Bad Advisor Syndrome Article

Solving the Value Equation
www.ephorgroup.com 1 ©Copyright 2016 Ephor Group, LLC. All Rights Reserved.
Bad Advisor Syndrome & Its Negative Impact on the American Economy
Bad advisors are the #1 barrier to success for CEO Entrepreneurs.
Did you know that annually more than 400,0001
new businesses are created every year?
But less than 1% of these achieves the success of $10m in annual revenues.
And when these business fail, jobs are lost and capital is wasted.
Is your knowledge and experience enough to achieve success?
Will you achieve success?

400,000 private businesses are
created each year while nearly the
same amount close their doors
Less than 1% of new businesses
achieves $10MM in annual revenues
REALITY: Only 4,356 business raised
institutional capital in 2015
How profitable are you?
Privately funded institutional capital
sponsored companies grew sales by
133%, while the average U.S. company
grew sales by 28% since 1995
Of the 1MM companies with less than 99
employees fewer than 1 in 4 achieve
10%+ year over year revenue growth
Less than 1% of Entrepreneurs create
wealth for their shareholders
If the biggest barrier to job creation is the success and growth of small businesses, then why are
small businesses failing?
1
In 2015 according to the Department of Labor more small businesses failed than were created. 400,000 new businesses were created and
470,000 closed per the U.S. Census Bureau.

Early Warnings Signs
www.ephorgroup.com ©Copyright 2016 Ephor Group, LLC. All Rights Reserved. 2
How Do You Know If You Have a Bad Advisor Syndrome
If you check the box YES for any of the following, then you have Bad Advisor Syndrome.
You have more than one advisor.
You absorb or only use “pieces” of the advisors advise.
The relationship is “idea” driven, not outcome/success oriented.
The leader/founder/CEO spends less than 20% of their time learning.
Problems or issues are treated and addressed as functional or personnel issues: not from a
“holistic” view of the entire business model
The financial engineering of the company is not appropriate for the maturity level of the company
and/or the advisor does not include “finances” as a “holistic” aspect of the business model.
No clear market discrimination or differentiation of the company in the marketplace.
The shareholder wealth objectives are not being accomplished.
The business model does not outperform the competition.
The common denominator is that a majority of the “bad advisors” create and settle for mediocrity,
because they are “lifestyle oriented” and they do not want to lose the client!
So, what makes a good advisor for a wealth creating company?
Successful Advisors Strive for the Leader/Founder/CEO to Achieve Balance.
A lot of companies fail, but the good news is that most
of the investment and execution risks can be averted if
you plan for them. The first step in learning to avoid
business failure is understanding both the investment
and the execution risks. The second step is ensuring
that the business and its leadership does not fall into to
the trap of failing to adapt, change, and grow when the
market changes. Every business requires evolution.
Without perpetually studying the market and evolving,
the risk of failure is eminent. All too often businesses
focus on maintaining the status quo; which in fact
raises the probability of failure.
Outcomes of Bad Advisors for Entrepreneurs
 Focus on the short-term
 Status quo incrementalism.
 Focused on financing activities more than operating performance.
 Mediocrity.
 Paralysis by analysis.
 Single digit EBITDA (limited profitability).
Six Reasons Businesses Fail:
1. Leadership Failure.
2. Lacking Unique Value.
3. Failure to Attract Customers.
4. Unprofitable Business Model.
5. Poor Execution.
6. Bad Advisors.

Bad Advisor Types
1. Lifestyle advisors. These advisors focus on cash flow and maintaining the status quo.
2. Big company advisors. Public company thinking applied to small businesses is a recipe for
resource misalignment.
3. Functional advisors. These single threaded advisors are focused on solving a functional situation,
without regards to the overall value impact. Typically, these advisors are functionally brilliant in
sales, marketing or operations, but their impact is largely constrained to one department of the
business.
4. Peer advisors. Typically, these “Feels Good” networks provide advice of what it takes to create
yesterday’s great place to work.
5. Financial advisors. These advisors most often fail to financially engineer the business to the
specific business model and the “sector” enterprise value dynamics: resulting in poor financial
alignment to the business model and exogenous factors.
Manage Shareholder versus Manager Responsibilities Balance
Founders/CEO Leaders have the responsibility of playing multiple roles within their business, but there
maybe no two harder roles than that of playing both the Manager and Shareholder roles.
 As a Shareholder, the founder is responsible for creating profits and their primary responsibility is
fiduciary.
 As a Manager, the founder is responsible for customers, operations, and the people of the business.
The “Board of One” must create a keen understanding the difference between Shareholder and
Manager Responsibilities, which to grow and create wealth is a challenge the majority of small business
must overcome.
Manager Responsibilities Shareholder Responsibilities
 Vision, Mission, Values
 Strategic Clarity
 Functional/Department Performance
 Allocation of Resources
 Value of the Business
 Shareholder Returns
 Governance
 Sources & Uses of Funds
For the business to prosper, founders must balance their skills and gaps compared to the needs of the
business and choose to not only surround themselves, but empower others. Unfortunately, bad advisors
are commonly incented to maintain the status quo, while addressing issues as functional issues, and
working “in” the company not “on” the company with the founder/CEO.
Surrender the Sovereignty to Achieve Your Goals
 Select and hire professionals that will allow you to get back to the “fun” of being an entrepreneur.
 Keep people aligned to the destiny/ mission: but do not micro-manage them to do so.
 Motivate and Empower the people: if worker and management turnover occurs, then assume the
CEO is the problem!
 As well as Surrender the Sovereignty to a singular advisor which is aligned and synched with both
the CEO Entrepreneur’s vision as well as the shareholder wealth strategy.
For the founding entrepreneur, it’s a very emotional thing—their identity is in the business. Ultimately,
every business is going to turn into cash at some point, and that can be favorable or unfavorable. At
Ephor Group, our belief and philosophy is that every company, that desires to be more than a lifestyle
boutique, requires a CEO Entrepreneur, a shareholder wealth strategy, a singular CEO Advisor. At Ephor
we call this the “Board of One”.

A successful advisor or “Board of One” must strive for the Leader/CEO to not do what just feels good, or
take “magic bullet’ actions. They must have a plan, implement the plan and measure the results in a
pragmatic manner.
At Ephor we often state: “If it feels good don’t do it!”
END OF BAD ADVISOR ARTICLE
THE REMAINDER OF THE BELOW IS AN ADDEMDUM OF ADDITONAL INFORMATION

The Single Most Common Entrepreneur Mistake
The Board of One™.
If indeed your objective is to create a sector leader, then the most common entrepreneur
mistake is the failure to choose a singular business wealth advisor.
Preamble. The majority of small business leaders, especially entrepreneurs, generally illustrate
a background that is dominated by one or two functional areas of expertise. (i.e.
technology/engineering, or sales/marketing) Therefore these leaders rarely are fully adequately
skilled to effectively manage all the functional areas of a growing business. This has become
especially prevalent in today’s economic environment. As a result, the Ephor Group over the
past 7 years has developed and refined a concept entitled “Board of One”.
The Big Idea. The Board of One objective is to provide the skills and resources necessary to
augment those that the company leader simply does not illustrate in order to create the “CEO
Entrepreneur.”
The Result. The emerging company and its leaders will have at its accessibility and disposal,
the complex skills required to create shareholder wealth. At Ephor we call this “Solving the
Value Equation”. Simply stated; crossing the chasm from a small lifestyle oriented business, to
a wealth creation entity requires a CEO Entrepreneur supported by the Board of One.
Paradigm of Change. Historically these skill deficienciencies have been solved by retaining
functional consultants to temporarily provide skills via a bottom-up or task oriented approach. In
the new economy this approach has frequently failed. What has proven successful is a holistic
approach that builds the long-term capability and capacity of the organization. The Board of
One and the CEO Entrepreneur together ensure strategic planning is holistic and aligned with
the wealth strategy, and that strategy is coupled with “best of breed” operational and execution
capabilities. Strategy without execution is a recipe for disaster.
Additionally, advisory boards or formal board of directors have proven likewise generally
ineffective due to the fact that the entrepreneur simply does not have the time nor skills
requisite to manage and facilitate effective outcomes from a pool of advisory resources.

The Board of One™
Board of One Application. What has proven successful in the creation of wealth for shareholders is
the Board of One where the emerging business leader partners with a proven well established,
experienced executive with access to the resources, and skills required. The Board of One facilitates the
project management aspect of developing the business operating model.
Vision Change. Designating one singular Board of One, dedicated to achieviving the wealth strategy for
your business is in the best interest of all shareholders. While most entrepreneurs play to their strengths,
many have great difficulty turning over, or even sharing control. There is zero change of control. The
Board of One simply augments the CEO Entrepreneur. The outcome is how entrepreneurs become CEO
Entrepreneurs and not lose their company to stagnation nor financiers.
Management by Committee versus a 1 to 1 Leadership Partnership
Managing a private business in its growth stages with
public company concepts is a recipe for disaster.
X Strategy by committee creates mediocrity.
X Management by committee creates stagnation.
X Multiple advisors cause disenfranchisement of the
business model as proven by the failure rates.
X Big company decision making is simply not
effective in emerging, growth oriented business
models.
A 1 to 1 partnership aligns strategy and execution so that
the daily contributors of the company perform.
 The Board of One does not require a change of control!
 The Board of One provides the resources to create a
wealth producing business.
 The Board of One Provides credence and credibility to
the market and financial sponsors.
 The Board of One supports the CEO Entrepreneur in all
the Strategic Clarity aspects of the business and its
execution.
Desired Outcome. The Board of One partners with the CEO Entrprereneur to make vision a reality.
Strategic Change. The Board of One makes growth realistic. Being a successful leader requires many
of the fundamental gifts and talents of an entrepreneuer such as: Passionate and Confident Belief, Ability
to Build and Lead a Team, Creativity, and Inspiration. Entrepreners are natural leaders, therefore given
the right skill and resource support they can transition to be successful CEO Entrprereneurs!
The Board of One directs the activities that, if executed correctly, make vision a reality. For entrepreneurs
to create wealth, they must learn to manage the company beyond its startup growth phases. The Board of
One makes it possible for the CEO Entrepreneur to effectively lead. The Board of One creates the
successful CEO Entrepreneur!

So you’ve established your business, and you have experienced some success and
growth; however, your vision is still unfulfilled, and you have not created the level of
financial wealth you desire.
For entrepreneurs to create sustainable growth for their businesses and the resulting wealth
from their business, it takes significant patience and commitment to steadily increasing skill sets
and competency levels, coupled with timely decisions.
After nearly 15 years of advising growth oriented companies, intermediaries, and investors, we
at Ephor Group, have come to the realization that the creation of real wealth requires a scalable
business model and “CEO Entrepreneur". Gone are the days when single functionally threaded
or domain oriented skills create wealth.
 We believe that the skill set of the CEO Entrepreneur must be enriched to enable small
businesses to create institutional wealth. And likewise we believe, and history has proven
to us, that the CEO Entrepreneur must surround themselves with highly skilled
professionals that enable them to “to do what is necessary for “definable and repeatable
sustainable” success.
Small businesses remain small because the founders do not utilize the guidance and resources
required to be successful in this new and most complex economy.
 Did you know that more than 400,000 new businesses are created every year in the
United States, but less than 1% make it ten years, and less than one percent reach $10M
in annual revenues?
Entrepren
eur Early
Warning
Early Warning Signs
& Barriers to Your
Success

Being a CEO Entrepreneur in the current economy is almost an impossible job. There literally are
not enough hours to work on everything. Consider that an ideal CEO Entrepreneur needs to:
 Be a great evaluator of talent
 Be respected and admired
 Build a high performance workforce
 Constantly learn and adapt to industry trends and changes
 Empower employees’ strengths and minimize weaknesses
 Formulate the right messaging and communicate effectively
 Have a knack for motivating employees and customers
 Oversee budgeting, planning, and strategic finance
 Run the management team
 Understand operating and financial performance at all times and have plans in place for
any potential gap, bottleneck or setback
No one is perfect, and certainly understanding ones’ limitations is key.
Ask yourself a simple question: Is your business meeting expectations and taking full advantage
of the market opportunity?
In our nearly 15 years of advising, investing, leading and guiding emerging services business we
have identified several attributes or Early Warning Signs that should signal to you, the CEO
Entrepreneur, that you need and must take decisive action to garner the requisite skill and
guidance to continue your successful journey to wealth creation.
10 Early Warning Signs of Barriers to Wealth Creation
CEO Challenge Problem Outcome
Management Science
& Governance
#1. Annual budget deficits
for 2 consecutive years.
Illustrates poor planning capability,
ineffective workforce management,
and severe leadership failures.
Product Leadership #2. Single digit revenue
growth for a 2-year period.
Illustrates product deficient
differentiation challenges: or sales
personnel productivity issue.
Operating Execution #3. Gross margins are not
increasing relative to revenue
increase.
Illustrates lack of scalability of cost of
goods sold, and inefficient processes
which are a barrier to scaling.
Revenue Execution #3. Cost of customer
acquisition expense as a %
of revenue is NOT
decreasing year over year.
Illustrates Sales and Marketing
Expense inefficiency.
Product Leadership #4. Lack of ability to raise
prices gradually.
Every 2 years pricing policy should
call for an increase.

Operating Leadership #5. Lack of scalability of
general and administration
expenses.
Illustrates that management “throw a
new body at every issue" and lack of
scalable processes.
Corporate
Governance
#6. Outsourcing or
professional advisors are
not being utilized for critical
functions such as:
governance: corporate
development: strategic finance:
HCM; nor IT audit services.
Illustrates that management is too
control oriented and not willing to
surrender control.
Culture & Leadership #8. Leadership only utilizes
outside help, advisors or
consultants, on a functional
project basis only.
Results in lack of franchise effect for
the business and the “holistic”
business model is not being
developed synergistically.
Culture & Leadership #9. Involuntary turnover of
>15% of the workforce on an
annual basis for 2 years.
Results in an unattractive place to
work.
Culture & Leadership
#10. EBITDA % and
revenue growth % do NOT
trend with each other.
Illustrates lack of scalability,
fragmented business model and
processes and “event orientation”
leadership.
For a detailed review of your business and its barriers to success contact:
ephor@ephorgroup.com
214-702-6427
24 E. Greenway Plaza, Suite 400 | Houston, TX 77046
www.ephorgroup.com

When considering expansion, this is what you need to know:
Structural Reporting
Sources of New Customer Logos
Key Personnel Hires, Changes
GoToMarket Program, Goals, Budget Factors
Distribution Partners, Sources
Compensation Changes, Equity Participation
By Functional Area: Key Contributor Review
WFM / HCM Productivity & Metrics
Technology Application
Product/Service Delivery
Operating Measurables & Reporting
Financing Spend Analysis
Financing Activities
Please contact Ephor Group at 214.702.6427 or ephor@ephorgroup.com for further
information and discussions relating to:
 Wealth Strategy and Strategic Clarity
 Market comparables analysis & forecast
 Financial engienering advisory for M&A, succession, or recapitlization
 Expansion and corporate development options
 Equity structures, compensation planning, capital markets investment
 Board presentations for corporate development & strategic planning
Contact Ephor Group to discuss your needs in confidence.
ephor@ephorgroup.com
214-702-6427
24 E. Greenway Plaza, Suite 400 | Houston, TX 77046
www.ephorgroup.com
Does Your
Strategy Create
Wealth?
What Do I Need
To Know To
Expand & Why?

Bad Advisor Syndrome Article

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (13)

Similar a Bad Advisor Syndrome Article

Similar a Bad Advisor Syndrome Article (20)

Más de Charles Bedard

Más de Charles Bedard (20)

Último

Último (20)

Bad Advisor Syndrome Article