Strictly Business

Thursday, Apr 24 2014 02:00 PM

RUSS ALLRED: Build a kitchen cabinet before a board of directors

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    Russ Allred, business consultant and author at Sunbelt Business Brokers & Advisors.

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BY RUSS ALLRED Contributing columnist

The kitchen cabinet is just beyond the fork in the road. Many executives develop an informal board of directors, called their Kitchen Cabinet. These are comprised of trusted advisers, usually with expertise in several fields. They are extremely helpful at navigating a global market, without the cost of keeping the pros on the payroll.

An entrepreneur would do well to develop such a team in advance of developing a formal Board of Directors. Unfortunately, most entrepreneurial actions are more like blenders than forks.

Given the choice between taking a decision at a fork in the road or just blending in with the rest of the workers, the majority of managers mix in with the mainstream. Consider Entrepreneur Moe. Moe has a nice pump service company. He makes his living by selling new and refurbished pumps to drilling operations.

When a pump goes down, the foreman calls Moe, who takes the specs of the pump and trades the broken one for a new or refurbished unit. Moe had a chance to merge with a drilling contractor. Moe considered the move, but it seemed every time he tried to pencil out the prospects he got another sales call. Moe didn't understand drilling machinery well so he was reluctant to make the move. He put the opportunity on the back burner, and went back to work.

If Moe weren't involved with daily sales he might have cooked up a good deal, but most small business owners don't have the budget to hire a sales staff. With a Kitchen Cabinet in place, Moe could have called a buddy in the drilling business. He could have received sound advice about those operations and made a better decision. He might also have called a business broker who could have told him the value of merging the two companies or an accountant might analyze the combined cash flow. It is a major mistake to make decisions without sufficient information, but that's how most entrepreneurs work.

The mix of your Kitchen Cabinet should be designed to make your income rise. Meeting with experts is easier than meeting them. It takes some investment in networking to find potential advisers.

There are a lot of smart people who aren't the president of a company or a competitor. You can meet them at trade mixers, Chamber meetings, on the golf course, at church or at the race track. Befriend them. Keep in touch on Facebook or LinkedIn. Then it will not be awkward to meet them for lunch when you have a question. Having lots of friends may the best thing about building a Kitchen Cabinet.

Contributing columnist Russ Allred, MBA. is a business consultant and author with Sunbelt Business Brokers & Advisors; the views expressed here are his own.

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