With Fans Like These...
Fear and Hedging on Mahogany Row
by Andy Birol, President, Birol Growth Consulting

from Cool Cleveland columnist Andy Birol http://www.AndyBirol.com

Two outs, bottom of the ninth, Yankees up 4-2. If this were September 1997 Lofton and Omar would be on base waiting for Manny’s next Grand Slam.

But, it’s Winter 2005, and we’re hibernating, recovering from the Browns, and hoping the New Year will give us a reason to cheer. For a region so steeped in franchise loyalty, dogged faith, and fan spirit, when it comes to our teams a mere sound bite of encouraging news gets us leaping to our feet.

After moving from Boston in 1993, I never thought I would see sports fans to rivals New England’s. But immediately I saw business leaders proudly listing their Wahoo and Dog Pound Club memberships alongside their board positions and country clubs in the Leadership Cleveland yearbook. And when Cleveland’s reigning power brokers, the attorneys, accountants, and investors stepped up and wielded their clout, our new stadiums sprouted up like weeds.

But when it comes to nurturing local businesses, why do so many of our current generation of intermediaries turn into shrinking violets or fair weather fans? With all the brouhaha about the Plain Dealer’s Quiet Crisis series, accountants, lawyers, and investors could face their share of the music.

I’ve witnessed too many examples like:

• The lawyer, writing a client’s operating agreement in exchange for a company’s stock, adds a clause giving him the option to convert his share into debt. While this reduces his risk, it later creates a Faustian pact, choking the new company’s ability to survive.

• An accounting firm, abiding by Sarbanes-Oxley regulations (which prohibits it from selling potentially conflicting services to larger firms) … does not apply these to smaller clients for whom the spirit, in addition to the letter, of the law should apply.

• The venture capitalist encouraging every wannabe to submit a detailed business plan, regardless of any intention or ability to provide finance.

• Law and accounting firms still billing clients on an hourly basis instead for outcomes and results. Whose best interest does this serve? Not the client’s!

• The investor who demands to see EBITDA (earnings before interest, taxes, depreciation and amortization) numbers from the founder of a family business knowing full well that this is a show-stopping request better suited for a midsize or public company.

• The attorney who works himself onto a client’s board only to have first pickings of the firm’s legal work.

• The accountant unwilling to confront a lucrative client’s irresponsibility - until the client’s business goes broke.

• The financial planner who knowingly puts his client in an investment more profitable to himself than his client.

How much of this stultifying behavior is driven by fear and uncertainty, and how much is simply self-interest? I am reminded of the movie Titanic, in which Billy Zane leaps over women and children to grab the last seat on a lifeboat. Whatever the motivation, it’s a weasel-like thing to do.

While we are still recovering from the Arthur Andersen, Enron era, and should institute ever-better financial safeguards, intermediaries here in Northeast Ohio must also become bigger supporters of risk takers. It is one thing to provide fiduciary oversight; it is another to be a wet blanket.

Now, let me be clear: There are many terrific, growth-focused professional service providers in our area, and I am absolutely not calling any accountant, investor, or attorney a “crook.” My beef is with my contemporaries who have the talent and confidence to lead clients through risk to success and won’t. Why? Because it’s easier for them to go along to get along. And since it is safer, it’s often more immediately profitable.

Just recently, I met with a couple of service providers to discuss co-sponsoring a business owners’ roundtable. After agreeing on the need to hold the event, both kept asking for more and more evidence of why they should work with me. Finally in response I asked them to show me their CPA and bar exam scores so I could make an equally conservative decision on working with them! What was I thinking?

As service providers or intermediaries, if we don’t point out everything our clients need to grow, we are playing it too safe. Clients should be discouraged from destructive ways or ultimately be fired. If we upset or lose a client because we pushed them too hard, we are doing our jobs and the region a favor. If we are good, then there will always be new and better clients to replace the ones who fired us. Our newly found time can be better spent not only serving the rest but also admonishing them to grow. It’s all about the confidence we can give business owners. Northeast Ohio’s businesses, just like the Indians and the Browns need to make the most of what they have.

Intermediaries need to step up and lead. Here’s how:

• Within your legal and ethical means, convince your clients to grow and expand.

• Promise them and yourself you will never become the bottleneck that slows them down.

• Persuade your clients to outsource locally and afar anything that allows them to further enhance their Best and Highest Use. A ruthlessly focused firm leveraged through many vendors is a lot more patriotic than a closed one.

With a renewed focus on growth, smart risk-taking, and innovation, we will see more Cleveland success stories. After all, many firms are already thriving. Who are these winners?

• The companies who get their customers to fund as much of their own growth as possible.

• The firms who figure out bite-sized successes to pursue rather than bet on the long shots of total solutions.

• The companies who hire proactive service providers—the kinds who work themselves out of a job, take risks too, and are growing themselves.

Undoubtedly, many accountants, lawyers and investors will read this and wonder what gives me the right to admonish them? And I expect they will never refer me into helping one of their clients grow. But after years of watching so many providers do so little for so many, what’s to lose? To them, let me suggest a new verse for the Willie Nelson-Julio Iglesias song, “To All the Girls I’ve Loved Before:" "To all the girls who’ve turned me down..." I say, 'Thanks for nothing.'

One of my favorite expressions is “You become what you tolerate.” Northeast Ohio needs to rise again on the strength of new ideas and profitable innovations. Come on Cleveland, the status quo is killing us. We’ve got to swing at every decent pitch and aim for the fences. And accountants, lawyers, and investors need to support and cheer their clients on just as hard as they do their Browns and Indians.

from Cool Cleveland contributor Andy Birol abirol@andybirol.com or visit http://www.AndyBirol.com

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