DILEMMA: Until now my business has used small, local firms of advisers who are used to acting for SMEs. As the business expands, when is it appropriate to change advisers?
ISSUES: Several key factors should influence your choice of advisers. First, what are your objectives - do you want to float, remain independent, sell? How is the business expanding: organically, by acquisition, or a mix? If your business is not an international one, is it planning to be? Will the company need to raise capital to fund expansion?
Then you can think about how competent or relevant your current advisers are and how much you can/should pay. Having determined the type of advice you want, weigh up the pros and cons of a smaller or larger firm. But, if you do decide to change, are you competent to choose a replacement?
A big international firm usually argues that it has the highest-calibre people and specialists for every eventuality and sector; that it can give you access to its global network of contacts; and will lend credibility to your company with fund providers, key customers and suppliers etc.
A small firm would say that it knows your business and it sees you as far more important than a big firm would. It will argue it has access, through a network, to firms worldwide and, while the big firms keep moving people around, you will know who you are getting with them. It will say it is cheaper and you shouldn't be paying to train someone. If all else fails, there's always the 'how can you desert us after all we've done for you?' tactic.
Ignore all that and think about what is most relevant to you given the factors above. You may already have an appropriate set of advisers but are failing to use them effectively.
- Establish what your strategy is.
- Change only if you can see a clear need to do so.
- Don't change more than one adviser at a time.
- Conduct a proper beauty parade. Clarify who will actually be doing the work, and how costs are structured. Use your non-execs and other advisers to help with the process.
- When you are happy with your advisers, ask them to re-pitch for the work at regular intervals.
- The right moment to change is before you need to. Changing in the middle of an acquisition or fund raising can be traumatic.