A founder CEO is faced with two options – either selling his company or buying
a complimentary company. The acquisition would fulfill his dream as CEO, but he
is concerned both about the synergy between the two entities and his ability to
manage the combined company. Should he sell, or buy the other company?
from the CEOs:
Given these concerns approach the
purchase opportunity skeptically. Be more prepared to say no than yes.
In evaluating his ability to run a
larger operation, the CEO should objectively assess his own abilities.
A good CEO is not a Superman. A good CEO
creates a viable business model and vision and hires a good team to bring that
model to reality.
Consider past accomplishments. In an
industry where nobody makes money the CEO has created a business model that is
sustainable, highly profitable, and technically superior. The only thing lacking
is size in terms of revenue.
The new opportunity – on the right terms
– can launch the company from dominance in a niche to dominance in a
significantly larger industry.
Assess the new opportunity both as a
technical and cultural match. If there is a good cultural match:
Fewer things must go right to add value.
The purchase provides a channel to a
The acquisition will rapidly speed company
The biggest concern will be the time to
manage both entities.
The most important factor will be the
chemistry between the two company teams. If the chemistry is good, the
combination offers reasonable assurance that the two teams will complement each
Look at the purchase as an opportunity to
build a win-win with enduring value.
In considering outside investors to
support the acquisition, be cautious about financial partners and the conditions
behind each financing option.
Situation: A company has done very well providing goods and services to the local community. In the process they have made good money for the owners and employees. Still, they are aware that they only serve a portion of the community in which they operate. How can they reach out and benefit members of the community who do not necessarily require their services? How do you give back to the community?
Advice from the CEOs:
When employees have children or children of friends who are selling fundraising items, like Girl Scout Cookies, make a large purchase. Give the cookies away as gifts to clients and key contacts.
Conduct educational sessions to help the community become more versed in and aware of the products or services in which you specialize. These won’t be sales or marketing presentations but rather information sessions with no sales pitch attached. Talks can be given at schools, community organizations, or other venues that seek speakers.
Create a gift-matching program for employees. Make a gift to your favorite charity and the company will match your gift.
Try a fun variation on gift-matching: “Make Joe Pay!” Make a gift to a charity, and Joe, the CEO, will match it 3 to 1!
One company has a policy that employees are not to pressure other employees into supporting their or their kids’ fundraising. Instead, the company steps in and does this.
Work with the Angel Tree Foundation. Set up a Christmas or Holiday Tree prior to the holidays. Employees or others pick cards, and then buy a gift for someone in need within in the community.
Support national charities, e.g., the Heart Foundation or Cancer Society.
Create a formula-based program whereby based on company profitability or some other metric the company creates a donation pool. Have customers vote on the charities to be supported from this fund.
Encourage management and employee involvement on Boards of community organizations. Create guidelines and allow them paid time off to participate.
Create a mentor program. Contact the local school system and ask about clubs or classes at local schools that the company can sponsor or mentor.
Situation: A company’s sales are bumpy. The CEO thinks that this may be due to a mismatch between products that they offer and their customers’ needs. They currently use online surveys to capture customer needs and input. How do you determine customer needs? How do you find your sweet spot?
Advice from the CEOs:
The most important first step for a smaller and growing company is to clearly identify the customer niche that they serve. This must be a niche where the company can out-serve their competition.
There are two types of niches to consider:
A product/service niche focused on a specific set of products and services – one where you can offer a differential advantage over your competition and become known for this, or
A customer niche – a specific set of customers that you dedicate yourself to serve in a way that provides a differential advantage.
An example of the product model is an individual who started an e-commerce site for lacrosse equipment – products not commonly stocked in sports stores. They offered a wide range of lacrosse products, built an online community, shared articles, etc. and became THE place for lacrosse players to get their equipment.
An example of the customer niche model is to focus on a population and build a concierge or member-only service. The niche here is the buying group. This can be employees of specific companies or government workers as examples. Costco grew using this model.
For an early-stage company, survival is about single pointed focus on that niche where you can provide better products/services or better serve your customers than anyone else. As you grow you can diversify based on the reputation and loyalty that you gained early on.
Look at competitors – how are they gathering customer preference information?
Look at your passion – is it products or people? Choose a niche that fits your passion.
Situation: A company has grown largely through the determination and energy of the founding CEO who is still the principal business development resource. The CEO wants to move from day-to-day focus to a leadership role, planning for the future. How have you evolved from principal doer to leader?
Advice from the CEOs:
Start by developing and managing an organizational chart for the business.
Create the organizational chart initially by role and responsibility.
Match existing people to the roles. Individuals may fill more than one role, but be sure that the individuals are suited to the roles to which they are assigned.
Give ownership of areas of responsibility to others.
Make it clear for each area of responsibility that the individual assigned is now in charge.
Match projects or assignments with individuals’ abilities and available time.
Establish quarterly or annual performance objectives WITH as opposed to FOR each individual – objectives that support company objectives.
See that people are rewarded for their results – both soft and monetary rewards – as appropriate to the responsibility held by each.
While you continue as the lead of business development, hand off new clients to others as soon as you get them on-board. Let others take on the customer nurturing and maintenance roles. Establish a plan to replace yourself in this role.
The EMyth Revisited by Michael Gerber provides a soup to nuts recipe for moving from doer to leader of a company. Everything starts with your organizational chart.