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
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
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
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 Aprocess@ 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
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
David: And this is one of the tools that one can use to get
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.”