Situation: A CEO perceives that the company has a conflict between performance and planned timelines. Of concern is performance against key metrics like pipeline performance and closing new business. A sense of urgency isn’t present. How do you create and communicate urgency?
Advice from the CEOs:
Management knowledge of company financial status and performance against key metrics – particularly key drivers like pipeline performance – is critical to their being able to assist the company.
A company decision to focus on project profitability may have the unintended consequence of exacerbating the lack of urgency. If revenue growth lags, the only option for managers who are tasked to hit a profitability target is to cut expenses. This delays projects and can negatively impact morale.
Accountability comes from meetings. Not 1-on-1 meetings but team meetings. Peer pressure is an important component of accountability. Nobody wants to be the individual who is consistently behind on projects or initiatives.
The challenge may be more external than internal. When business closes more slowly then everything else slows down: hiring, new development, investment and profits. All of these are driven by new business acquisition.
Another CEO has same issue with her contracts. All contracts include a timeline. If work or deliverables slip, the customer wants to slow down delivery and billings. Her solution is to include stop work and delivery delay fees in the contracts.
What actions would others take to address this?
Institute progress payments. For example, instead of charging 50% up front and 50% on contract completion, shift to, for example, 50/30/20 with the 30% due on completion of project framework. This way, only 20% can be delayed due of customer timing issues.
Built financing into total pricing. The customer is free to delay projects, or aspects of projects, but there is a charge calculated into delayed delivery which covers the cost of money and additional management.
Situation: A US-based company is in the process of merging with a foreign company. The US company has multiple locations across the US, and there are cultural differences between these locations. The CEO has worked diligently to mitigate these differences. The foreign merger presents new challenges. How do you maintain company culture in a merger?
Advice from the CEOs:
Between some of the US locations, there has been a “we make money, but you spend money” perception. How did the company get past this?
The company adjusted metrics to demonstrate the contribution of each division to short and long-term profitability.
This information was communicated selectively to key opinion leaders within the company.
Use the lessons from this experience to plan post-merger communications and protocols that will contribute to team integration post-merger and improve the chances of merger success.
Focus on the common vision and interdependency of the teams. This accommodates differences in culture and encourages teams to appreciate each other’s contribution. Use the same technique during the merger.
Have lunch with CEOs of other companies that have been bought by foreign firms. Learn how they adapted to the new reality. Ask what worked or didn’t work. Seek specific details of solutions that were developed that could be applicable to the planned merger.
Become better educated on business culture in the country of the company with which you will merge. Seek experts who can give seminars to company employees on what to expect and how to work most effectively with workers and executives of the foreign company.
Situation: A company uses outsourced manufacturing but is concerned about inventory damage by the manufacturer. Tests have been established to assure both visual compliance and functional performance, overseen by a company employee. Still the company is receiving too many unacceptable parts. How do you minimize inventory damage by an outsourced manufacturer?
Advice from the CEOs:
It is perfectly acceptable for a vendor of consigned materials to bear the risk of product that is not to specification.
In any contract for manufacturing, require that the vendor carry insurance to cover the full cost of materials and processing in case of damage either during manufacturing or shipping.
It sounds like this is a new opportunity and situation for the company. In the process they have not guaranteed that both cost and risk are covered.
There is no point in assuming all this risk.
For future opportunities like this, take on the work as a time and materials project at an appropriate hourly rate for the market, and with a significant mark-up to cover risk as the project is transferred to a contract manufacturer.
Another option is to take on the project under a project management contract, and to bill engineering separately.
This situation sounds familiar for an evolving project. In the future try to unhitch the manufacturing piece from the engineering. Engineering should be more profitable, which will allow the company to more successfully manage the project into early manufacturing.
Strategically, this could be a good move for the company provided they partner with a reliable vendor to facilitate early stage manufacturing. One option for paying sub-vendors is to pay for yield – particularly if early stage work has a high failure rate.
If the market opportunity is there do two things:
Set up an organization with professionals who know early stage manufacturing.
Be aware this group will have a different culture and approach compared to design engineers.
Situation: The CEO of a family business faces his most difficult conversation. One brother, who makes more than anyone else, is not living up to his responsibilities. A long-term key employee currently handles most of this brother’s responsibilities at a modest salary. The CEO is intimidated by this task. How do you prepare for a difficult conversation?
Advice from the CEOs:
Call a meeting of the three brothers and the key employee. Propose putting all four into a pool. The key employee is treated like a brother. Ask: what is a fair way to split the pie and to build incentives so that each makes what their father, who built the company, made? Make it clear that all four members of the team want the same earning potential and that one team member is not more equal than the others.
Prepare and script this meeting ahead of time.
Don’t allow the under-performing brother to play the others off against each other.
Know what must be said if this brother says he will leave.
The CEO must stick with the message. If the underperformer doesn’t like the message, he is not indispensable. A replacement could be hired for far less than he is currently being paid.
What are the key points for the conversation?
Turn the question around – the brothers all joined a company model that no longer works – the three brothers, combined, make less than their father made.
Ask the underperformer – what are the proper incentives? What is fair? Is it fair that for years, he has made more than anyone else?
It’s time for each member of the team to work together to figure out how to make what their father made in this business.
The brothers have supported the underperforming brother for years. Any old debts that were owed have been paid.
Ask the underperforming brother for his voice in how to expand the company and make it more profitable.
This is a new game. If all members pull together everybody wins.
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.
A CEO is concerned that her company does not have enough new prospects or
business on the horizon. New business opportunities appear sporadically but not
predictably. She asks how others schedule their time and effort to bring in new
clients. How do you maintain a robust pipeline?
from the CEOs:
Devote a regular amount of time to business and relationship development. Even when business is busy it is important to have the discipline to devote 4 to 6 hours per week to new business development. Schedule this time and fill it with activity. Occasional networking doesn’t work.
What differentiates a company is its brand. If new business comes from referrals, turbo-charge this by becoming the information hub for the referral group. Make it easy for others to make referrals.
There is a hierarchy of things to do.
Stay on potential referrers’ radar screens – monthly or quarterly awareness marketing to referral sources.
Spread awareness of best practices in areas where the company has expertise.
Make best practices relevant with situational stories.
Think in terms of a target.
Where do most referrals come from? This is the center of the bull’s eye
2nd Ring – 2nd level of referrals
3rd Ring – 3rd level of referrals
Network more with contacts at the center of the target – they know clients in need of help.
There is a lot of information in the cloud that is relevant to the business – personnel moves, hiring, firing, etc. If you it is possible to track this, it can help.
LinkedIn can help. Look for 1st and 2nd degree links to individuals of interest. For example, you want to meet a CEO who on LinkedIn is a 2nd degree link. Request a warm introduction from a 1st degree link between you and the CEO.
Think of LinkedIn in terms of rifle shots, not a shotgun approach. This makes it both more manageable and more valuable.
Situation: A company has secured a significant new contract with a new, large customer. The customer sent over their standard, non-negotiable contract which includes the right to cancel orders anytime, even if the company has invested significant funds preparing product against those orders. How does the company respond? How do you negotiate contract terms?
Advice from the CEOs:
Before you sign the contract talk to the customer about restocking or cancellation fees in cases where you have already invested irrecoverable funds against the customer’s orders. See if they will adjust their purchase order clause or offer language to cover unrecoverable costs.
If the customer says that they cannot change the contract, ask for an addendum or side letter of understanding that will protect you from loss of sunk costs against cancelled orders.
If the customer will not bend on any contract language, you can go ahead and sign the contract and then take care of your needs as they submit purchase orders. Create a stamp that you can stamp on their purchase orders defining your protections. Each PO is a new contract that supersedes the general contract.
Situation: A CEO is in the process of rebuilding the firm following a period of inactivity. Historically their marketing was word-of-mouth. How do you reestablishing a network which has been dormant for a period, find new clients and communicate an updated value proposition? How do you rebuild a company?
Advice from the CEOs:
Track down and visit old customers and contacts. Let them know that you are rebuilding the company and ask for their advice and help.
Use LinkedIn to find and reconnect with old contacts. Have breakfast or lunch with them, even those who are retired. Reestablish old connections and ask for an update on their companies and activities.
Focus on your knowledge base and the results that you’ve produced historically. There are more technology choices available now than there were in the past. Help old and prospective new clients to navigate the array of choices.
Development assessments to show your prospects where they are and where they need to focus their effort.
Many have built companies on their own – without professional assistance. The results often look good on the surface but lack a solid foundation. You have the perspective and expertise to bring it all together in a coherent and cohesive strategy.
Rejoin professional associations and networks that you may have dropped.
Go virtual – use virtual assistants to manage expenses while you rebuild.
Do webinars, and give talks on developing and executing a successful plan.
Create some pro-bono or low-cost programs for charities. Your target is the Board Members who may become future clients.
Situation: A company serves a market with a lot of new small entrants. Clients purchase from these other companies as well as the CEO’s company. They are continuing to call and network with their client base to retain clients and build new customers. What else should they be doing? How do you deal with cut-throat competition?
Advice from the CEOs:
Make a list of those clients who are no longer purchasing from you or referring new clients. Go talk to them. Ask why they are no longer purchasing from you or referring new clients. This may open new options. You may find something new or unexpected that you can offer.
Work with an outside service to follow up with on clients lost and won. The key question for them to ask clients is why. Learn from the responses what is most important about the clients’ purchase and referral decisions.
Consider a new service. A health/happiness outcome would be a nice value-add: a quarterly report back to referral sources on how happy the clients that they referred are. The last question on the survey should be – Would you work with our firm again? Why or why not?
Consider using an outside source to gather the data for these surveys. To get more valuable responses, don’t just ask about your company, but also several of your top competitors; this will produce a richer set of responses.
There are two ways to compete: either you are low cost or have established a unique value proposition. Whatever this is, sustainability of your critical point of differentiation is essential.
Health care legislation is now in flux. Whatever the outcome, it will have an impact on your market. Become an expert resource on the implications of various outcomes.
Look at social media resources – feed valuable information to your audience via blog.
Situation: An early stage company is positioning itself for growth. The CEO believes that they need to adopt a new model to grow. She is focused on a new channel – an affiliate model using the web. How do you build a young company?
Advice from the CEOs:
Introducing a new product to a new market is very difficult, especially for an early stage business that is still establishing itself. Shifting from direct sales to ancillary services presents a new challenge and a new demographic. In addition, in your market there are low barriers to entry so it may be too early to diversify. You are more likely to be successful marketing to your core.
Evaluate and decide whether there is growth in your core business. If so, stick with your core plan. If not, then you either must change or decide that your core market is not what you thought it would be.
You offer a valuable, important service. The issue is branding and a clear vision of what you want to be. Start by identifying your revenue stream. Then assess ways that you can move from one-time sales to an annuity revenue stream without major adjustments to your model.
Is it feasible to build a revenue share model for ancillary services with your core business partners? Here are the steps:
Develop a model.
Talk to both your business partners and customers – test the concept. See how they respond.
There are two things to look for: does it turn out that that the model is easy to sell and implement, with little effort or distraction from our core business, or does it compliment your core business. If either or both is the case, you may want to pursue it.