The CEO of a new company is building her business. She has a business plan but
is struggling to bring in new clients. How do you create a roadmap for a new
from the CEOs:
Creating a new business is a numbers game. Draft a 3-year plan that will generate $1M in billings.
The bottom line of the plan is bringing in new clients.
Create a financial template that is driven by how many clients it takes to reach the financial goal in three years. Fill out the annual numbers including where new prospects will come from and set quarterly and monthly goals and activities to generate those clients.
Develop a marketing “hook.” For example, in the case of business services:
Fixed cost business tune-up – a low-level retainer with limits on time and services offered (up to x hours work per month or quarter on y projects)
Fixed fee in-house service for small business – again with limits on the services offered
Additional services beyond the limited services will be at the company’s normal rates, possibly with a discount to those on the basic retainer service.
Create a list of desirable new clients – the company’s sweet spot. Next look for people who can connect the company with these clients.
How to get to the target client?
This is a funnel question. To build the funnel take three sources of clients: referrals, current business contacts, networking. How many contacts are needed from each source to generate 10 new clients per year?
Make presentations to groups which may produce clients or referrals.
Get to know the local business people who make referrals.
Write articles for magazines that these business people read. Be an expert.
To save money, use student interns from nearby colleges and universities to do some of the basic work – target client research, researching and writing articles (make then co-authors on the articles – looks great on their resumes!) This is an inexpensive win-win for both the company and the intern.
Situation: The CEO of a family business seeks to create a succession plan. One family member has expressed an interest in taking the reins of the company but has failed to take the initiative to demonstrate that he is prepared to take on this role. Another family member is now demonstrating both interest and initiative. How do you plan for succession?
Advice from the CEOs:
How should this situation be approached?
Do not view this situation competitively, but rather from the standpoint of what is best for the whole family because many family members stand to benefit from the ongoing success of the business.
Whatever decision is made, the successor will need support and assistance understanding both the financial and business sides of the company. This individual must also be aware of conflicts and challenges that face the business.
What else should be done to prepare for succession?
Given that there are two individuals interested in becoming CEO sit down with each individual and negotiate a clear boundary statement on what you, as CEO, can and can’t do, as well as what can and cannot be expected of you, as CEO, as the succession decision is made. This understanding should be documented in writing and signed, signifying understanding by both the CEO and the candidate. Each candidate should have their own signed agreement with the CEO.
In a family business, the CEO, as guarantor of the company, may be faced with a different level of financial risk than other family members. Both candidates for the CEO position must understand that if they accept this position, they also accept this risk.
Situation: A component company is struggling to set financial goals. Its sales are dependent upon purchases by large customers whose orders are influenced by the economy and demand for their products. How do you set goals in a volatile economy?
Advice from the CEOs:
What are the principal drivers that define the market? Have they changed? If so, how? Focusing on principal drivers creates more clarity in a volatile economy.
Rather than looking at the company as a producer of components, focus on the critical value add that the company’s products provide to customers. By focusing beyond the product, strive to become a key partner to customers. This can allow you to develop retainer contracts with key customers rather than working solely on a project basis.
The Holy Grail is predictable recurring revenue, for example on a service contract basis. The establishment of retainer contracts can help the company move in this direction.
The company’s customers have increasingly placed rush orders because they have been hesitant to commit to steady production. This, in turn, increases the costs to the company because they are being asked to alter their production schedule to accommodate rush orders. It’s fair to publicize and charge expedite fees for rush orders, just as delivery companies increase their charges for expedited delivery. Expedite fees will cover the cost of altering production schedules and can also add cushion to company profits.
A portion of the company’s business is supplying consumable parts that the OEM marks up and distributes to end users for their equipment.
As an alternative look at parts manufacturing/sourcing, storage and distribution direct to the customer as a separate business opportunity and take this over from the OEM – it may be a nit to the OEM that they would be willing to give up for a reliable service alternative.
A company is revising sales forecasts for 2016 and seeks the advice of others. A combination of low energy prices and shaky financial markets sparked by the Chinese decline has left many questioning whether they should revise their plans to account for an economic contraction. How is the economy impacting your sales plan?
Advice from the CEOs:
Niche Software Company – we are coming off of a good year. Our industry has seen low impact so far. Going forward we are cautiously optimistic. A couple of clients have delayed projects but didn’t cancel.
Services Company – hiring has been frozen. Adjustments to staff count have already been made. Clients are asking us to contact them again early in the second quarter. Opportunities exist in the health care area.
Hardware Company – we are running scared. We have cut business and personnel expenses to assure survival. A large customer just announced new plant construction earlier this week – this may help to turn things around. We are assuming this will be mean a longer term rather than a short-term opportunity.
Niche Software Company – cutting personal/business expenses. Long term things look favorable, but we have to survive the short term. Attendance at a large trade show this month was a little above last year but we don’t know whether this will yield a significant increase in sales.
Trades – Projects with big bank backing are on hold. We see large scale bidding wars for projects. Where there used to be 3-5 bids there are now 15 or more. Looking for consolidation of competition – especially union–based shops.
Situation: A CEO asks: How do you help people appreciate the difference between where they want to be verses where you need them to be? How do you help them understand the realities of career and financial potential that have been set for your company? What do you do to help your employees understand what has to happen before they get to the next step? How do you set appropriate expectations?
Advice from the CEOs:
The current labor market has yielded a different employment environment compared with 20 years ago. Many new hires are either:
Young – without long term expectations or perspective;
Possess an entitlement mentality;
More seasoned and possibly looking toward retirement; or
Have personality challenges.
This is just current reality and will last until the next contraction.
If you have a clear policy on compensation and promotion you are way ahead of the game because you can communicate this clearly at onset of employment. If you don’t have this, create it and make sure that it is communicated consistently to new employees and during all employee reviews.
Once you have established and communicated a clear policy on compensation and promotion the question becomes, on an individual basis, whether an employee “gets it” or not. If they don’t, perhaps your company is not for them.
Is there value to stock options as a bonus?
If you are a public company, they have value because stock options are tradable within legal guidelines.
If you are a private company it’s a different matter. Other than as an emotional boost, without a liquidity event the stock has no value except for possible periodic distributions against shares held.
Situation: A professional services company has developed a new trial offer to promote their services to prospective clients. The offer includes a discount for an initial evaluation accompanied by a discount on services should the client choose to proceed with recommended solutions. They seek guidance on whether this is an effective approach. How do you craft and effective trial offer?
Advice from the CEOs:
The suggested approach is similar to what others offer to new prospects, but only goes half way. A discounted offer only works if you’ve convinced the prospective client that first, they need your services, and second, that there will be a positive financial impact to their bottom line if they agree to your trail offer. You need to add recommendations that will demonstrate a significant short term financial benefit.
Target your message. Give the prospect a reason to spend scarce dollars now.
Offer to apply all or some of the initial fee to future expenses if they contract you to solve problems that you identify in your initial review.
An example of a more targeted offer would be as follows – we will audit your accounts receivable as well as any debts that you’ve written off last in the last 2-3 years. Based on this audit, our past experience has been that you can boost short-term collectibles from these accounts by 30%. An offer like this demonstrates an immediate impact on cash flow.
Do you feel comfortable offering a guarantee? You will save the client $X over a guaranteed period or the service will be free.
Situation: From time to time companies face crisis situations. A company, planning ahead, wants to establish a culture that can deal with crises effectively. What are the most important elements that should be part of this culture?
Advice from the CEOs:
Everything starts with a brutally honest SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats) of your company and operations. Identify where you are Strong, where you are Viable, where Urgent Care is Necessary, and where you have No Reason to Be. Based on this assessment, cut your losses – for example, eliminate exposure to the No Reason to Be activities and efforts – and focus resources on your strengths and what is necessary to assure your future.
Support all efforts or activities that you will keep or pursue with a Bottoms-Up Financial Analysis. This will include a P&L, Balance Sheet, Cash Flow Analysis, assumptions, variables, and best, most likely and worst case scenarios. This Financial Analysis is an essential part of facing up to the Brutal Facts of your business and environment. From this exercise you will gain clarity on where to focus first.
The greater the potential crisis, the more frequent this exercise must be.
When dealing with creditors, remember their priorities: honesty, eventual payment, fair treatment and long-term customers. Present them with a credible plan, don’t make commitments you can’t keep, keep all commitments that you make, keep in touch monthly, and pay what you can. The development of trust makes it possible to negotiate incredible terms.
Special thanks to Tom Spanier of Spanier & Associates for his contribution to this discussion.