In the News

David Jennings interviewing Marc J. Lane

Friday, December 27, 2002


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David: It’s time for Bull Session. Joining us is Marc Lane. He is the author of the book “Advising Entrepreneurs.” We have a copy of the book right here. Marc Lane is an attorney who works in Chicago, who’s been at this for over 30 years. Welcome.

: Thanks, David. Pleasure to be with you.

David: How much has the job of becoming an entrepreneur changed in 30 years, and how essential now is having a professional who can advise you in what to do and how to get through the process?

: Obviously, the challenges are becoming trickier. Today, one needs to understand tax law, the marketplace, how to differentiate yourself in terms of developing a sustainable competitive advantage. You need to be able to work with employees. It’s a very difficult and complex place in which to succeed.

David: How much has the role of the professional entrepreneurial advisor changed in the last five years?

: Well, I’m a Professor of Law at Northwestern University School of Law, and I also teach at University of Illinois in its MBA program. In both cases I teach entrepreneurship courses. So, for the very first time over the last several years, a body of knowledge has been accumulating that can be taught to professional advisors - financial advisors to the entrepreneur.

David: What do you as a entrepreneur need to look for in someone who says, “Hi, I’m here to help you, I’m a professional advisor?” What do I ask?

: Well, you want to make sure the advisor has clients similar to you and has had successes in the areas where you need help. We may be looking at an attorney. We may be looking at an accountant. We may be looking at a financial planner. We may be looking at a venture capitalist, an accelerator or an incubator. There are all kinds of people who wear the hat “of advisor to the entrepreneur.”

David: How many different pitfalls just in the tax area alone can someone run into just trying to get off the ground? Let me rephrase it: does your choice of how you want to structure your business get impacted by the tax picture?

: Very definitely, David. What you’re looking for is the way in which the government may subsidize your launch. How can you reduce the after-tax cost of investment? The choice of entity figures very heavily in that decision. Similarly, the choice of an entity will also determine to what extent you can pull money out on an after-tax basis as tax-efficiently as possible.

David: Let’s switch and look at this from the other side of the fence. With what we’ve been hearing about Enron, with the questions we’ve been hearing about some of the accounting things done at Tyco, as another example - what does an individual investor, how do they go about finding out if you as an entrepreneur have your act together, that you know what you’re doing?

: Excellent questions. Very few entrepreneurs or would-be entrepreneurs have an absolutely hairbrain idea. Where they fall through is in the execution. I’m a [email protected] guy, so what I look at is the business plan. I look at the quality of the people, their track record, what they developed in terms of intellectual property, how their budget looks, how their financial forecast looks, where their money is coming from. Are their forecasted returns on equity reasonable and sustainable and achievable? So, really you’re looking at financial questions, tax questions, legal questions, business questions - and God is in the details.

David: How much of what you’ve done in the past 30 years rings true even now in terms of this is how it was done then and you know some of these same basic core concepts still work now?

: Well, I think the principles have remained unchanged. The way in which they are applied, however, is much more sophisticated. Toda, the best advisors, I think, are holistic. They bring together the legal, the financial, the tax, the insurance, the investment, the capital formation aspects of running a business successfully. So what you’re really wanting to do is bring together an inter-disciplinary, integrated approach to these issues so that the legal and financial decisions can intersect.

David: And this is one of the tools that one can use to get it done?

: Indeed, this was written for financial advisors. It’s also used as a text in a number of entrepreneurship courses around the country.

David: Alright, Marc Lane. He is an attorney in Chicago, author of “Advising Entrepreneurs.”

 


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