How Do You Evaluate Marketing Partners? Six Observations

Situation: A company is interested in partnering with a larger company to market a suite of services. They have identified two good candidates. They haven’t worked with partners in the past and are curious about how other companies work with marketing partners. How do you evaluate marketing partners?

Advice from the CEOs:

  • The danger of working with a single marketing partner is that all of your eggs are in one basket. Your success in this relationship will depend upon the success of the marketing partner. This, in turn, will depend on the amount of attention that they pay to marketing your services, and on how actively their sales department sells your services. The danger to you is loss of control over the marketing and sales process.
  • Another company had a similar situation several years ago. At that time, the advice of the CEOs was to not select an exclusive partner, but instead to work with two different marketing partners, even though they are competitors. The company followed this advice, and it has worked like a charm.
  • Start with a position that you want a non-exclusive relationship. If a potential partner insists on exclusivity then ask for fixed guarantees of business and fixed minimums.
  • Other companies around the table work in partnership with competing companies all of the time. All of the partners value the services that these companies provide, and the relationships are harmonious.
  • If a possible partner insists on an exclusive relationship, another alternative is to split territories and supplement your agreements with most favored nation clauses.
  • Going back to the original question, provided that the terms offered by the marketing partner/partners are favorable, you won’t really know how they will perform until you establish a relationship and monitor it over time. Exit clauses and conditions will be an important part of any marketing agreement.

Do You Focus on Taxes or Investment? Eight Considerations

Situation: A company’s accountants advise them to make distributions for tax purposes. Simultaneously, the company’s future is based on technology and staying ahead of the competition. This requires ongoing investment. Do you focus on taxes or investment?

Advice from the CEOs:

  • The focus of the answer is distributions and company morale, not tax planning. Think about the impact on the team. Are there considerable differentials in compensation within the company? If so, this may be impacting morale.
  • Differentiate bonuses from variable compensation. Make bonuses special. This starts at the top. The attitude should be that if someone works hard, they will be compensated. Once bonuses become assumed, they are just regarded as part of the overall compensation package.
  • Smaller geographical units can help retain a small company atmosphere and drive. As a company grows, similar results can be achieved with Tiger Team projects.
  • If the organizational structure enables this, foster friendly competition metrics between offices – and publish the results.
  • One company distributes performance data to top staff – with color-color coded red/yellow/green metrics based on performance. All red and yellow numbers require an explanation. The company has seen a significant reduction in red and yellow metrics since they started this.
  • At company meetings – publicize and recognize top 10 performers in various areas. Recognition boosts morale.
  • Company events boost teamwork and morale. These may include company barbeques, in-house cooking shows created and run by staff, and quarterly outings – bocce ball, tubing, sailing on the Bay.
  • Growth is accompanied by change. When a company starts it’s a mission. After 15 years it’s a job. This is a function of growth, and it takes ongoing creativity to keep individual employees excited about their job and role.

Is It Time to Hire a Marketing Manager? Five Considerations

Situation: A small company has always used guerilla marketing as its marketing modus operandi – trade shows, etc. Their VP Sales recently left. They feel a need for a marketing plan and hired a company to assist them in understanding how they are perceived by their customers.  Should they continue to outsource, or is it preferable to bring marketing expertise in-house? Is it time to hire a marketing manager?

Advice from the CEOs:

  • How well do you understand your customer profiles? It is important to characterize, segment and understand your customers before you can understand your marketing.
    • What is the company size of your typical customer? Small companies don’t spend a lot on big trade shows, other than perhaps sending a couple of people as attendees. Event marketing may be a more effective way to reach small customers.
    • The company that you hired should be answering these questions for you.
  • Marketing is about creating an environment in which people are aware of you and find you versus your having to go out and find them. Social media have fundamentally changed the marketing challenge, emphasizing pull versus push marketing – commercials, ads, billboards, etc.
  • An important role of marketing is perception management so that when a lead or need arises, your company is a natural answer.
  • Whether or not you hire a person, you need a marketing plan. Once you have a plan, you need a marketing budget.
  • The company is now at 35+ employees. Fischer’s growth curve research indicates that at this size you need a professional in the marketing position – someone with experience who knows the ropes. This person could be inside or outside.

Do you Merge, Sell or Keep the Company? Nine Factors

Situation: A company has been approached by an international firm with an existing West Coast presence that is interested in expanding its US operations. A Letter of Intent is in place but will expire in weeks. The LOI is of interest because the company has cash flow challenges. The CEO seeks advice on whether and how to proceed with a sale or merger, or whether to continue as an independent entity. Do you merge, sell or keep the company?

Advice from the CEOs:

  • This is a personal decision. Do you want to be your own boss or to become an employee? It really is a question of what you want.
  • If you are burned out, there are advantages to having a boss, at least in the short term. However, 2 to 3 years out you may tire of this.
  • While cash may be tight, you can address this with other measures.
    • Can you save money by reducing office staff (hours or people) short-term until your cash flow improves?
    • Talk to private investors – offer up to 9% interest on a note. The company is a going concern and therefore likely to be able to pay off the note. You may be able to negotiate a note at a favorable rate.
    • Negotiate a 5 year note, with interest only payments for the first 3 years; sweeten the deal with an offer that if you get new business worth $X during the period of the note, you pay them Y% of upside.
    • You have revenue-producing business and receivables. Factor your receivables to raise the cash that you need. Adjust your prices to cover the cost of the factoring discount.
    • If you have the margins, or can increase prices to produce the margin, offer discounts for early payment of accounts receivable.
  • If you decide to sell, avoid a contract that takes away your flexibility to maximize your future payouts.
  • Can you be confident that the buying firm will survive until your payouts are completed?

How Do You Evaluate Business Opportunities? Five Guidelines

Situation: A company is planning for growth and is considering several business opportunities. None are fully baked, but broadly speaking the CEO is interested in a list of pros and cons that will help her team to evaluate the opportunities before them. What questions should the management team be asking? How do you evaluate business opportunities?

Advice from the CEOs:

  • Which of the opportunities do you find exciting? Which opportunities ignite your passion? Which opportunities would be exciting to pursue on a daily basis? Use this to create your first cut.
    • When you meet with your team, prompt discussion by asking: why do you come to work each day? What drives you now?
    • Now look at each of the opportunities that you are considering. Which opportunities best reflect your answers?
  • Rank the opportunities in terms of probability of success. For each, do a SWOT analysis – how does each address your current strengths, weaknesses, opportunities and threats? How could each make the company stronger or address potential threats that you foresee?
  • Which opportunity provides the best segue to your long-term strategic opportunities over the next 2-3 or 3-5 years?
  • On a personal basis, how important is power and authority to you? What about the personal and work time that is available to you? What is your role, as CEO, in each opportunity? For each opportunity, does this role reflect your personal priorities? Finally, what is your ideal opportunity, in personal terms?
  • Once you have evaluated all of your opportunities – including your personal ideal opportunity – perform a weighted scoring of the opportunities to test your assumptions. Among the opportunities available, which is closest in score to your ideal opportunity?

How Do You Recruit an Outside Director? Five Suggestions

Situation: A company’s current directors are all insiders. The CEO wants to bring in an outside director for greater perspective, someone who can help the company grow to the next level. What should they look for?  How do you recruit an outside director?

Advice from the CEOs:

  • Look for an individual at a company in a similar market segment that is the revenue size that you want to be and which is selling to the same customers that you do. You want their sales process to be similar in type and complexity of sale but non-competitive with your company.
    • This can be an inactive founder or past employee who has been in GM role with P&L responsibility.
  • Write a list of the needs that you want this person to fulfill. Use this to evaluate prospective candidates.
  • Is it OK to hire a stranger?
    • Before you speak with a candidate, research their background and reputation.
    • You want someone who can provide information and a perspective that you don’t have now. During the selection process you will get to know the person.
  • Consider a high level individual from a company that has been a top customer. This individual can help you understand how you are viewed in the market, and how you can enhance your positioning and competitiveness.
  • Have lunch with a local recruiter who regularly recruits directors for companies. Get their perspective on how to select an outside director and what to look for in a candidate.

How Do You Forecast Sales & Revenue? Six Suggestions

Situation: A company is developing new forecasting metrics for both sales and revenue. The immediate future does not look robust, and they are concerned about mid-term future revenue. Ideally they want to extend a 3 month forecast window out to 6 months. What is an effective methodology for forecasting revenue out 6 months? How do you forecast sales and revenue?

Advice from the CEOs:

  • Get your team together and gather impressions on the direction of business through the end of year. How many see sales going up, staying the same or declining through the end of the year. Discuss the rationale behind each member’s estimate so that you fully understand their thinking and what metrics each sees as important to their forecast. Work to make the estimates and metrics as rigorous as possible.
  • Based on the metrics discussed, develop an algorithm that you can monitor on a monthly or quarterly basis, depending upon your needs.
  • As you develop your algorithm, test it against past sales forecasts and history. Can it accurately plot past performance based on the metrics that you had at the time. If not, what needs to be adjusted or better understood.
  • Do you ask clients for forecasts of their purchase needs and do you track the accuracy of their forecasts? Weigh their responses by the quality of their past predictions.
  • As an alternative to trying to predict demand, assemble your resources to fit the needs of your market and customers and arrange your resources for flexibility.
  • Look at industry resources. How far out do experts in your industry claim to be able to forecast demand and sales or purchases? How reliable are these forecasts? What can you learn from this exercise that will improve your own forecasts?

How Do You Create Values, Mission and Vision? Four Ideas

Situation: An early stage company wants to create core values, vision, mission, and a BHAG (Big Hairy Audacious Goal) to guide the company and inspire employees for the next five years. What are the most important aspects of this process? How have other companies done it? How do you create core values, mission and vision?

Advice from the CEOs:

  • As the founding CEO of an early stage company, define yourself first. What are your skill sets and talents? Start from the beginning: why did you start your company? What motivates you and what do you want to build or accomplish? What are you passionate about? What really turns you on? You are the individual who, in an early stage company, must inspire your employees. What inspires you and what has attracted your employees to the opportunity presented by your company?
  • Create your business plan around your dream. If creating something exciting and new or making money is important, how can you make creating something exciting or making money living your dream? If the most important factor is something else, how can you achieve this living your dream?
  • The US Government is desperate for export opportunities involving high tech products which will employ Americans. The opportunities are in new innovations, not commodities. For example, solar panels are high tech but they have become commodities at least in their current configurations. Look for something that is unique and new – for example software that helps to increase the efficiency and security of the grid.
  • Entrepreneurship is not about having a steady income. It’s about creating something new. If what you develop works, you will make money. However, if you want a steady income – go get a job.

How Do You Manage Multiple Priorities? Six Suggestions

Situation: A company has developed a number of initiatives and priorities which are important to the success of the company. All of the initiatives are daunting.  What do they need to do to get all of these accomplished? How do you manage multiple priorities?

Advice from the CEOs:

  • Start with corporate level objectives and set these independently from your initiatives. Pick your top corporate goals and objectives – financial, performance, and so on. Once this is in place, rate your initiatives in terms of how they help to meet your company objectives.
  • Create an initiative list. Measure the upside and risk for each initiative. Based on the results of your analysis classify each initiative: critical, important, or nice to have. This, plus alignment between initiatives your corporate objectives will indicate which initiatives are most critical to company success.
  • Every company needs long and short term goals. Use these to align and prioritize initiatives. Only and your team you can tell what is important and importance is a matter of your strategic focus and objectives.
  • They key to accomplishing multiple objectives is focus. Focus on your top 2-3 initiatives first – if you can reasonably handle this many. Once these are accomplished, focus on the next 2-3, and so forth.
  • Look at your competitors – where are the opportunities in the marketplace. How will your initiatives make you more competitive?
  • What does your leadership development plan look like? If you plan to add new leadership, include in your thinking a transition plan to new leadership, taking into account your multi-year timeline.

How Do You Make the Most of Changing Your BHAG? Eight Points

Situation: A company recently changed their BHAG (Big Hairy Audacious Goal) to focus on premium customer acquisition, but as a small-to-medium sized company has a 3-year focus instead of the typical 10-20 year focus of a larger company. They want to make this a company-wide effort. How do you make the most of changing your BHAG?

Advice from the CEOs:

  • First, it is measurable and specific – grow to 10 times your premium current customer base in 3 years. Your marketplace is changing quickly, so a shorter-term BHAG makes sense. Call it your 10/3 Program or 10/3 Challenge.
  • Is it too shallow? No – this is something that people can rally around. It represents significant company growth.
  • What happens when you achieve the goal? Celebrate in a big way, and then set the next BHAG.
  • How do you create excitement? Every time you hit a milestone, bring in pizza, or conduct a special event. Celebrate.
  • Success = Change. What does that next milestone mean for the company and your capabilities? This isn’t just about new clients, but also includes scaling your delivery systems and customer service. Rally your non-sales staff around these important tasks.
  • Create milestones not just around sales numbers but also around timelines. Tie incentives to achievement of BHAG milestones.
  • Conduct a company meeting to announce the BHAG, and announce progress in future company meetings.
    • Progress against milestones.
    • Share pipeline data to maintain excitement.
    • Develop scale-up programs and share progress of non-sales departments as they ramp up services.
  • Think about building a competition around the goal. As long as this fits your culture it can add excitement to achieving both milestones and the BHAG itself.

Note: The term ‘Big Hairy Audacious Goal’ was proposed by James Collins and Jerry Porras in their 1994 book entitled Built to Last: Successful Habits of Visionary Companies.