a deeper understanding of the business' history, its values and culture, factors that can help in offering good advice and counsel that is on target for the particular needs of each client.

In my own experience as a management consultant with one of the Big Five consulting firms, I interacted extensively with the client's employees.  In an effort to thoroughly understand their businesses processes, I interviewed managers, talked extensively with employees, attended meetings, conducted research and visited manufacturing plants.  Becoming intricately involved with the client's business processes enabled me to offer good advice and also to develop training documentation for employees.  With a team of consultants, we were able to successfully implement changes within the clients' organization that resulted in client satisfaction, improved business processes and cost savings in their operations.

A good advisor takes the initiative to spot opportunities for the business.  That means offering information, contacts and ideas that can help make the business a success.  Without being asked, they send articles, books, reports, seminar information and other items of interest.  Advisors create opportunities for key managers to meet people they should know.  They also share ideas and lessons learned from working with many other businesses like the client's.

Looking now at some statistics on new business in the U.S., it is reported that the number of businesses that were started has more than doubled during the past decade.  Well over 520,000 new business incorporations were recorded during the first nine months of 1988.  But the percentage of those that survive has remained the same (according to the Massachusetts Institute of Technology) or declined (according to Dun & Bradstreet).  Either way, business start-ups are facing tough odds nationwide.  According to the Small Business Administration (SBA), 80 percent of all new small businesses formed will fail within 5 years.  These figures are alarming and indeed substantiate the need for small business owners to seek expert advice in order to keep the doors of their business open.  It cannot be overemphasized how important it is for small business owners to seek good advise on an ongoing basis and certainly before it's too late.

Successful businesses can no longer operate within a vacuum.  Every business owner needs help from time to time, especially in this  competitive and constantly changing environment in which business is conducted today.  The way business was conducted previously has changed dramatically in this information/technological era.  Tremendous focus is now placed on customer satisfaction, market trends, quality of goods produced, fast exchange of information, quick turn around of orders placed for goods and services, among other trends.  It is virtually impossible for the business owner to keep abreast of all the changes taking place that directly affect his business.  Also, one individual does not possess all the skills (marketing, finance, accounting, legal, etc.) to successfully operate in this ultra competitive business environment.

Finally, having examined some benefits derived from getting good advice, I strongly recommend that small business owners do not wait until they sense that all is not well within their business.  Also they should not wait until they believe that things could be better and they do not have the tools with which to translate that vague feeling into concrete action steps.  However, if that occurs, immediately begin the process of getting an advisor who will help you to define diagnostic steps that will lead ultimately to action programs and concrete changes that improve the situation.  Before that situation arises though, getting an advisor to look at your operations can help to define a new path, compare the competition, and gain varying perspectives, all of which can help to jettison your business to new levels.

P. Angela Dennis and Clinton w Daley
BizJump Consulting
Clinton@bizjump.com