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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 Stephen

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

structured formally. William Rue, the third-generation owner

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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