Tag Archives: Invest

How Do You Develop a Sales Organization? Four Points

Situation: A small company’s business is increasing and they need to build a sales organization. To date all sales have been conducted by the founder CEO and a single employee salesperson. Should they build inside or outside sales first? Are there trigger points at which one or both should be increased? How do you develop a sales organization?

Advice from the CEOs:

  • Right now you have first mover advantage in your market space. You have a unique offering and no existing competition. The immediate objective is to maximize early market share. Borrow if necessary to ramp sales. There is no trigger point.
  • Hire an outside salesperson now. You want an individual who is knowledgeable about your market and who has a large set of contacts. Make at least 50% of this individual’s compensation variable (commissions) to start and escalate the percentage of variable compensation as sales grow. Hire at current market rates.
  • Supplement your existing marketing with an investment in social media marketing and SEO (search engine optimization). Don’t try to do this yourself on the cheap – hire a pro. Invest in Pay-Per-Click to push your visibility.
  • To sell this plan to your existing salesperson and the rest of the team, it’s time for a Come to Jesus talk.
    • Make a strong business case for your program.
    • The trade-off is either invest now to rapidly build sales or become insignificant.
    • Once you’ve made your pitch and received consent, let the plan work before you ask for more.

How Do You Create a Win-Win Situation? Five Suggestions

Situation: A company collaborates with a large client to provide services to their mutual market. The company wants to offer similar services to secondary markets not currently of interest to the client. The challenge is that the client is very conservative; their current priorities are forcing long delays responding to the company’s requests, and the primary contacts within the client will not take any risks arguing the company’s case to their upper management. How can the company approach this situation to create a win-win situation with this client?

Advice from the CEOs:

  • Since the services provided combine the capabilities of the two companies, it is necessary to develop a strong case to show how the proposed extension of services will benefit the client. Without their agreement the service offering is compromised.
  • One option is to offer a no-risk revenue share or royalty arrangement to the client in exchange for their agreement to allow you to build the secondary markets.
  • A second option is to offer to sell a minority share of your company to the client in exchange for your ability to develop the secondary markets. The deal could include an option to make a larger investment in your company if your strategy plays out profitably.
  • A third option is to raise money and purchase rights to the client’s capabilities outright. It is worth exploring whether the client would be open to this.
  • Find an informal setting to ask the client’s CEO for advice on how you should proceed. Have your ducks in line to offer options if the CEO responds positively.

How Do You Attract a High Powered Individual? Three Thoughts

Situation: An early-stage company is in discussions with a high-powered individual who could invest, join their Board, or help them more directly as an executive. They want to involve him enough so that he is interested in working with them. How do you attract a high powered individual?

Advice from the CEOs:

  • You are still in fact finding mode. Get an NDA ASAP! Backdate the NDA to your first conversations.

o    This individual needs to meet face to face with your current team. See how the dynamics work; be very sensitive to conflicts and jealousies. These can wreck an early stage company.

o    You need to see how the new individual interacts with your current team to check chemistry before you go too far.

o    Be gingerly with your co-founders about adding another “founder.”

  • Create a high level straw man for this person’s roles and responsibilities.

o    Ask the individual what he sees as the potential for the company and how he foresees being able to contribute.

o    Develop a business plan for this individual – with the appropriate title. Spell out roles and expectations.

  • If you offer an equity position, be sure that shares are on a vesting schedule and that you have a shareholder’s agreement.

o    Be creative in your vesting. Rather than vesting on time, consider vesting on individual and company performance against milestones. If the company doesn’t hit the milestones what is the value of the shares? Make the milestones consistent with the individual’s objectives – bringing dollars into the company based on investment or revenue hurdles.

o    If this individual wants to come in as a “founder” insist on some investment to demonstrate commitment – you and your co-founders have funded the company to date.

How Do You Respond to a New Competitor? Six Options

Situation: A company performs service that is primarily locally-based.  A competitor is establishing a new site less than two miles from the company’s location, offers a broader array of services and is larger than the company. How can the company protect its business by responding to this new competition?

Advice from the CEOs:

  • Your most important asset is understanding what you are doing right, and what is most important to your customers.  Remember that business is more than just a product or service. It’s a relationship. Your customers depend upon your for more than just what you offer for sale. Reach out to your customers for these answers. Make sure that you respond to their needs. As a benefit you may also find new growth opportunities.
  • Ask current customers whether you need to expand your service offering, or whether your current offering and lead time is acceptable to them. Ask how their needs are changing and how you can better serve them.
  • Reestablish the connection to your customer and listen. Preempt new competition by contacting your customer base before the competitor gains a stronghold.
  • Study your options and avoid knee-jerk reactions.  You may be in better shape that you think.
  • Major retailers and service companies have moved into many locations. Local businesses who survive their presence do so because they are focused on their customers’ needs and are better at serving the customers that the big companies are.
  • Invest in key components of your business relationships:  services, payment terms, responsiveness, your facilities, and so forth.

How Can You Ramp Sales With Limited Dollars? Six Suggestions

Situation: A company survived the recession by cutting back and using cash reserves. Business is now on the upswing with significant new opportunities. However, the company has limited resources to invest landing new opportunities. How do you ramp up sales and business development on a constrained budget?

Advice from the CEOs:

  • Identify and focus on your niche market, and invest your limited resources closing qualified clients. This is a rifle shot approach, not shotgun. While seeing new business, make sure that you have sufficient production capacity to handle new business. You want your clients to be satisfied so that they will refer others to you
  • Cash is the most critical resource. Spend carefully and get the most from your investment in business development.
  • While marketing materials are important, they may not be essential if you have and can leverage excellent referral sources. Word of mouth and referrals from trusted clients are your top assets.
  • Leverage Linkedin as a free or low cost resource to identify key contacts in your top 100 customer prospects.
  • You can also use Linked-in.com to recruit additional sales resources who may be amenable to a pure commission sale. This can help you to augment your efforts so that you only pay for success.
  • Your most important current unused resource is leads and referrals from existing satisfied customers. Let them know that you are looking to grow and ask whether they know of contacts in other companies who could use your product. It is surprising how frequently they will share their contacts with you. Ask whether they would call the contact and provide a personal introduction.

How Can You Best Use Excess Profits? Five Suggestions

Situation: A company, an S Corporation, produced substantial profits during the first 6 months of their fiscal year. This becomes taxable personal income to the owners if it remains profits. How would you advise the CEO and owners to make best use of these excess profits?

Advice from the CEOs:

  • Use some of the funds to invest in new opportunities for the future growth of the company.
  • Prepay significant costs like software licenses multiple years in advance. Make sure that you attend to your accounting so that you properly reflect the ongoing profitability of the business. Otherwise, what you may believe is profitable in future years will not reflect true profitability because you will not be accounting for all of your true expenses.
  • Is anyone in the company deserving of a one-time special bonus for performance or a salary increase?
  • It may make sense to take dollars out of the company and to diversify owners’ investments by investing in real estate, stocks, etc.
    • Check out the current rules around 401K programs that may allow you to invest increased amounts per year per person. Talk to your financial advisor about the details and regulations surrounding these programs.
  • List your alternatives and compare the anticipated ROI, on an after-tax basis, of the various options. This will help you to evaluation options including:
    • Reinvesting in the business – various options.
    • Investing outside of the business – various options.
    • Talk to your financial planner about the choices.