Entrepreneurs Know How to Use Professional Advisors -- number nine in a series taken from: How to Evaluate and Profit from a Business Opportunity - The Entrepreneur's Guide The first time a person starts looking for an opportunity they become immediately confronted with professional help. Besides those who make direct contact, well-intentioned friends will provide names of brokers, CPAs, business consultants, and lawyers, all of which, they insist, must be contacted before you, (the person who is looking for a business) make all sorts of horrible mistakes. I do not advocate that this should be your first act. Certainly each of these professionals can help -- and depending on your background, some more than others. But think about what you have to do to pursue your goal of finding a business. Know yourself, understand your resources, start to focus on the type of business that suits you, begin looking to see what's available, and these are just a few of the items that you now have on your check list. Do you really want to make another to do list with the names and contact information of professionals you should talk to? Such a list could become very large, very quickly because everybody you know knows somebody and whoever they know is the best or at least they think so. But are they the best? And how much time do you want to spend trying to determine who is the best? I regard all professionals as tools for me to use to accomplish specific tasks. For me the best way to decide if a professional is one I want to use is to first, decide if I want them in my life as a human being and then second, give them specific questions so I can gauge their answers and compare them to others I might be considering. Both take time. How do you come up with the questions? By getting involved with a situation that provides issues about which you need help. This approach also provides you with opportunities to try to understand more about what you are doing. This is a new thing for you, looking for a business -- you should want to learn all you can about it. The more you probe, the more you make inquiries from different perspectives, the more businesses you look at, the more business owners or their agents you talk to, the more you learn. The more you learn, the more complex the questions you can't answer become -- and then when you ask a professional those questions the more you challenge them. This is where you should spend your time. As an example of how this works in real life let me tell you about a situation in which I was involved. I was helping several high-tech engineers take their part-time development activities to a more formal structured and higher level of business. Working under one fellow's Sub S Corp, they developed a module for use in an instrument produced by a multi-million dollar company. That company was so pleased with their work that it wanted to invest several hundred thousand dollars with them and acquire a minority interest in their business. I advised them to form a C Corp, which would be owned by the multi-million dollar company, and the Sub S Corp. As the 2005 tax return for the Sub S Corp had not yet been filed, I advised them to restructure its ownership so that all of the engineers would be shareholders. I knew that the Sub S Corp had no value as of December 31st, 2005 and so advised them to do the transfer as of a date in 2005. This would permit the owner of the Sub S Corp to sell the shares to each for a minimal amount. I also suggested that they retain a CPA to oversee the books and records for the C Corp that would be created and that they start interviewing possible candidates. The CPA they decided to retain suggested that the transfer of ownership in the Sub S Corp be a done as of January 1, 2006. In addition since the new C Corp would have substantial value at the end of 2006, and therefore the Sub S Corp as majority owner would too, the shareholders of the Sub S Corp might be subject to an inquiry from the IRS for having bought the shares for less than the fair market value. To protect themselves the CPA suggested they form an LLC which would become the majority owner of the C Corp. When I questioned why they should then become owners of the Sub S Corp the CPA had no good answer. Then I asked if he was worried about the potential of an IRS inquiry, why did he advise them against doing the transaction in 2005. He had no good answer. The point of this is that the high-tech engineers who were taking their first entrepreneurial steps were about to rely on the advice of a professional that they did not know how to challenge. Most professionals trade their hours for your dollars; some are very interested in creating work. Test who you are going to do business with, make sure they can do the job for you and don't buy time, buy results. You will find more about this topic in chapter eighteen in my book. By Art Consoli www.artconsoli.com |
