Situation: The CEO of a start-up software company focuses on connecting potential parties to business opportunities. Early signs are that this offering has legs and potential parties have responded positively. The critical question for the CEO is how best to turn interest into revenue. How to you monetize your business model?
Advice from the CEOs:
The first step is to segment the audience and determine both the potential for each segment to both benefit from and fund the service that they receive.
Individual contributors may not have a lot of financial resources but may be interested in participating as employees or providers of expertise or services. They also may know others and can spread the word.
Collaborating organizations may be able to offer both funding and services to help build and sustain momentum.
Companies have funds to support the effort provided they see value to their bottom lines as a result.
Suggest a fee or contribution for services from companies who will benefit. Provide guidelines or a sliding scale of fees depending upon duration of services provided to the company. Make it clear that moneys earned will be reinvested to increase the range and depth of services offered.
Suggest a sliding fee scale for individual contributors based on the financial benefit that they receive.
For companies and collaborating organizations offer levels of membership or recognition for support based on benefit received.
For all segments – start with small, timed fees and increase these as the model proves its benefit to them.
Note: Ceo2Ceos will take a two-week break over the holidays. See you in January 2020.
Situation: The CEO of a software company needs to increase revenue to cover expenses. He doesn’t want to cut salaries because if employees leave it will be hard to find replacements with the required skills. The better solution is to increase revenue. How do you expand business development efforts?
Advice from the CEOs:
Look at the markets which are growing rapidly:
Gaming. This is currently a good investment area. Large casinos are spending heavily on high end projects, and people just keep gambling!
Medical imaging. Potential targets include:
Pharma and Biotech R&D and Marketing/Sales – the ability to show how a drug binds with the cell receptors and how this impacts the cell is interesting to both groups. Also look at Medical schools. This is where you find the top researchers and they love teaching and presentation aids.
Military markets, particularly simulation spaces and unmanned vehicles. They value realistic simulated environments. Also look at training programs that value visually intensive simulations including marine and naval applications, aircraft, and battlefield simulations.
Consider the company’s business focus and strategy. How can it move from a “next project” model to a recurring revenue model? Is it possible to write client agreements to include a piece of the recurring revenue stream from client products?
Look at what the company does and package this as a product/service vs.an hourly problem-solving model. Focus on where the market is going. For example, iPhone apps – cheap to the customer, so millions buy them People now interact differently using electronic media. This opens new options.
What is the company’s key focus – Product Leadership, Operational Excellence or Customer Intimacy? How is the company’s differentiating strength presented consistently to client audiences?
It is important to clearly define the company’s niche – what makes it truly different. The communication must be clearly understood both by the engineers, and the business development and marketing people.
Invest additional funds in business development – with payments highly weighted on success.
Situation: The CEO of a software company has been presented with two opportunities by a large customer – international expansion to support their sales and creation of a data warehouse facility. The company has the option of pursuing either or both. The customer is not offering up-front cash to support either opportunity. Should they pursue either or both? How do you choose between opportunities?
Advice from the CEOs:
Keep pursuing both opportunities and establish a series of decision points which will yield either a Go or No-Go decision on each. The big question is to determine how either will support company growth.
The customer is interested in both opportunities so ask them for assistance such as: removing barriers, client referrals, or some form of cash or investment.
For either opportunity to succeed requires a high level of internal buy-in and support from the customer.
If the company can afford to be aggressive now, this is a great time to move.
Look carefully at the ROI on each opportunity under different scenarios.
Do background work with potential clients to validate each market opportunity.
Specifically to International Expansion
Buy-in from the customer’s head of international sales is essential – without this it will be difficult to establish a solid relationship with the international sales team. Lack of this support will be a No-Go sign.
Can the customer provide office space, access to their infrastructure, administrative support, assistance in gaining necessary licenses to do business, etc. during start-up?
Could this venture be undertaken through a joint venture with an established international company? This would save start-up costs and allow validation of the opportunity before risking the company’s investment.
Execution will require a large-scale effort – both time and money. Include both in the Go/No-Go calculation.
Specifically to the Data Warehouse Facility
A competitor’s right of first refusal on this business is a barrier. However, the opportunity may be viewed as too small for the competitor. Is it possible to buy rights from this competitor?
Ask the customer to transition their customers to your company and its product.
Situation: The CEO of a successful small software company is snowed under by day to day tasks. She wants to focus more of her time on business and infrastructure development. However, the company’s departments are not strong enough to run without her supervision. How do you free up more of your time?
Advice from the CEOs:
The first priority is to develop infrastructure that will allow the CEO to focus on strategic development.
To build this the company needs the right people to do the work.
Look at the daily task list and develop or hire new managers to oversee day-to-day non-strategic functions.
For example, offload payroll and back-end accounting to a bookkeeper.
Look at the gaps between where the company is now and where you, as CEO, want to be in terms of your time and responsibilities:
In addition to a bookkeeper, hire an experienced executive assistant – to keep you focused as CEO.
The company is growing rapidly. It is time to hire a human resources manager.
The company’s cash flow projection for the coming year indicates a substantial surplus.
Use this surplus to hire infrastructure.
In front of key clients, keep the impression that you are available to them; however, this is primarily for client relations. The CEO doesn’t have to do all the work demanded by clients.
Use the lawyer / rainmaker model. The rainmaker maintains key client relationships; however, the rainmaker has staff do 90% of the work.
The 7 States of Enterprise Growth Model indicates that the company is now in what’s called a Wind Tunnel. The critical activities in a Wind Tunnel are:
Letting go of methodologies that no longer work and acquiring new methods that do work, and
An early stage venture which focuses on a humanitarian mission needs funding.
The founder is more interested in providing a peer-driven platform and service
than in producing profits. She envisions most of the funding coming from
donations rather than investors, at least near term. How do you fund an early stage venture?
from the CEOs:
that the venture is focused on building a peer-driven software platform, it is
possible that it may be of significant value if the venture was to be sold for
its technology or audience. Facebook and similar platforms could have a
distinct interest as the venture attracts a significant audience. Is this a
potential conflict with the original vision? The answer to this question will
impact funding choices going forward.
are several resources available to assist in fund raising:
for local groups that assist with fund raising.
Foundation Center (www.foundationcenter.org)
specializes in helping organizations to secure funding for non-profit ventures from
foundations. They have online facilities as well as locations in New York,
Boston, San Francisco and other major cities. They also provide training in
raising funds from foundations.
the founder’s network to find people with an interest and contacts in
with local churches and synagogues which also excel in fund raising. The
congregations may be smaller than the mega-churches, but the members are often
very connected. Because of the humanitarian nature of the new venture, churches
and synagogues may be natural partners.
Situation: The founding
CEO of a technology company is considering options for the future. The company
is doing well, with two options for future development either within or outside
the company. How do you choose between strategic options?
from the CEOs:
expertise is less important than business experience, P&L experience, and fund-raising
success. A diversified background and successful experience as a CEO are as
important as specialty industry experience.
to pursue all options for the time being. See how the new opportunities mature
before making final choices, and either split time between the options or
assign good managers to oversee each.
agreements should be based on cash investment of the parties – not time and
#1 – Focus on the primary company.
challenge is that most of the Board members just see the numbers, not the
dynamics of day-to-day operations. They don’t know the CEO’s contribution.
that the Board understands the CEO’s contribution and is rewarding the CEO appropriately.
#2 – Focus on New Opportunity #1.
this option more like a product or a company?
this option as a product incubator rather than a single product company –
producing and spinning off a series of ideas for development.
can be done either within the primary company or as an outside effort.
#3 – Focus on New Opportunity #2.
development can be self-funding. Compared with manufacturing, software is
inexpensive to develop and requires little investment to scale and sell once
the code is written.
trick is to rigorously focus on market opportunity while minimizing cost.
staffing commitments. Use scarce resources to lock up irreplaceable
capabilities. Hire or offer equity only for significant contributions such as
IP development. For labor, use consultants, independent contract arrangements,
or look for what can be outsourced.
Option #2 this can be done either within the primary company or as an outside
A company is losing billings because individual billings are getting lost in
their process flow. Requests for enhancements come from clients to Project
Managers. Project Managers take on development of the enhancements but are
sometimes too busy to keep track and don’t report their work to the billing
department. How do you improve quote to collections flow?
from the CEOs:
appears that two processes are missing:
formal trigger mechanism to assure that a PO is in place BEFORE Project
Managers undertake enhancement work, and
are incentivized to assure that the client is billed and revenue collected for
the work performed.
the process and do not allow Project Mangers to initiate any work until a work
request is logged in the billing system and a PO is received from the customer to
cover the expense.
a process to track customer requests, estimate development and transmission to
billing, forwarding of estimates by billing to the customer with a request for a
PO, and upon receipt of PO authorization by billing to initiate work.
can all be tracked and managed by most accounting software packages.
Facilitate tracking of
actual expense vs. estimate;
Tracking of requests
for which no POs are received, for client follow-up; and
Tracking of enhancement
requests to guide future product development.
Account Managers to track and manage the process.
an Account Manager receives a commission for enhancement work they will have an
incentive to keep track of all ongoing work, both for timely delivery and to
assure that the customer invoiced for the work.
paid to the Account Mangers will be a small percent of the extra revenue collected.
improve process management, schedule regular meetings to review all enhancement
and other work being done for clients. Review and assure that all work has
accompanying POs, that the work is being completed on a timely basis and in
line with original estimates, and that the company is invoicing and being paid
for the work. Empower Account Managers to organize and conduct these meetings. Their
incentive will be the commissions they will collect on payment for the work.
upgrades and a certain number of enhancements into the product price.
enables to company to increase prices and to collect prepayment for
enhancements and upgrades that may or may not be requested.
the process outlined above to track enhancements which are credited against the
prepaid accounts, and to assure that enhancements above the prepaid limit are
A CEO is concerned that all her key personnel are over 50. This includes software
engineers who are experts in languages which remain at the foundation of many
customers’ databases, but which are no longer formally taught. How do you
replace aging talent?
from the CEOs:
at which areas potentially limit the company’s growth. Is it technology and software
expertise, or marketing and sales? Based on this assessment, rank the critical
positions to be filled and start hiring staff who can grow into the most
a cue from the Japanese. For years their aging workforce was predicted to limit
the country’s growth. Instead, they chose to retain employees through their 70s
and this has helped them to maintain both productivity and employment.
Baby Boomers are finding that they don’t have the savings to retire and are
working well past the historic retirement age.
Baby Boomers retired but found themselves bored after a productive career and have
returned to the labor pool.
factors may delay the company’s need to replace aging talent.
bigger question is what to do if a key player is lost. Focus on hiring back-ups
to key personnel and allow several years for them to come up to full speed. Current
employment trends suggest that numbers of experienced people are returning to
the labor pool. Look for a few good people to add to the team.
are the plans of the company’s key clients? Do they plan to stay with the
company’s products and expertise, or to sunset these and replace them with new
technology? Adjust operational objectives, as well as the exit strategy, to achieve
desired growth given customers’ timeframes.
Situation: A company is developing a companion application that simplifies the use a major company’s software. The CEO is considering how to show this application to the major company as well as at their user group conference. How do you market a companion application?
Advice from the CEOs:
This is an interesting situation. If the major company likes the companion application, the principal question is whether they will want to attach an additional license fee if the companion application is marketed through them. This presents three options:
Research other companies that have developed front end or access products for this company – what was their experience with the major company and did that company demand an additional license fee payment. If so, how did they handle this?
Be up-front with clients, and if an additional fee is required pass these through to the clients. It may be cheaper for clients to pay license fees through this route than to purchase and pay license fees for the major company product.
You may want to take a wait and see attitude while conducting your own research on the situation. See when and if the major company asks for a license fees, and if so, find out whether they are willing to negotiate.
Large companies are often focused on their own offering. Forget the idea that they will market another company’s companion application or front end. Instead focus on your own contacts within the industry and your client base and start talking to them about your application. Generate some experience and traction on your own.
Situation: A rapidly growing US software company has an office in Europe. Prospects for key positions have been flown from Europe to the US for interviews. Two or three good prospects have withdrawn their applications before the company could make an offer, citing cultural incompatibility as their reason. How do you hire foreign personnel?
Advice from the CEOs:
Cultural incompatibility can be an evasive non-response. It is important to dig deeper, perhaps with the assistance of a European-based consultant, to determine what the candidates perceived as the incompatibility. Do this with the candidates that have already rejected the company. Identifying the deeper reason will help to pre-screen future candidates before flying them to the US for interviews.
It is important to have a local leader. This appears to be the individual that the company is attempting to hire. The local leader will then do the hiring for the local office. Employees work for their managers and with their peers and will decide on whether to accept a position based on their feelings of compatibility with these individuals.
Given that the company is attempting to hire the leader of the European office, review and approval of the candidate by the CEO is important. Here are options to explore:
Spend some time studying the culture of the country in which the office is located (European countries vary according to local culture) and adapt the interview style so that it is more compatible with this culture.
Hire a European that the CEO trusts to do the recruiting, screening, interviewing and selection a final set of candidates. Ask this individual for their input on the best way of facilitating a meeting with the CEO. For example, instead of flying candidates to the US, once several candidates have been identified travel to Europe and instead of conducting formal interviews, have dinner with each of the candidates. This reduces the tension and makes the interview more congenial. Consider taking the head of HR with along and both of you having dinner with the candidates and their spouses. Again, this will reduce the tension in the meetings, and you will have two viewpoints on the candidates.
If, after trying the suggested alternatives, it continues to be difficult identifying a good European candidate, an alternative is hiring an American – someone with solid experience managing offices and operations in Europe – to oversee the European operation.