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STREET SMARTS

Hiring the Best

Don't assume you can't afford top-notch executives for your small company. Given steady incomes and space to perform, they'll soon pay for themselves.

Norm Brodsky is a veteran entrepreneur.

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Street Smarts

There's no shortage of top-notch executives for small companies, and they'll pay for themselves many times over--provided you give them what they're looking for

Early in my career, I learned an important rule of business--namely, that you can do almost anything as long as you have a steady income. It doesn't have to be as much as you want, or even as much as you need. What matters is that you can count on it month after month. Without that regular flow of funds, you'll always be getting distracted from your goals. With it, you're free to focus on the things you enjoy most and do best, both in business and in life.

Now you might think everybody would know that rule, but a lot of people miss it, including some of the smartest and most capable business practitioners around. I'm talking about the type of people most of us would love to have on our payroll. They're executives who've run businesses and done deals, and who have the knowledge, contacts, and experience to lift a company to another level--if you can afford them, that is. Most small-business owners assume they can't.

I've found, however, that, with the help of the steady-income rule, you can sign up talent that would otherwise be far beyond your means, and it won't cost you a dime. How's that possible? Because people of that caliber pay for themselves many times over, provided you give them the space to perform.

Let me tell you about my friend Ben, who came to see me after a couple of deals he'd been working on had gone bad, costing him a small fortune. He wanted to know if I'd give him a job.

Understand, Ben is one of the best deal makers I've ever met, a guy who's made millions putting mergers together, helping companies go public, finding capital, and the like. He's owned and run businesses. He can sell. He can negotiate. But he'd never learned the steady-income rule. As a result, he was always just a couple of bad deals away from disaster.

Now that disaster had finally struck, I was of course going to help him, but I knew right away it would never work to bring him in as an employee, at least not in the usual sense of the term. Ben is a free spirit. Even if I could come up with the money to pay him what he was worth--probably somewhere in excess of $300,000 a year--there was simply no way he was going to devote his full attention to any job I might find for him. Sure, he'd give it a shot, but before long he'd be off working on his own deals, and I'd be fuming.

So I thought it over and came up with an offer. I said, "Look, Ben. I know you. You don't need a job. What you need is a steady income that will allow you to get back to what you love--doing deals. So I'll hire you, but I won't hire you full-time. I'll give you projects to do for me. You'll work out of my office, and you can set your own schedule. As long as you take care of my projects, you can do all the outside deals you like. In return, I want a percentage of any deals you close."

I wasn't just being a nice guy here. I knew that even if Ben worked part-time, I'd be paying him an annual salary in the low six figures, and that kind of expense had to make financial sense for the company. Otherwise I'd have to find another way to help him instead.

But it so happened that I'd recently landed a contract with the New York State court system. I needed someone to expand our business in that area. If Ben hadn't come along, I would have had to hire a salesperson for $50,000 a year. From that perspective, I was overpaying Ben by a substantial amount. Then again, I knew the result I was going to get, and I fully expected that, over the long term, he'd return three or four times whatever we paid him.

He didn't disappoint me. Within eight months he'd expanded our sales with the court system enough to cover his salary, and he's been paying us big dividends ever since. In the past four years, that part of our business has grown from $250,000 to more than $1 million a year, largely through Ben's efforts. Meanwhile, he landed two very big customers and got us our first round of financing. Without him, I'd have had to hire an outsider to do the deal--at a cost of about $50,000. He also came up with more than $800,000 for our new warehouse from a state program to promote employment in the inner city.

On top of that, there are Ben's own deals, in which I have stakes of 10% to 40%. Together, they'll repay every bit of salary Ben has received.

And here's the kicker: Ben isn't alone. I have a similar arrangement with my friend Sam, who's helping us upgrade our management system. (See " Necessary Losses," December 1997.) Sam is another guy you'd think a small company like mine could never afford. A Harvard M.B.A., he has bought, run, and sold seven businesses over the past 20 years. I gave him more or less the same pitch I'd made to Ben: come with me part-time, and you'll get a steady income, a place to hang your hat, and the flexibility to pursue other interests.

Sam knew the steady-income rule, so it was an easy sell. He paid for himself in about five minutes. I asked him what we should do about the new facility we wanted to build but couldn't get financing for. He looked over the plans and suggested a few simple changes. We had a financing deal in two months. Without his input, we'd probably have had to lease the additional space we needed. Right there he saved us at least $100,000 a year for 10 years.

So here I am with two top executives providing the kind of advice and service that would normally cost a company hundreds of thousands of dollars--and I'm getting it, in effect, for nothing. Granted, it helps to have friends like Sam and Ben, but people with similar credentials are all over the place. These days there are very few places where you can't find cashed-out company owners who aren't yet ready to retire, or experienced businesspeople looking for a base from which they can do deals.

Those people represent a source of talent that most small to midsize companies overlook. I'm not talking about start-ups and very young businesses here. They need the kind of help you get from a mentor, or maybe a board of advisers. But in established companies you want top-notch executives who can implement as well as advise, and whom you can talk to as insiders about the big issues facing your business.

And the hard part isn't finding them. The hard part is keeping them, which requires you to put aside your own needs and focus instead on theirs. Why? Because you have to create a situation in which they're going to be happy. They won't stick around because they need the job, after all. They'll stay only if they're making money and having fun.

Think of them as one-person businesses. When you hire them, you're investing in a company. To get a return, you have to give them the leeway they need to run their business, which you may find difficult.

I certainly did. I used to get furious with Ben when he first joined us. He came in when he wanted to. He had his own schedule, his own ideas, his own way of doing things, and it drove me crazy. I'd go home and rant to my wife. It was the hardest part of the whole experience.

But I didn't interfere, and neither should you. You have to make a firm commitment to give the person a year to show what he or she can do, as tough as that may be. I still find myself getting frustrated with both Ben and Sam--but I can't argue with their results.

Now if I can only keep them from reading this column....

Norm Brodsky is a veteran entrepreneur whose six businesses include an Inc. 100 company and a three-time Inc. 500 company. This column was coauthored by Bo Burlingham.

Last updated: Feb 1, 1999

NORM BRODSKY | Columnist

Street Smarts columnist and senior contributing editor Norm Brodsky is a veteran entrepreneur who has founded and expanded six businesses.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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