Lessons from ‘Downton Abbey’
Published: February 5,2013
Ironically, he was referring to himself in the face of his son-in-law Matthew Crawley’s ever-increasing efforts to right the listing ship that Lord Grantham has apparently steered into the shoals of economic disaster. I say “ironically” because it is Matthew Crawley who, thus far, has played the fool by investing money in Downton Abbey prior to apprising himself of its financial condition.
So, what does this Masterpiece Classic set in the early 20th century have to do with 21st-century business? Matthew Crawley is not the first person to jump on board a sinking ship, nor will he be the last. Unfortunately, many who follow in his footsteps can ill afford to, and such a decision may cause them more harm than simply having to downsize to a smaller estate in the country with fewer servants.
Although credit markets are opening up a bit more than they were at the height of the recent recession, borrowing money from traditional sources is still a tough path for new businesses. And by new, I mean start-ups through emerging growth companies. So, many entrepreneurs are forced to turn to friends and family members to help launch their dream or keep it afloat in the choppy waters of a recession.
Friends and family members can be a good source of much-needed capital, but this is an area where the term “buyer beware” has heightened meaning for would-be investors. Sure, you want to see your daughter, son, sister, brother, cousin or best friend from grade school succeed, and who hasn’t read the stories about the early backers of Bill Gates or Steve Jobs? There is real potential in the world of entrepreneurialism to hit it big and retire early to a warm, sunny place. There is also a one-in-175,223,510 chance of winning the Powerball jackpot, a one-in-12,500 chance of hitting a hole-in-one on a par-three golf course, and a one-in-10,000 chance of getting struck by lightning in your lifetime.
So, assuming you’re not Matthew Crawley and haven’t just inherited a huge wad of money that you feel somewhat reluctant to accept due to the heartbreak you caused your benefactor’s daughter, contributing to her untimely death from influenza, how do you improve the odds of betting on a winner?
1. Ask to see the business plan … and then read it. Don’t assume because you’re handed something called a “business plan” that it truly contains the nitty-gritty nuts and bolts that not only explain the business owner’s vision, but also lay out an objectively solid blueprint for getting that vision off the ground.
2. Don’t be like Lord Grantham, who, as Matthew recently lamented, “Harks business with being mean, or worse – middle class, like me.” Ask questions. Be nosy. Test the answers you receive from the owner against objective evidence. Get financial reports. Find out how much skin the business owner has in the game.
3. Assess the business owner’s experience and willingness to seek advice and, when appropriate, heed it. Does the owner have a team of advisers on board? Have they met with counselors at the Treasure Valley chapter of SCORE or the Idaho Small Business Advisory Council, or availed themselves of other such resources?
4. When you’re finally ready to invest, get it in writing. And, be sure you seek your own legal counsel on any written agreements that you are asked to sign. Yes, it is tempting to save a few dollars and assume that the other party’s legal counsel is “good enough” to bestow the necessary mumbo-jumbo blessing on the document, but the key here is that the other party’s attorney has their best interest in mind, not yours.
Because, like Matthew, once you’ve anted up, it’s pretty hard to start asking the tough questions you should have asked in the beginning without, as he confided in the Dowager Countess of Grantham, “putting people’s noses out of joint” – or worse.
Molly O’Leary represents business and telecommunications clients throughout Idaho, and is a managing member of BizCounselor@Law, PLLC, in Boise. In addition, Ms. O’Leary serves on the Idaho State Bar Board of Commissioners and on the statewide advisory council for the Idaho Small Business Development Center.