As the recovery picks up speed, hundreds of thousands of America’s middle market companies appear poised for a new era of opportunity and growth. Gone are the days when declines in revenues and margins, excess capacity, anxious employees and restless investors were the general rule. Capital for expansion is on the rise. Credit is flowing again to private equity firms, armed with nearly $1 trillion to invest in growth companies, sufficient to fuel three and one half years of deal activity.
Meanwhile a host of innovations like cloud computing and the virtual back office are enabling new variable cost-based business models that are flexible and adaptive to unexpected market changes. New social media channels and viral techniques like mobile promotions can help upstart companies get their products and services attention.
Yet the same market dynamism that spells opportunity also means intensified competition - from rivals across town or around the world. Copycat competitors threaten even the most successful product or strategy. Facing a complex regulatory environment, low cost offshore rivals and the increasing need for equity to fund growth - among other challenges - entrepreneurs are eager for any edge they can find.
Getting Actionable Advice
A growing body of evidence points to a key frontier for growth-oriented middle market companies: their ability to reach beyond the borders of their own firm to tap the best available strategic and operational advice. As entrepreneurial companies track competitors, plan product strategy, raise capital and eye their long-term exit strategy, they need to look beyond day-today operational firefighting. They need the timeliest, savviest, most reliable counsel about markets, trends and companies. For example, counsel about changing market dynamics; how to keep the business ahead of industry shifts; how well yesterday’s assumptions fit tomorrow’s realities.
The romantic image of the lonely entrepreneur trusting in intuition is out of date. Entrepreneurs need as many compasses as possible to chart a course to success across an ocean of information. Of course in today’s hyper-connected world there’s no shortage of advice, expert and otherwise. Blogs and Web sites offer free advice on all kinds of specialized business topics. Entrepreneurs can use CEO networks and forums to pick the brains of their peers. Albeit for a high price, expert network companies offer access to what they claim are tens if not hundreds of thousands of experts on call. Many entrepreneurs rely on occasional, informal advice from business people they know, typically through their social networks. But much of this ad hoc intelligence can be hard to integrate meaningfully into a company’s operations. How can the CEO be certain that the advice is a good fit for the company’s particular situation or that the advisor is competent enough to heed?
Advisors Who Know The Company
The idea of adding independent members to the board of a closely held company might seem surprising at first. Why would entrepreneurs, even those who haven’t yet attracted external investors, want to give independent directors a say in their business? Sure, corporate boards often exist to represent minority shareholders and other stakeholders. But a board of directors should serve an even more important role: enlisting experts who invest time to understand the company through a regular process of review and analysis, offering seasoned advice to strengthen the firm’s growth prospects and long-term value.
Download the full whitepaper here.
Co-Authors
Mark Rosenman and Gary Kunkle came together to share their knowledge of the value of using independent directors. Mark Rosenman is Chief Knowledge Officer of Newport Board Group and heads the Newport Expert Network™. Gary Kunkle is a consultant who is an internationally recognized authority on identifying high growth sectors and companies. He is an advisor to the Edward Lowe Foundation.
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