Situation: The CEO of a service company is focused on growth, which is driven by new contracts. This, in turn is driven by new sales contacts per week. Sales staff are paid on commission. The CEO wants to assure that quarterly objectives are met to grow the company. How do you maintain focus on quarterly objectives?
Advice from the CEOs:
Track and publish progress against weekly, monthly, quarterly metric objectives and key drivers.
Post charts around the office to maintain staff focus on objectives.
Put up whiteboards that show individual metrics as well as daily “top 3” focus items.
Identify key market sectors where focus will pay off for the company.
It’s OK to take a generalist approach as the company develops a new market sector. This helps to learn the dynamics of that sector.
As sector market penetration grows, develop functional or sector specialties.
Identify and focus on the gaps to company success.
Monitor and generate incentives to increase sales activity. The more fun that is involved in this, the faster the company will close the gaps.
Focus marketing on developing more prospects. Brainstorm creative marketing approaches that will generate prospects. Create a competition to develop the best new ideas with incentives or prizes to celebrate the most successful ideas.
If additional resources are required, currently beyond the company’s budget, investigate adding commission-driven contract resources with strong incentives for identifying new prospects and landing new clients.
Situation: The CEO of a service company needs to expand its market base due to concerns that a significant service and referrals partner may decide to stop working with them. A break-up would have significant impact on salaries, effort and focus. The company’s priority is to expand client growth to minimize the impact of a break-up. How do you expand your market base?
Advice from the CEOs:
To expand or build a market requires a champion. Someone like the company’s founder who has the passion and contacts to build new business.
Second, incentives must be established to reward success bringing in new clients. These incentives must have teeth – no success, no incentive. No safety valves.
Third, create a plan to support the new business development – including marketing, event attendance, etc.
Initially, be selective and target just a few highly desirable new clients to test and refine the client attraction model before expanding to the broader potential client audience.
Build a set of case studies of services and results for new clients.
Track and prove out the profitability and workability of this model.
How should the effort to expand the market base be constructed?
Start with preparation. Research the current prospect list to assure that they are good prospects. Also look at the current company culture – do the company’s strengths align with what is needed to attract and serve new clients?
If the research shows that a significant number of prospects are different from current clients, think of this as a new channel. Create a different business unit to specialize in serving these clients. Hire a team to focus exclusively on the new client group, with proper incentives tied to achievement with these prospects.
Another company had a similar choice. They created a program to increase their market base and went after it with full focus. It took five years to accomplish vs. the two years that they had planned. Nevertheless, the results have been worth the effort and expense. If the company believes in the model, invest in it.
A CEO is concerned that too much of her company’s business is focused on two
few customers. The loss of a single large customer can potentially mean a significant
hit to revenue and profitability. How do you diversify your customer base?
from the CEOs:
If current cash flow is good, the company should consider purchasing diversity by buying a company.
Consider acquiring a supplier that is in good shape, but with lower margins. They will have the infrastructure to run their own operation, and the purchasing company will have the additional profitability to make the combined entity more interesting.
Given the company’s existing cash generation potential, there are creative ways to finance such an acquisition.
Why is this a good strategy?
Purchasing another company can instantly expand the customer base.
Diversifying the company opens additional options to build long-term sustainability.
A purchase strategy can bring in a ready-made and smoothly running infrastructure in the form of the purchased company.
Diversification can boost the value of the combined company on a more diversified business base. It might allow the company to combine low volume, high profit lines with high volume, lower profit lines. There are advantages to each of these business models.
Where can such a company be found?
Look both inside and outside of the current geographic base.
A candidate could be a higher volume but lower profit supplier of one of the company’s current customers that does not compete with the company’s current offering. Alternately, look at companies with more diversified customer bases in a related industry.
Look at the niches that the company’s current customers serve.
What similar niches exist? Are there acquisition candidates there?
Look at the functionality that the company’s products add for its clients. In what other industries would similar functionality be of value?
As these questions are asked, look for candidates that have complementary customer sets, customer bases, and geographical reach.
Situation: A CEO and his COO find it difficult to focus on core tasks when business is booming and everyone is busy. The company is small but has been very successful. However, the pressure of simultaneously attending to key customer relationships, training new people, and formulating plans is overwhelming. How do you stay focused when it’s busy?
from the CEOs:
If the CEO and COO are doing a mix of corporate and project tasks, the first step is to delegate so that top staff focus on strategic areas rather than execution.
Over the next week, keep a record of what the CEO and COO are doing. At the end of the week sit down and determine which activities were corporate activities, and which should have been delegated to staff.
As an example, training of new personnel should be a key role of someone else. The CEO and COO will be involved, but only tangentially. The bulk of onboarding should be handled by staff.
Similarly,restrict sales activity of the CEO and COO to high level discussions and decisions.The rest should be handled by sales staff.
What must the CEO and COO be involved in? Intellectual property development, high level decisions about new service offerings, high level decisions on business expansion opportunities, and occasional oversight of company operations.
It is important to focus. The first priority should be the company’s principle revenue stream.
The second priority should be new service offerings which are central to efficient delivery of the primary revenue stream.
Meet with top staff and develop a five-year vision. The order of priorities that are developed will determine where to focus.
In the process of developing priorities, ask the following questions:
What do you love and what do you need to love?
Analyze the comparative importance and urgency of each activity of the CEO and COO. Which require top level input, and how much? Which are better delegated to staff?
Situation: A software company is developing a new solution for their B2B market. The CEO has been in discussion with a potential partner to assist developing this solution. The question is whether this partner is the right partner. Is it smarter to complete development as a partnership, or on their own with the aid of subcontractors? How do you evaluate a potential partnership?
Advice from the CEOs:
Is the potential partner also a competitor? If so, is the partnership arrangement on or off the core focus of the company’s business. Is there potential for future development in the partnership, or is this just a one-shot opportunity?
What would a new partnership look like? Ask the following questions:
What is the long-term vision for the company?
Does the partnership fit this vision, and under what terms?
Is the potential partnership “sticky”? Will it bring in business that can be nurtured and developed under the company’s shingle?
Until answers to these questions become clear, soft pedal the partnership opportunity and plan for the company’s future.
Take advantage of situations that the partner presents as they benefit you, but do not let these become a distraction to the company’s focus unless the partner is open to working with you as a partner rather than as a source of bodies and skills.
Put a deadline and milestones on the partnership relationship. If they don’t pan out, walk.
Don’t burn bridges, if the partner takes off, then jump back in more strongly, but on terms that benefit the company’s strategy.
For the immediate future and until the situation becomes clear don’t let people become idle. Unless something develops quickly be ready to redeploy them.
An alternative is to stick with the company’s current customers and expertise. This involves investing resources and focusing R&D on solutions for these customers. If the market remains substantial and current customers are the largest players, this has the greatest potential for growing the company’s business.
Situation: A company has strong technology and good top customers. However, the CEO is concerned that the company is too dependent on a few large clients. She wants to increase business among mid-tier clients. How do you expand the sales funnel?
Advice from the CEOs:
Get very crisp in identifying who your core customer is and focus on them near term. Look at what you offer that your competition can’t match and create appealing offers for new clients.
Simplify and clearly define your market position.
Here’s an example: First to market with the best, smallest, fastest solution.
This clearly defines who you are. Focus the company on delivering this.
In each high potential market find one company to whom you can offer a significant advantage.
Their current market position might be number 2, 3 or 4. Offer them a solution to gain an advantage on #1 and shift the playing field. This is a win-win for both you and them.
Horizontal business expansion could be the best near-term strategy. This lets each vertical market solve their own problems of technology direction, logistics, etc. Seek customers who have the resources to manage this in their respective market places.
Tailor contract minimums and pricing according to customer order commitments. Be willing to sacrifice price and some margin for committed purchases that match your timelines and resources.
Buyers often overstate their anticipated needs because they don’t want to be caught with short supply.
You can meet and promise lower prices for higher volumes because they rarely order them. However, combine this commitment with higher prices for the lower volumes that they are more likely to order.
Look across markets and focus on promising targets.
Use a call center to queue up prospecting telephone calls.
Have sales people conduct scripted qualification calls with prospects by telephone.
Only send sales people out to talk to qualified prospects. This saves travel expense and increases the productivity of in-person sales calls.
Situation: A CEO wants to establish baseline metrics to evaluate company performance, and guide both planning and operations. Without baseline metrics it is difficult to compare the impact of options that the company faces. What are the most important areas to analyze, and what do other companies measure? How do you establish performance metrics?
Advice from the CEOs:
Start with the basic divisions of the business. As an example, take a company which has three arms to its business – products that it represents for other companies, products that it distributes, and custom products that it manufactures to customer specifications.
For each of these lines track gross revenue, profit net of direct costs, FTEs necessary to support the business, number of customers, net profit percent, net profit per employee and net profit per customer.
Calculate these metrics on at least a quarterly basis for the past 2-3 years to set a baseline and a chart of historic trends.
Once you establish a baseline, chart current performance on at least a quarterly basis and look for trends and patterns.
Where is your greatest growth and greatest profitability – not just on a global basis but in terms of profit per customer and profit per employee?
If you’ve included your full costs including the costs of the FTEs to support each business, then the analysis should show you where you want to invest and what it will cost you to support additional investment.
Do a similar analysis of costs per line to further support investment analysis.
This analysis will help to evaluate whether it is better to purchase another rep line, or whether you would be better off investing the same funds to grow custom business.
Similarly, it will demonstrate on what kinds of customers and products you want your sales force to focus to grow profitable business and will help you to establish objectives based on anticipated revenue or profit per new customer that sales closes.
Finally, it will highlight potential vulnerabilities such as the impact of the loss of a key customer in one portion of the business.
Situation: A company is purchasing another company to expand its product offering. The CEO is concerned that the employees need to stay focused through the closing date. He is also concerned about retaining key employees both of his company and the company that he is buying. How do you prepare for an acquisition?
Advice from the CEOs:
Until the deal closes, don’t change anything about your current direction.
As you negotiate and move to close, be mindful of competitive bids.
This will help to keep the deal in place.
It may also open the option to put together the deal and then seek competitive bids to fund the deal through private equity groups.
Get three second opinions – learn what could go wrong with this deal so that you can plan and anticipate.
To assure that you retain key staff take the following steps:
Hire consultants: HR, financial, see what they recommend.
Offer key employers favorably priced options for a combined minority position in the company. This offers them an upside and will be an effective retention package.
What else can be done to retain key employees.
Let them know how this acquisition will position the company as the Dream Team company in your space.
Explain how this acquisition gets the company closer to a true exit strategy which will be financially beneficial to them.
If you can assure key employees that they will not experience any change in their job, title, responsibilities or compensation, retention may not be an issue.
Situation: A professional services company wants to grow while maintaining the small company atmosphere that has been the key to its success. There is a limit to how many clients a manager can manage, and with this the reality that if the firm is to grow they will have to bring on more client managers and support personnel. How do you maintain your culture as you grow?
Advice from the CEOs:
To maintain your boutique atmosphere, consider hiring to fit your needs rather than to maintain a culture. Use team meetings to direct team members while communicating and instilling the culture that you wish to maintain.
Don’t risk diluting the strength of your client relationships. A $250K client who is fully committed to your service may have more demands than a $1M client for whom you only represent 10% of their business.
Service companies with the highest profit ratios rotate customer contact among several qualified people. What matters is the level of service provided, not the individual providing the service.
Grow by adding locations. Instead of growing vertically in the same office, grow modularly by spawning additional offices.
Create an optimally sized model for the level of service that you wish to deliver.
Design the organizational structure for this model and identify the order in which slots will be filled as business grows through each office.
Develop a service and organizational template with standard operating procedures, metrics, technology, and reporting.
Once the model is created, spawn it.
Focus your business. Define a niche that you can serve better than your competitors. Focus on this niche and develop a sustainable advantage over your competition.
Assure that your service delivery is seamless to the client and make sure that it remains seamless.
Offer a menu of service options and price options by the level of service delivered. Some will want to buy a Mercedes, and some will be happy with a reliable lower priced sedan.
Situation: Revenue for a product and craft business has been slipping. At the same time, their competition has been disappearing. It is clear to the CEO that demand is and will continue to be present because of the market that the company serves. The question is how to maintain the profitability to survive long-term. How do you build in a declining market?
Advice from the CEOs:
The keys to recovery in a business like this will be in two areas: improving sales and increasing margins.
To increase sales the choices are more aggressive marketing and selling to existing customers or creating new markets like previous generations did when they started the business. Consider services that you could bundle with your products to augment the ways that customers use them. It will be the responsibility of your sales and marketing teams to demonstrate these product/service bundles to increase sales both to new and existing customers. This will help to solve the revenue slippage.
The other side is ongoing efforts to reduce cost which will, in turn, improve your margins. Costs can be reduced in creative ways that are not obvious. These include improvements in purchasing, reduction of waste, recycling of component materials, and inventory controls. It will be the responsibility of your production, purchasing and inventory management teams to develop these solutions. Assure that these teams are recognized and rewarded for their solutions.
Look at the segments of your product offering. Are they declining at the same rate or are there differences? This will help you to focus your efforts, as a company, to grow market share even if the overall market is declining.
Other suggestions for increasing sales:
Take advantage of the craft trends. Do this with NEW talent – not tired talent.
Consider partnerships and collaborations.
Set up contests and craft classes.
Look at how other industries promote to the craft industry and follow their lead.