Situation: A company’s customer base is experiencing market softness and uncertainty. Customers are tightening budgets and delaying purchase decisions. How do you boost sales in an uncertain environment?
Advice from the CEOs:
Offer incentives to prompt customers to buy now instead of waiting. Two potential options:
A limited time discount – Sign by <date> and save X%.
Pre-announce a price increase. Follow this with a promotion – buy now, before the price increase.
If you are selling a service, package your service options in smaller chunks while pricing them so as not to erode your margins.
Consider 30 day trials for $X, or discounted pricing for large or committed long term purchase contracts.
Examine your sales process. Are your sales people speaking to the right people? Try to move the sales process up a level if this gets you to the decision maker.
If some of your sales people are significantly outperforming others, give them incentives to share their sales techniques with other members of the sales team.
If the issue is sales productivity, leverage someone else’s sales team through a partnership. The partner incurs the sales cost while you focus on implementation.
Look for opportunities where a partner can sell your product on top of theirs to boost value of the overall offering and increase their own top line.
Situation: A private company has not issued stock options in over 6 months. The business press highlights concerns over appropriate valuation at the time of option grant. How do you value the stock of a private company to assure that option awards reflect proper company value?
Advice from the CEOs:
Decide on the objectives of your valuation exercise. These may include:
A credible valuation to protect the Board from challenges over option valuation.
A calculation that the company can use quarterly or semi-annually to assess company valuation; possibly something that can be done internally on a quarterly basis, with independent validation annually.
Given that your concern is option valuation and protection of your Board, they only clean way to do this is to have an outside party perform your valuation. Internal valuations are subject to challenge. Look for reputable CPAs that specialize in private company stock valuation and get quotes from several for initial valuations plus follow-up valuations in 12 months. You may anticipate paying a fee of $12,000 to $15,000+ for this service.
There are issues that you will want to address in your valuation process:
A valuation must have a supportable rationale and demonstrate consistency of methodology so that valuations will be performed on a comparable basis year after year.
You want to see consistency between valuations with your annual financial audits which will reflect company performance.
There are at least two models that you may follow – a hard model and a soft model.
The hard model is a one-time valuation based on your financials. This may include historic performance, as well as forward-looking ROI.
The soft model is based on operational and risk assessment.