In 1995, when I suspected the time had come to sell my company, I turned first to six individuals with whom I had consulted for decades – on personal as well as professional matters.

I asked what they thought of the four options I was considering for Helzberg Diamonds, the business I had taken over from my father in 1962 (and which my grandfather had founded in 1915.) I could take it public, sell out to a venture capitalist, merge with a national retail chain, or accept an intriguing offer from legendary investor Warren Buffett.

It took this group – which we call the “forum” and of which I am a member – all of a few seconds to rule out the first two options. Because we know each other personally as well as professionally, they understood that I couldn’t sell to a buyer who would flip the company, leaving long-term employees without jobs. Just as instinctively, they knew, as did I, that the Buffett offer was the way to go.

In a nutshell, this scenario illustrates the value of advisory relationships for entrepreneurs. Advisors provide a knowledgeable third-party perspective that can’t be overestimated. In this article, I will discuss the advisors who have played a part in my entrepreneurial life and suggest ways in which other entrepreneurs can benefit.

Advisors for All Seasons

In my years building Helzberg Diamonds, I’ve had several different types of advisory, or mentoring, relationships. Some, like the forum I mentioned above, have been informal. That group was suggested three decades ago by the Young Presidents’ Organization, of which I was a member.

We are still active today. Unlike advisory circles comprised of businesspeople from the same industry, we seven are an eclectic group. Included, besides me, are a grocer, a flower grower, a lumber dealer, a construction man, a druggist and a tire dealer. Over the years, we have become friends as well as business associates, sharing concerns about whether to undergo operations as well as sell companies. For a while, we met on the balcony of the grocer’s store, over rounds of coffee and bagels.

Another of my informal associations was with the late Ewing Marion Kauffman, the founder of the nonprofit organization that bears his name (and publishes eVenturing). I met him in 1973 at a conference in Pebble Beach. We had a drink, and he suggested I contact him when I got back to Kansas City. That I did – again and again over the years, availing myself of his wise counsel.

In the late 1980s, after two and a half decades of running Helzberg Diamonds, I decided to form a formal Board of Advisors that would meet twice a year and consider a pre-set agenda. I felt that confronting issues, such as financing and planning, on a regular basis would help bring order to the often seat-of-the-pants decision-making at our family company.

In creating a formal board, I nonetheless decided to keep it small and personal. It has had only three members. The first was a Wall Street analyst who has been a lifelong friend; in fact, he and I met at summer camp when I was 12. YPO suggested the person who became the second member – a C.P.A. – and he, in turn, referred me to the third. They are all among the brightest people I know.

Telling It Like It Is

As a businessman inclined to seek advice – my employees have chided me for going up to every bum on the street for an opinion – I believe that doing so provides marinade for the brain. The more points of view you have, the more your own thoughts mature.

Another plus is that advisors are willing to undertake the difficult task of telling you what you don’t want to hear. Just after putting together my formal board in the late 1980s, I made one of my periodic visits to Mr. Kauffman, who said I needed “depth of management.” He said Helzberg Diamonds had gotten too unwieldy for me alone.

But who was I to listen? I promptly went back and did nothing. My old camp buddy delivered the same message when I saw him in New York. Then, when he came to Kansas City, we had dinner with Mr. Kauffman, who had wanted to meet my friend. It was there that they both jumped all over me – with hobnail boots!

The result was as they intended. I decided to step aside as president, retaining the chairmanship, but bringing in someone to lead day-to-day operations. I also agreed to leave that capable individual alone to do the job.

In the mid 1990s, I ran the issue of selling the company by, not only the forum, but also my formal Board of Advisors. One member said that if I didn’t sell, I would have to “go out of the country” to expand.

While I had understood viscerally the need to sell, the advisor was able to speak from experience about the need to do so. His comment about going global brought me up short because I knew at that stage in my life I didn’t want to expend as much energy on the business. So I thought, “Now I know I am right about selling, because the last thing I want is to go overseas.”

Putting It Together

In considering my own relationships, I have come to believe that advisors are essential for entrepreneurs, many of whom prefer not to go it entirely alone. Thus, what follows are six suggestions for making the best of these valuable associations. Most have been the underpinnings of my own dealings with advisors.

• Start Slowly. I didn’t have a formal advisory board for years. When I put it together, I started with one person, whom I had known and trusted since childhood.
• Limit the Terms. While I never took this step, I still believe that asking candidates to serve for a pre-set amount of time is wise. If your company’s needs change, you won’t have to fire that person.
• Consider the Chemistry Between Members. Use your best judgment to recruit members who will work well with each other – and then pray.
• Allow Prospective Members to Meet. I learned this lesson the hard way, when I named my second board member and failed to inform my old friend. Is it any wonder he was upset? (A subsequent lunch between the two rectified the situation.)
• Keep It Small, Flexible, and Absolutely First Rate. My board has had three members throughout. I’ve never had to replace anyone, but I do admire those entrepreneurs who have replaced me on their boards when their businesses changed.
• Pay Your Advisors. This isn’t always possible for young companies. But when you can, do so, because it obligates the advisors.

It’s smart for entrepreneurs to seek advice, and the best advise comes from knowledgeable third parties who aren’t afraid to tell it like it is. Cherish these people – they are “advisors.” Their expertise will help you build your company. Play your cards right, and they will also become friends who will help you build your life.