10 Questions to Ask a Banker or Lawyer
NEW YORK ( TheStreet) -- Most people take friends' referrals, call a company in an advertisement or hire someone they meet at an event. But that shouldn't be the full extent of a service-provider search.
Selecting the wrong professionals can cost money and credibility. Management needs to be selective and thorough in its choices.
Most companies need four types of professionals: an accountant, a banker, an insurance broker and a lawyer. The following are 10 questions you should ask service providers.
1. Do they have experience working with Internet companies?
All too often, business people hire outside professionals based on personality or a friend's recommendation. That's a good start, but management needs to know if they have they ever worked within its industry or a similar type of business. Do they understand how much money it takes to be successful on a regional, national or international basis? Do they have contacts that can speed up the time it takes to get to profitability?
2. How many years have they been in the business?Experience is important to any business, but it could mean the difference between success and failure in a startup. Management wants professionals who have been around long enough to have personally experienced the unavoidable ups and downs of business. Management should look at professionals with 10 to 15 years of experience because those people have been through enough hiccups and learned most of the tricks of their trade.
3. Have they ever worked with a startup e-commerce company?Any manager who has been in involved in a distressed company knows the psychological and financial issues that management has to deal with. Management needs professionals who are calm and experienced at advising and servicing troubled companies.
4. Are their fees reasonable?Management shouldn't be shy about asking for service providers' fees up front. Make sure the charges are comparable to those of other companies in the area. Right now, anyone with cash to spend dictates the price. No need to pay retail when wholesale is the rule of the day in these rough economic times.
5. Will they work with us financially if we can't afford their full fees in the beginning?If management does a good job of selling itself and builds trust with the vendor, there will be some payment flexibility.
6. What do their clients say about them?Ask service providers for references and check up on them. Ask other service providers to recommend professionals outside of their field. Ask an accountant to recommend a lawyer and vice versa. Professional service providers have experience working with each other and they don't want to make a bad recommendation. The best group to ask for referrals is private investor groups, venture capital trade associations and venture funds.
7. When clients have left them, what were the reasons?Always try to find and speak with the clients who have left service providers that you are considering. There are many reasons clients leave and a lot of them don't have anything to do with performance. Personalities and the ways of doing business may not have matched.
8. Can they grow with our business?If management is trying to grow a business larger than a couple of million in sales and possibly go international, the company will need a firm that has experience in larger businesses and has an international department or affiliations with other firms around the world. The company doesn't have to be a large company to consider selling abroad.
9. Will a seasoned executive be assigned to us or will we be used to allow a junior executive to cut their teeth?Most firms of any size will assign a partner to handle complex issues and an associate to handle the smaller issues. Many times the associates will have developed an area of expertise that the partner doesn't have and can be more valuable. It is important to know that an experienced executive who has handled problems such as the ones management is facing will be available. If management wants an idea on the level of service, look at the provider's business card and see if it lists a home telephone, pager or car phone number. If a pager or car phone number is listed, you know the company provides superior service.
10. Will they introduce us to their other clients who can potentially bring us business?All good service professionals should have a diverse and large database of contacts. Such a contact source is an extra value. If all else between professionals under consideration is equal, management chooses the one that can open doors for new business, and provide advice and capital.
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