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Many small company bosses have a regular dialogue with a business advisor. If you are the owner or manager of a small business, you may speak to an advisor already. If you don’t, you may have thought about the idea, but not yet acted on it. In this article, we discuss the surprisingly varied roles that a good advisor can play and the ways in which a small company boss can benefit from their expertise and support.
Here are some quick links to the sections detailed below:
Many small company bosses make use of a business advisor
To run a business successfully, many entrepreneurs seek support from a small business advisor at some point during their careers. Sometimes these are one-off contacts. In other cases they become regular, long-lasting relationships.
It’s not surprising — CEOs can’t be experts in everything.
For starters, company bosses are expected to have strong leadership qualities. They should have the ability to formulate and communicate a compelling vision, direct and motivate their executive team, apply sound judgment when taking decisions and so on.
Then they need to be experts in the product or service their company sells.
Finally, they are expected to be able to analyse their market, anticipate future trends, develop winning strategies and so on.
In the real world, few company executives have the good fortune to be blessed with every single attribute they need to excel in their role - it's an incredibly long list of technical skills and personal qualities for one person to command.
How should companies respond? The best approach is to hire bosses for their high level leadership and executive skills and lean on outside support for additional technical skills as and when they are needed.
That's because it’s hard to imagine a CEO being successful without the ability to set out a compelling vision and inspire others to want to realise it too. Integrity and good judgment are also essential. So are strong executive skills - the ability to get things done.
By contrast, it makes perfect sense for a CEO to call in a good business advisor if they find themselves in need of particular know-how from time to time. An advisor can contribute specific expertise, offer an outsider’s fresh perspective, provide an intelligent sounding board for ideas and many other things besides.
In this article, I will pinpoint six examples of how a good advisor can help a small business owner:
Advisors often assist companies in developing or refining their strategy.
An advisor can work with you to anticipate how your industry may change in the future and position you to profit from whatever outcome materialises.
An advisor can prompt you to challenge your own assumptions and consider a diversity of viewpoints. This should help you take better decisions across all areas of your business.
CEOs often value a second opinion when they need to take an especially important or emotionally charged decision.
For a CEO who wants to make major changes in their business and needs to win over other executives and shareholders, an advisor can be an important ally and reinforcement.
A trusted advisor can provide empathy and moral support for a CEO in what can be a lonely role.
Let’s delve into these situations in more detail.
Advisors contribute specialist expertise in developing business strategy
Some CEOs are great strategists, but some aren’t. That’s not surprising – many executives don’t need to call on strategy skills very often in their day-to-day role.
Executives are do-ers – they see their role as moving their business forward and getting things done. By contrast, business strategists spend a lot of time thinking and asking questions. And they think and ask questions in a particular way.
An advisor can guide you through the key stages of your strategy development process:
An advisor who is a good business strategist will work with you to identify your competitive strengths. Your strengths are the capabilities that enable you to create products or services that your customers value and which your competitors find it hard to match. Identifying key strengths can be hard for executives because they are so close to the business. An advisor looks at companies from a distance through the lens of competitive advantage. They will help you to better understand which are the factors that enable your company to compete and win today.
Your business strategist will then help you create winning strategies that are based on sound judgment about where and how you should compete in the future. They should bring out your creative thinking while ensuring that your ideas stay aligned with the key strengths you have identified. The strategies you settle on should be a set of practical initiatives that use your strengths to capture profitable opportunities to grow your business.
An advisor who is a good business marketing strategist will help you to develop a marketing strategy that flows naturally out of the key benefits that your product or service deliver for your customers. In fact, there is no point building a great product or service if you are not going to be able to sell it effectively, so developing your business strategy and your marketing strategy should be a holistic process – the two should be perfectly aligned from the start. Your business marketing strategist should be involved in your wider strategy discussions from the start.
Finally, setting good objectives should be a natural outcome from the process of understanding your strengths and developing the right strategies.
There are many potential pitfalls to avoid when creating strategy. Your advisor can help you guard against these. For example:
Activities across all your business functions (research/design, production, marketing, after-sales etc) should play to your company’s strengths. Your different departments should all reinforce your strengths and not pull in opposing directions. A common pitfall is to fail to link the benefits your product delivers to the way it is pitched to customers. A good business marketing strategist will ensure that you market benefits not features and that the benefits you market are the ones that solve your customers’ biggest pain points.
You must focus your efforts. Don’t dissipate your energy across many initiatives that will bring you average results everywhere instead of outstanding results in the areas that will really bring you success. You need to prioritise and say ‘no’ to new ideas as often as you say ‘yes’.
Staying focused and making sure that initiatives don’t collide with each other can be among the trickiest elements of developing strategy. That’s because optimising strategy for your company as a whole can require some people or departments to accept changes that will detract from their individual performance when seen in isolation.
With this in mind, your business advisor should be good at keeping debate focused on facts rather than personalities. They must be able to head off any tensions and keeping everyone working together.
For more on this topic, see our comprehensive guide to creating small business strategy.
An advisor can work with you to anticipate how your industry will change in the future and position your company to profit from whatever outcome materialises
To run your business successfully, you need to have the right business strategy. And designing the right business strategy requires that you anticipate how your industry will change in the future and put in place options for adapting to whatever change materialises.
Some industries are in constant upheaval. Others operate in the same way for years, even decades. But the world doesn’t stand still and most industries eventually go through periods of change. When they come, those changes can sometimes be dramatic.
To quote Max McKeown, one of today’s most prominent writers on strategy:
“It’s a fair bet that at some point what made your company money in the past will stop making money… You need to know when (and how) to switch focus.” [1]
Successful entrepreneurs are always experts in their own business and their own industry. But when it comes to the big trends that are shaping the wider world, it can be a different story. For a time-pressed company boss, keeping up to speed on technology, geopolitics or social trends may seem like a use of time they can’t afford.
Yet the biggest opportunities for your company, and its biggest challenges, may not originate inside your own industry. They often have their origin in an adjacent industry, or even a distant one. Your own industry is then impacted by so-called ‘second order’ (ie, knock-on) effects.
Let’s take an example to illustrate the point. The cost of computing power has collapsed over recent decades. Computing power that was previously only available to big corporations with mainframe computers is now available cheaply to even the small companies over the Internet.
As a side effect, startups have been able to attack large incumbents across a huge range of industries. The effect is especially strong in industries where access to computing power was a major market entry barrier, such as banking.
Second order effects catch people out. Sometimes they are hard to predict in advance. But sometimes they are predictable, it’s just that unrelated industries seem remote and people don’t devote enough effort to thinking about them.
Let’s quote Max McKeown again. He urges business leaders to be alert to adverse changes in their industry and be ready to take the leap into a different market. His view is that such big industry shifts are often foreseeable if you put your mind to it:
“It shouldn’t be an unplanned opportunity because you should be able to see this kind of market movement ahead of time. And it shouldn’t really be about reacting…because it’s often about long-term trends.” [5]
A business advisor can work with you to anticipate the future changes that will impact your industry. A good advisor should have a wide field of vision. They follow both domestic and international business news. They read specialist industry publications and books about any topic under the sun. They talk to other businesses, they network with fellow advisors and they attend industry events.
With this knowledge, they can bring you fresh insight into what is going on in the world beyond your own industry. By combining your insights with those of an advisor, you should be better placed to connect the dots and predict what the future may hold than if you try to work out the answer on your own.
An advisor can also help you understand how to adapt effectively to any industry changes that do materialise. Preparing for change is not about making single, high conviction predictions of the future – the world is too uncertain for that. Rather, it involves considering more than one possible future. This is usually referred to as ‘scenario analysis’.
Scenario analysis requires you to think about the various different ways in which your industry might evolve and develop contingency plans. You should focus on the outcomes that are the most likely as well as any which seem unlikely but, if they were to play out, would have a large impact.
Carrying out a scenario exercise doesn’t require you to abandon the assumptions about the future that underlie your existing plans. The central (ie, most likely) scenario that you are currently basing your plans on is the one you will continue to use, unless it becomes apparent that it is no longer the most likely outcome.
Rather, scenario analysis calls on you to open your mind to less likely, but still plausible, outcomes for your industry and examine their implications. That way, you will position yourself as well as you can to benefit from whatever outcome materialises. You will know which direction to take if the unexpected happens.
Scenario planning might seem like a frivolous use of time, but it’s not. Every day, a company somewhere collapses when scenario planning might have enabled them to save themselves. Another company somewhere else catapults to success because management had put in place a smart plan for an event that seemed unlikely but happened anyway.
Consider the classic example of Toys “R” Us, the once dominant US toy retailer. In 2000, when bricks and mortar stores still dominated toy retailing, the company signed a 10-year agreement to become the exclusive seller of toys and baby products on Amazon.
This was profitable to begin with, but Toys “R” Us consequently built no online store of its own. By the time management realised that the future of toy shopping was online, the company had fallen so far behind other retailers in online selling skills that it proved impossible to catch up. Toys “R” Us eventually filed for bankruptcy in 2017.
Did nobody at Toys “R” Us consider what would happen if toy shopping moved online before they signed the Amazon deal? Was adoption of online shopping really such a remote possibility? In a scenario analysis exercise, wouldn’t it have been highlighted as a plausible negative risk?
Looking forwards, what will be the impact on business and the economy of Artificial Intelligence? Of the trade and geopolitical rivalry between the US and China? Of climate change and decarbonisation policies? We can’t predict the future with complete confidence but with a little thinking we can usually draw up a surprisingly long list of sensible Dos and Don’ts.
Many companies base their strategies on the single outcome they think is most likely and are caught unprepared if the unexpected happens. Maintaining a dialogue with an advisor can help you stay on top of the trends that will shape the future of your industry and work out how to prepare for the unexpected.
An advisor can help you challenge your own assumptions and consider a diversity of viewpoints, helping you to take better decisions across your whole business
I have already mentioned how incorporating an outsider’s perspective can be helpful when you are developing strategy for your company. But leaning on advice from an outsider can help you take better decisions in almost any area of your day-to-day business — from recruiting and motivating your employees to organising your internal processes.
How so? Because an outside perspective can prompt you to examine your own thought processes, shift you out of any harmful routines and thereby keep your decision-making processes healthy and robust.
Where do the bad habits come from that we are prone to slipping into? Often, they come from human biases. These biases are hard to overcome because they are hard wired into our human brains. They inhibit us from thinking self-critically, as individuals and as a group.
What are these human biases? In the following paragraphs we have highlighted two that are especially relevant to the business of managing a small company. In our explanations, we have used the terms popularised by Robert Cialdini in his landmark book Influence: The Science of Persuasion. [3]
The first is the principle of Commitment and Consistency. None of us likes having to accept that we have been wrong about something. Even if circumstances have changed in a way that was not foreseeable, changing your mind on an important topic feels unpleasant, as if we have been a fool.
For these reasons, we tend to unconsciously reinforce our belief in the opinions we have already adopted and the decisions we have already made. We become more alert to any news that would confirm our existing position and find reasons to discount any evidence that it may be wrong.
If we don’t guard against this phenomenon, our views and positions can become entrenched – they become emotional commitments rather than rational ones – and we lose the ability to be self-critical.
The second bias is the principle of Unity. We like people who are like us – people who share our views, our social background, even our hobbies. We feel a bond with them that we don’t feel with other people. When we meet someone who is like us, we tend to notice their positive qualities while justifying character traits or behaviour of which we would ordinarily disapprove.
It’s an unconscious habit but a powerful one. For example, people tell opinion pollsters they trust those who share their political views more than they trust those who don’t. Police forces and other organisations have covered up crimes by their members. The examples are endless.
In the workplace, the Unity bias causes us to listen to people like ourselves more closely, take them more seriously and – if we are the CEO – promote them more quickly. If a CEO doesn’t guard against this bias, the top management team may become dominated by people whose background and opinions resemble those of the boss. This reduces debate.
The cultural failures that flow from these human biases are so powerful that even large companies regularly fall victim to them. A classic example is Nokia. In 2007, Nokia captured more than half of all worldwide mobile handset sales. Just a few years later it collapsed and was bought for a song by Microsoft in 2013.
Two authors later published an in-depth study of the saga based on interviews with Nokia staff. The paper (Vuori and Huy 2015) [4] concluded that middle managers were so afraid of contradicting top management’s entrenched optimistic views that they stopped telling top management the truth. As other brands improved their technology, Nokia fell behind, its products became obsolete and the company’s market share collapsed.
Corporate failures like Nokia suggest that consistently good decision-making relies on a diversity of perspective, experience and personality within the senior management team. If meetings end with quick agreement, this may lead to harmony in the management suite. But some points of view are likely not being considered properly and there is probably insufficient informed debate.
In the words of Richard Rumelt, one of the world’s foremost current experts on strategy: “Universal buy-in usually signals the absence of choice.” [5]
Lack of what I will call ‘intellectual diversity’ is a particular risk for small companies:
Small businesses are run by fewer people than large enterprises. There are just not as many people in the room when decisions are being taken.
Small companies often lack institutional checks and balances. The CEO may be the only or main shareholder. There may not be any independent non-executive directors who could contribute fresh insight to key debates.
When a large company makes a senior hire, there is usually a formal vetting process involving people from inside and outside the hiring department. This checks the tendency for managers to hire people like themselves. Hiring processes in small companies are often less formal.
Small business CEOs often hire from their own network of friends and former colleagues. This reduces the risk of making a bad hire, because the new person is a known quantity. But the new hire’s personal debt to the CEO may inhibit them from providing constructive criticism. A CEO needs their top people to call out problems, not stay silent out of misplaced loyalty.
A small business advisor is emotionally detached from your business. They are supportive of your aims, but they are not invested in the status quo and are open to doing things differently. Unlike an employee, an advisor will not be nervous of displeasing their boss and missing out on a promotion or pay rise. They will call things as they see them and not act as a ‘yes man’ (or woman).
A good advisor can sensitise managers to their blind spots, foster constructive debate and reduce the risk of group think. By engaging an outside advisor, a CEO can help the executive team to consider a diverse range of viewpoints before taking important decisions.
CEOs often welcome a second opinion when taking an especially consequential decision
Sometimes, a CEO just wants a second opinion about a decision they need to make.
The decision might be of very great financial or commercial importance. For example: making an acquisition; launching or closing a business line or an office; making staff redundant; raising new capital; and so on.
When a decision is very important, it makes sense that it should not rest entirely on the shoulders of a single person. That is true even if the CEO has all the experience needed to take the decision and is confident in their own judgment.
Let’s not forget that the decisions we are most confident about can be the ones that trip us up. If we are very familiar with the issue at hand, this can lead us to drop our guard. We may do less due diligence than usual. We may just overlook something that is in plain sight.
On other occasions, a CEO might have to take a business decision that has an emotional component. The decision might not even be very consequential from a commercial point of view. Yet the CEO might still value hearing from someone who has no personal attachment to the situation.
The purpose may be to confirm the conclusion to which they have already arrived. It might be to explore whether there is another option that could solve the problem in a less painful way.
Examples include:
Letting go of a long-serving and loyal member of staff, whether because of poor performance or changed economic circumstances.
Letting go of an employee who is a personal friend or a family member. Small company CEOs often hire from within their personal networks and family businesses often employ second or third generation members of the family. Working out how to deal with an underperforming friend or close acquaintance is not an unusual dilemma for small company bosses.
Making a significant number of staff redundant. There are many angles to consider in this situation, beyond the commercial one. How will it impact morale among remaining staff? And the public image of the company? It can be hard to decide how much weight to attach to the various factors, some of which are impossible to quantify in pounds and pence.
Whatever the circumstances, engaging with an independent, trusted third party, such as a small business coach, can help tremendously, if only to provide peace of mind that a difficult decision is the right one.
For a CEO who wants to make major changes in their business, an advisor can be an important ally and reinforcement
Sometimes, a CEO may have decided to make changes in the way they run their business. They may be convinced they are making the right choice. Yet this may not be the end of the story.
CEOs who want to make significant changes at their company are usually well advised to secure the active buy-in of their senior executive management team. Any initiative that involves major change typically requires the positive support of top managers for it to be truly effective.
They may also need to consider the views of shareholders, whether it’s a family business or one that has raised capital from outside investors.
If the CEO anticipates pushback from managers or shareholders, it is not unusual for them to turn to an external advisor for support:
The advisor can provide additional arguments that support the CEO’s decision. They can present examples of best practice, showing how things are done at other companies or in other industries.
They can be a useful ally in meetings, adding an extra voice for change if the CEO is outnumbered by sceptics.
They can even play ‘bad cop’, arguing for more radical measures and thereby enabling the CEO to position their own plan as a sensible, middle ground compromise.
Hiring an advisor is a time-honoured way of pushing through changes that are unpopular but necessary. That’s because it often works.
A trusted advisor can provide empathy and moral support for a CEO in what can be a lonely role
As every entrepreneur knows, running your own company can be a lonely occupation:
You need to appear confident and in control, even if you sometimes don’t feel that way.
You would love to brainstorm new ideas but you hesitate to bounce them off your management team in case they seem ill-considered or you appear indecisive.
It often helps to talk through day-to-day worries or doubts but you can’t share them with your staff because it would undermine your authority.
This gives rise to our final, and most personal, reason for a small company CEO to seek outside advice. Sometimes, it just helps to talk to someone about what is on your mind. Talking about a problem may not make the problem disappear, but it can make you feel better, which is partly the same thing. As the saying goes, a problem shared is a problem solved.
The person you speak to must be someone you can talk to freely, in complete confidence. Almost by definition, that rules out anyone who is involved in your business – they must not have any financial or career stake in the outcome.
They must be completely neutral, yet empathetic and supportive.
It may help if the person is roughly your equal in age and experience. In any case, the conversation should be like talking to an old and trusted friend.
A knowledgeable and experienced small business coach can fit this remit perfectly.
While experienced CEOs of established small companies make extensive use of small business coaches as sounding boards, the need for moral support can be especially acute for founders of startups:
Startup founders can be young. They may be running a business for the first time. They must live with the uncertainty that their business could become a life-changing success or end in failure. That’s a lot of pressure to deal with.
Talking to family and friends may be off limits if they have put seed capital into the business to get it off the ground. Sharing concerns or doubts about the business with its first financial backers may not be a good idea. (If the business is about to fail, that’s different).
Senior employees may be incentivised with equity. Retaining them is crucial for the business to be successful. If they lose confidence in the founder’s business plan, they will likely leave.
If you have raised capital from angel investors or VCs, you will likely have a board of non-executive directors. The board is normally a source of good advice for a CEO. However, if the board has been appointed by your financial backers, they may have divided loyalties. Sharing problems or concerns with them might trigger a loss of confidence and cause your backers to deny you further funding or even push you out of the business altogether. [6]
For startup founders in this situation, support from a trusted small business advisor can be invaluable.
[1] McKeown, M. (2012) The Strategy Book. 3rd Ed. Harlow, Pearson Education Limited. For more about Max McKeown’s profile and work, see https://www.linkedin.com/in/maxmckeown [2] McKeown, M. (2012) The Strategy Book. 3rd Ed. Harlow, Pearson Education Limited. [3] Cialdini, R. (1984) Influence: The Psychology of Persuasion. New York, Harper Business. For more about Robert Cialdini’s books and other work, see https://www.influenceatwork.com/ . [4] Vuori, T. and Huy Q.N. (2015) Distributed Attention and Shared Emotions in the Innovation Process: How Nokia Lost the Smartphone Battle. Johnson Cornell University Administrative Science Quarterly. See https://www.researchgate.net/publication/281965483_Distributed_Attention_and_Shared_Emotions_in_the_Innovation_Process_How_Nokia_Lost_the_Smartphone_Battle . [5] Rumelt, R. (2011) Good Strategy/ Bad Strategy. 4th Ed. London, Profile Books Ltd. Richard Rumelt is one of the world’s most renowned authors on strategy. For more about Richard Rumelt’s life and work, see his biography page at the UCLA Anderson School of Management here: https://www.anderson.ucla.edu/faculty-and-research/strategy/faculty/rumelt#tab-biography , where he is Professor Emeritus. [6] For some brilliant advice about the pitfalls of dealing with outside investors, budding or actual founders should read Wasserman, N. (2012) The Founder’s Dilemmas. Princeton & Oxford, Princeton University Press. For Noam Wasserman’s biography and more about his work, see https://www.noamwasserman.com/.