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This article by Kathleen McGinn Spring was prepared for the February 12, 2003 edition of U.S. 1 Newspaper. All rights reserved.
Create a Brain Trust
Every business needs a brain trust, a group of trusted
individuals with a wide range of expertise and a deep base of experience.
The surprise is that at least the beginnings of this outside council
is best assembled before the business even exists.
"A lot of people say they want to be in business," says
Klein, a partner in the accounting firm Klatzkin & Company, who
spends much of his time advising small and mid-sized businesses. "I
ask them `do you know that 80 percent of people who go into business
fail in five years?’" There is a lot more to business than "just
opening your door," he points out. Among other things, there is
risk. "If you need a loan, you may have to sign personally,"
he says. "You could lose your house."
Sobering thoughts, indeed, and good reason to start building that
brain trust of advisors even before deciding whether to launch a new
enterprise as a corporation or a partnership. Klein speaks on "Creating
Your Own Brain Trust" on Thursday, February 13, at 6 p.m. at a
meeting of the New Jersey Association of Women Business Owners (NJAWBO)
at the Merrill Lynch Conference Center. Cost: $35. Call 609-924-7975.
Klein, a graduate of Indiana University (Class of 1963), came to New
Jersey at the request of Uncle Sam. Assigned to Fort Dix after joining
the Army Reserves in his native state, he decided to stay in the Garden
State after he was discharged in 1969. He signed on with Klatzkin,
which now has offices in Hamilton and in Langhorne, as a seasonal
tax preparer. Within two years he was offered a partnership.
How big was the company then? "Wait, I’m counting rooms,"
says Klein, mentally moving around his company’s offices as they were
nearly 35 years ago. "Five, six, seven rooms," he says, counting
aloud. "Fourteen people then," he says. Klatzkin, founded
in 1930, now has about 40 employees.
The firm has grown, but still, says Klein, "we’re a small firm."
Small enough to get to know its clients well. Among the services are
setting up accounting systems, reviewing internal controls — "so
no one steals" — working on succession planning, and building
value in the company.
The goal, Klein says, is to grow the business and operate it as a
entity apart from its owner. "You want to work on the business,
not in it. Otherwise, it’s just a job."
Accountants like Klein are a vital part of a company’s brain trust.
Along with other professionals, including attorneys, they are the
part of the trust that make a business of advising companies. In other
words, they get paid for their advice. Other members of the brain
trust may not be paid at all, or may be paid minimal amounts. Examples
Klein cites include government-backed business incubators, professional
associations, personal coaches, and mentors.
The brain trust of which Klein speaks may be informal or it may be
of Rue Insurance and another panelist, has created a board of advisors
with a formal structure. Interviewed about a year ago, Rue said that
his board is made up of individuals outside the insurance industry
— "I talk to insurance people all the time," he says.
The Rue board meets three times a year and is paid.
Rather than providing industry insight, Rue’s brain trust gives him
a wide perspective, both on big-picture issues and on specific situations
the firm is facing. Another function of the advisory board, he says,
is to hold his feet to the fire. "They challenge me," he says.
The board looks at everything he is doing, ranging from holding down
expenses to growing the business.
Whatever the composition and structure of the brain trust, it is important
that its members have no financial stake in the business. That way,
according to Rue, "they tell it the way they see it."
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