Situation: A CEO’s company is short of cash to make a scheduled payment against a line of credit. They have been notified that if the payment isn’t made, the bank will transfer cash from the company’s checking account to satisfy the payment. This would compromise their ability to meet payroll and pay vendors. How are your relations with your bank?
Advice from the CEOs:
What the company needs is time, so that they can pay down the line of credit from cash flow. It is best to compartmentalize any discomfort with this situation. Remember that any bank action generally takes time.
Advice from the company’s lawyer is that if they stop making deposits, the bank will notice and react negatively. Given that the current interest rate on the line is low, a negative reaction from the bank could lead to an increase in the rate.
The company has a bargaining chip. The bank does not want to show the company’s line as delinquent. If they admit that a delinquency exists, it puts them in a bad place.
Develop a contingency plan to guard against the company’s biggest risk – inability to make payroll. Assure that this can be covered.
Use checks paid by customers to move a portion of company assets to another bank.
Secure a new line of credit with another bank to cover credit needs, including salary coverage if the current bank acts adversely.
Assure that any conversations with the bank are documented in letters to the company’s contact at the bank.
Situation: A CEO is in conversation about combining with another company. One option is for the other company to absorb his company. What are the pros and cons of this option? Are there other options that will better serve both owners and employees? How do you improve a business model?
Advice from the CEOs:
The company has a great model today. The option under consideration looks like a double compromise – it alters both the company’s strengths and its fundamental business model.
The company’s strength is lean and mean – moving from a hourly/fee-based model with high utilization to a salary-based model, as the option on the table proposes, will change this. It also changes the dynamics of who will work for the company.
The magic of the current model is that it attracts top talent by offering them the best of two worlds: high individual billing rates with ready access to billable hours. Over the long term this has also made it very profitable.
Explore an alternative – how does the company transform its existing business model while retaining its strengths – lean, mean, low overhead – while transforming the model so that it builds “products,” perception, and recognition for the company?
A longer-term alternative is to look for a financial acquisition of the company. It has good net margins, good cash flow, and even spins out cash. This is valuable to a financial buyer.
What is the role of the CEO right now? Another CEO was asked “Do you have a job or a company? What happens if you leave? If the company dies, you have a job. But it may not be necessary to change much to become a company.”
Situation: A CEO has been approached about a potential acquisition of his company. The offer was a surprise, and the team within the company is split on whether they are interested in a sale. They are currently very happy with what they do. How do you prepare for a potential acquisition?
Advice from the CEOs:
How does a company best position itself in advance of discussions?
Rebrand the company to boost the value proposition. Make what the company does best the focus of its value proposition. Position the company as the “experts” in this area.
Look at a series of possible scenarios that could develop and determine who on the team can best contribute each scenario. This will help to evaluate the implications of each scenario and to rank them in terms of favorability on the company’s terms. It will also help to quickly exclude certain scenarios if they come up during discussions with acquirers.
What research should the company conduct on the acquirer?
Do a deep dive into the potential acquirer. Research is simplified if the acquirer is public. Go online and look at their SEC and public filings. Look at their revenue trend as well as their profitability or losses.
What is the acquirer’s history of acquisitions? Interview people from companies that they have purchased.
Don’t pitch anything to the acquirer until you understand what they want to buy – this is critical so that the company positions itself well.
What is the best approach to take once the conversation starts?
Quick first step – send the company’s financials to the acquirer with a 3-year projection. Ask them, based on this, for a price range that they would consider for the company. If the range is outside of expectations, the conversation is over.
Determine whether this looks like a strategic vs. a financial buy. A strategic buy yields a higher price.
Cut a deal structure with a bonus tied to success post acquisition. This means a reasonable upfront payment with big payments for future success. This creates golden handcuffs to motivate the company’s staff to stay post-acquisition.
There should be multiple options on table – addressing both financial considerations and the future of team.
Situation: A CEO perceives that the company has a conflict between performance and planned timelines. Of concern is performance against key metrics like pipeline performance and closing new business. A sense of urgency isn’t present. How do you create and communicate urgency?
Advice from the CEOs:
Management knowledge of company financial status and performance against key metrics – particularly key drivers like pipeline performance – is critical to their being able to assist the company.
A company decision to focus on project profitability may have the unintended consequence of exacerbating the lack of urgency. If revenue growth lags, the only option for managers who are tasked to hit a profitability target is to cut expenses. This delays projects and can negatively impact morale.
Accountability comes from meetings. Not 1-on-1 meetings but team meetings. Peer pressure is an important component of accountability. Nobody wants to be the individual who is consistently behind on projects or initiatives.
The challenge may be more external than internal. When business closes more slowly then everything else slows down: hiring, new development, investment and profits. All of these are driven by new business acquisition.
Another CEO has same issue with her contracts. All contracts include a timeline. If work or deliverables slip, the customer wants to slow down delivery and billings. Her solution is to include stop work and delivery delay fees in the contracts.
What actions would others take to address this?
Institute progress payments. For example, instead of charging 50% up front and 50% on contract completion, shift to, for example, 50/30/20 with the 30% due on completion of project framework. This way, only 20% can be delayed due of customer timing issues.
Built financing into total pricing. The customer is free to delay projects, or aspects of projects, but there is a charge calculated into delayed delivery which covers the cost of money and additional management.
Situation: A CEO and her staff are struggling with a difficult employee. This individual fails to send invoices on a timely basis, doesn’t provide required reports to management, and doesn’t return vendor calls. The CEO has spoken to the employee, who acknowledges the issues but then rapidly defaults to old habits. How do you manage a difficult employee?
Advice from the CEOs:
Ask for specific weekly/biweekly AP/AR reports, and be very clear as to everything that this should cover as well as the required deadlines. Make it clear that these deadlines are mandatory and that there will be disciplinary consequences for failure either to meet the deadlines or to create the report as specified. Address issues with timely mailing of invoices and timely return of vendor calls the same way. Make all three standard operating procedure.
This is not an at-will employee so assure that there is very good and complete documentation over a period of time to demonstrate that the employee is not meeting required job responsibilities.
Tell the employee that he has 90 days to demonstrate that he can consistently meet required responsibilities, and that there will be a retain or termination decision at the end of this period.
Update policies that are not being following so that they are clear.
Check with a human resources expert for advice on what needs to be done. Regulations are shifting, so this will assure that the company is following regulatory requirements.
If the final decision is to retain this employee, adjust responsibilities to mitigate potential future damage.
Given the current challenges, why is this employee’s behavior being tolerated? What message is this sending to other employees?
Situation: A CEO senses that employees don’t have his sense of urgency regarding the business. A case in point is responding quickly to new customer inquiries in a competitive market. Too often, he takes over to assure that bids are submitted quickly. How do you get comfortable delegating to staff?
Advice from the CEOs:
Prepare for a meeting with staff by defining the key desired standards in advance.
Initiate the meeting with this message: “We have a company image. This is how we define it.” Work with staff to create standards that define this image.
Agree on standards with the team.
Discuss standards with the team but have them make the decision. Guide the conversation – through questions – to focus on the desired standards. Be open to using the language developed by staff to enhance ownership.
Examples of standards that may apply:
Response time to incoming calls, maximum number of rings before response.
Time to return telephone messages.
Time to return emails.
Invoices completed the day or the order, or whatever is appropriate.
Establish a response regimen – assure that response is professional.
Train all people who pick up the phone.
Assign rotating office days for salespeople with responsibility to answer the phones.
Emphasize the importance of speedy response with an explanation that everyone will understand.
When a customer calls, assume that they are also calling 2-3 other suppliers. The first responder can shape the conversation in favor of their company and offering – for example the company can offer both a solution plus design and logistics assistance.
As first responded, assure that the focus is on the company’s strengths – this puts the competition at an immediate disadvantage.
Enforce and maintain the standards
Once standards are set, make review and updates of performance against standards part of weekly sales meetings. Use large charts to track this.
Create friendly internal competition. Who got the most business last week? Who did the best with incoming calls? Have the team develop competitive goals.
Recognize top performers with $50 – $100 cash award, restaurant certificate, etc. Make it fun!
If “everyone” is supposed to pick up the phone this becomes “nobody” because nobody is responsible for picking up the phone!
Situation: The CEO of a new company is struggling to generate sales momentum. Part of the issue is adequately productizing their current offer. A second issue is building a good sales team and sales momentum within the team. How do you productize an offer?
Advice from the CEOs:
The issue may be that the company is regarding its product and the sales process too narrowly. Look at the sales process in new and different way.
Role play the current sales-to-close process. Have salespeople document what they do. Look for a product concept that appears from this exercise.
Try different models to determine what works best at the company’s current stage of growth.
Position the company’s ability to deliver outcomes. Make it risk free if nothing is produced. “Here’s our package – it costs nothing if we don’t produce results as promised.”
Consider specializing in services that enhance other companies’ sales – a need that is always present.
Look at the car dealership model – lower level salespeople qualify prospects and bring the qualified prospects to more experienced colleagues for the close.
How is the company currently positioned – as a generalist or a specialist? Potential clients more often look for a specialist to help them solve specific needs.
Conduct local surveys to help define prospects’ and clients’ top needs.
Start developing and advertising specialty areas. Add to the list of specialties as the company expands.
To build the sales team look at younger salespeople currently with competitors. If these individuals have been recruited right out of school, they will often look for other opportunities after a year or two.
Target good salespeople who are currently employed. Tell them that the company is interested in getting to know their business and look for salespeople who are good at selling themselves as well as their offering.
Situation: The CEO of a small but profitable company has a promising employee who she wants to promote to a supervisor role. The challenge is that this employee has limited English. Promoting this individual may upset the current supervisor. Do you promote an employee with limited English?
Advice from the CEOs:
Before making any decisions consider taking the “lead” position in manufacturing short-term instead of promoting or hiring a supervisor.
This will allow you to fully understand the manufacturing operations, as well as any points of art in the operation that can serve as the company’s foundation IP.
To think about the role of supervisor or Plant Manager, visit a Starbuck’s for an hour and watch the Starbucks Manager. This individual will, over the course of the hour, perform all functions within the establishment. This is a good model for a hands-on supervisor for a small operation.
Given the small size of the current operation, look for a more modest role for the position. Instead of Operations Manager perhaps Plant Manager. This will allow the individual time to grow into a larger role as the company grows.
How should the message be delivered to the promising employee with limited English as well as to the current supervisor?
Tell the employee “We like you and think that you have real potential. Would you be interested in an English as a second language course to build your English skills? We’ll pay for the course.” It is important to be enthusiastic and positive with the individual as you have this conversation.
A supplemental alternative is to reimburse the individual’s use of one of the online programs like Babbel or Duolingo that enables learning or improvement of language skills using a mobile phone. These programs are inexpensive and highly effective with diligent practice.
Promoting this individual above the current supervisor may generate a problem. This doesn’t prevent the promotion. Just assure that it is done carefully and be prepared for the current supervisor’s reaction.
When it is timely, instead of promoting this individual immediately, consider offering a temporary lead role for key tasks of increasing levels of responsibility. This will allow time for the individual to prove their merit and capabilities to others over 2-3 months.
Situation: A CEO wants to create new markets outside the US. They have investigated options and locations and are starting to plan. One question is how long it will take to start seeing results, so that they budget accordingly. How do you build international sales?
Advice from the CEOs:
Decision timelines internationally are longer than they are in the US. For example, in Europe timelines are easily twice as long. This means that new entrants must budget for a sustained effort.
It took another company three years to develop traction in Europe. They have an office in Germany, but most new sales are coming from Eastern Europe. After three years their European operation is now break-even.
International markets, especially in Europe, can be very conservative. Job security and maintaining cash flow are the focus.
Labor laws encourage companies to do things themselves rather than outsource. The result is that a new entrant will face competition from internal departments of potential prospects.
In European the emphasis is not growth, but on conservative steady operation. Growth tends to come from acquisition.
Sales pitches should be tweaked for international audiences. For example, highlight reduced need for additional personnel to manage the systems, fewer breakdowns and glitches, and the ability to count on seasoned outside expertise to quickly address complications.
Relationship selling is very important internationally. Sales and tech support are best provided, and in some cases required to be provided in the local language.
In Europe, Italy can be an important lever to sales with the right partner. Italian companies can be excellent at marketing and can jump-start European sales. This will be a very personal relationship.
Situation: A CEO wants to build additional incentives into the company’s compensation plan. The objective is to add group incentives to the pay mix – to focus more attention on group performance rather than just company goals. How do you create an incentive-based compensation plan?
Advice from the CEOs:
The best policy is to be upfront, open, and transparent as the plan is presented.
Communication is the key to success, including the following bullet points:
Pay starts at a base which is 75th percentile – a generous base in our industry.
Group bonuses, which reflect the results of the group’s efforts, allow you allow to reach the 90th percentile or higher.
On top of this, profit sharing enables the addition of 10-20% of your base.
Altogether, management thinks that this is a generous package. The difference from the old system is that employees will be rewarded for making decisions which will benefit the group as well as the company – and you will be generously rewarded for this.
Once plans are communicated to employees 1-on-1, reinforce the message with a group presentation and open discussion at monthly company meetings.
Consider: significant changes in compensation may be best taken in small rather than large increments. Start with small incremental adjustments. If these are effective proceed to larger increments on a planned and open schedule. This is particularly true if the historic culture has been that we all win or lose together.
A downside of rewarding by team is that some will get rewarded for producing minimal results. Consider some percentage of discretionary payments to recognize and reward effort instead of pure parity within the team.
Consider longer-term results within the payment scheme – not just quarterly results.
People need to know that they are accountable. Let them know that a 75% base is reasonable but that the significant rewards will be for producing results above this level.