Michelle Coyle is president of BGSD Strategies, where she provides strategic advice for political business owners. Have a question about your business? Email her directly at email@example.com and she’ll answer them here.
Q: I have two partners at my firm, and one of them wants to add a fourth to develop business before adding more staff. Do you think it’s a good idea to have another principal at a firm courting business before we add the capacity to do the work?
A: It depends. I would want to know a lot more about your situation — including what specific business you’re in — before advising on this one way or the other. But here are some questions to consider:
How is equity currently divided? Whose equity gets carved out to make room for a fourth partner?
Hopefully this type of contingency was already planned for and written about in your operating agreement. Whatever the answer is, all three existing partners would need to agree that it’s worth it to have another person carving into the equity pie in order to do this.
Can the potential partner in question bring something to the table that the existing three partners cannot?
It usually only makes sense to carve out existing equity if the new partner brings some kind of capability to the business that the existing partners don’t already have – one that would be the catalyst for the company to grow to a size that would be impossible without them. Someone may be telling you that they have access to an entire book of business to bring in with them. Still, it’s worth making the time to critically scrutinize whether it’s really true that you and your existing partners couldn’t bring in that type of business without carving into your equity.
Put another way: imagine selling this business in a few years for $10 million. Does it feel good to hand this person a couple million of those dollars?
Does the type of work you do require skilled employees with years of experience to execute? Or can entry level folks be trained quickly?
This is a trick question, because the answer really speaks to the time and attention you’ve put in to building a smooth operating system inside of your business. Companies that have done this well can hire entry-level folks and train them quickly.
If your answer was leaning toward the first option, you probably either haven’t been in business very long, or you’ve stayed really small for a long time. If you’d want to grow bigger, faster, you’ll need to stop and take some time to define your systems and processes — and document them. This will set you up to be in an optimal place to quickly hire and train up new talent to execute on any work that comes in the door, and you won’t have to worry about accidentally selling more work than you can service.
If you’re not there yet, it’s not time to bring in a new partner, and any new employees you’re hiring should be down to work through this systems process with you to get you ready for expansion.
How long is your sales cycle?
The longer your typical sales cycle, the sooner you need to invest in business development talent, whether that talent comes in at the partner level or not.
Can non-partners do BD?
Often, firms jump to the conclusion that if they want someone else on hand who can sell stuff, they need to bring that person in at partner level. The reality is that there are plenty of people in the world who can sell who are happy to work for commissions and bonuses and work their way up. See if you can get this need met another way before resorting to adding an additional partner.
How well do you know this person?
One last thing: this isn’t just about money. In fact, no amount of money is worth getting into a bad deal with a business partner who makes your life a living hell. Make sure you know someone really, really well before going into business with them.
Q: My partners and I are discussing rebranding our firm to go after more corporate work, do you have a suggestion for what our new name should be? We’re looking for boardroom appeal.
Names matter so much less than anyone thinks. My main advice here is to stay away from anything too literal.
Think about the biggest brands in the world. Apple. Starbucks. Nike. Can you imagine them reaching the same level of success if they were called Cool Computers, Fancy Coffee, and Good Running Shoes? It always amuses me how many political firms are named this way.
There’s always the option of using your name(s) as the brand. It’s safe and definitely corporate-friendly. There are drawbacks however – the main one being your future clients and potential clients are likely to get salty if they’re not always talking to or working with the person whose name is on the door. If you’ve already got a senior staff that handles sales and/or high-level client work — or you want to grow into the size of firm that will have one — I’d avoid this route.
The bottom line is that re-branding involves a hell of a lot more than just changing a firm name. And if you want to go after an entirely new vertical of work, you’ll need to entirely overhaul your brand strategy before you even start to think about updating your tactics. Your brand is one of the most important assets in your business, and you can’t afford a lot of trial-and-error with this. Call in an expert to help you. (Shameless plug: if you’re on the left, that expert is me.)
Q: I’m striking out on my own and launching a new firm, do I need to form an S-corp, an LLC or just get an EIN number? My lawyer seems to think I can just use a business name with an EIN because I’m mostly doing comms (hence no need to limit liability), but I don’t think that sounds “official” enough. Thoughts?
Do what your lawyer and your accountant tell you to do. Most of the time when you’re just starting out, that will be to form an LLC, get an EIN number, and open a business bank account.
Regardless of the exact legal designation you decide to go with, it is always a good idea to keep your personal money and business money physically separated. It might feel silly to do this at first when you’re just one person moving money from one bank account to another, but this kind of hygiene is easier to put in place and stick with from the beginning, and you’ll be glad you did as your business grows and things start to get more complicated.