How Do You Select Good Business Developers? Five Thoughts

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Situation: A company wants to expand its business development staff. What is your experience, and what has worked best for you in selecting among business development candidates? How do you select good business developers?

Advice from the CEOs:

  • The first priority is your compensation plan for the new person. There are three basic compensation schemes: High Base/Low Commission, Medium Base/Medium Commission, Low to No Base/High Commission.
  • Choice between these options depends on your own philosophy, as well as common practice within your industry. Compensation is central to candidate selection. The CEOs recommended asking candidates about their own preferences for compensation. If they prefer Option 1, don’t hire them – they either lack experience or confidence. Ideally they prefer Option 3 – they can make more money, but cost you little unless they perform. If they prefer Option 2, probe. They may be good but face personal obligations that make it difficult to choose the high risk/high reward option. Ask about past compensation and performance. Verify any claims made during the interview.
  • You want to structure sales compensation so that non-performers leave of their own accord – without costing you dearly in time or money.                                              
  • What are the most important traits to seek in a good B.D. candidate? Understanding of customer’s requirements as well as purchase behavior and understanding of your product or service.
  • How do you find candidates? Use a Head Hunter who knows your industry and competitors. Use written tests to evaluate the individual’s traits. Let the hunter find and screen prospects and present the top 2-3 to you as a test of their skills.

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How Do You Communicate Benefits Changes After Being Acquired? Seven Suggestions

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Situation: A company was recently acquired. The acquirer wants to merge benefit structures between the two entities. While company contributions are similar, distribution of benefits between retirement plans, health plans, and other benefits between the entities varies considerably. How do you approach the staff about the changes in a positive manner? How do you communicate benefits changes after being acquired?

Advice from the CEOs:

  • Ideally, you want to survey employees on what is and is not important to them about their benefits before the package is finalized. This will help you negotiate on your employees’ behalf.
  • Ask the acquirer whether a “cafeteria” benefit program is feasible. This would allow your employees to make choices among benefit options, and to fund these choices either at a company-paid base level or to supplement their choices through payroll deductions.
  • Inform the acquiring company of your state’s regulatory policies on state-specific benefits.
  • Once the new benefit package is finalized, ask for assistance communicating the new package to your staff. Create a simple and concise grid for the program: amount of company contribution: benefits under old program, benefits under new program, use the grid to demonstrate that while the allocation may be different, the company contribution remains the same and the total value of benefits offered is unchanged.
  • If you find that a highly valued benefit is being reduced, consider a short-term subsidy to ease the shift.
  • Be clear about decisions that your employees must make in the new program.
  • If you have access to industry or regional comparisons for like-sized companies, you may wish to share these.

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How Do You Reduce Dependence on a Few Customers? Four Thoughts

Situation: A company has been very successful, but one customer represents over 60% of their sales. To grow, the company needs to diversify its customer base. How do you reduce dependence on one large customer? What are the risks involved? How do you reduce dependence on a few customers?

Advice from the CEOs:

  • The key to getting new customers is to dedicate time and resources to the task. Consider hiring a business development professional – a commission based “hunter” who has experience landing big accounts. You may pay this person a hefty commission for bringing in new business, but diversifying your customer base can be worth the cost.
  • If there is shared ownership of technology co-developed by the company and client and the client does not wish to pursue markets beyond its strategic focus, is it feasible to negotiate rights to pursue this business? The larger client will pursue their own interests, not those of the smaller vendor.
  • Perhaps a win-win can be worked out, but it may be challenging – particularly if the client is concerned that use of the technology in other markets could have a negative impact on the client. Use caution. The easiest way for the client to defend itself from a perceived threat is to sue and bury the smaller vendor through legal expenses. Regardless of who is “legally right,” deep pockets can win through attrition.
  • Consider recreating the opportunity. Create your own adjunct proprietary product with your own software or design talent and use this to expand your horizons. Be aware, the large client can still sue if they believe that your proprietary product impinges on their rights.

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How Do You Choose The Right Strategic Partner? Five Guidelines

Situation: A rapidly growing company is expanding in both its primary market and into new verticals. A number of companies are interested in strategic partnerships. How do you select the right partner in the right space? How do you choose the right strategic partner?

Advice from the CEOs:

  • At the end of the day it’s about a connection with the partnership which extends across both organizations. Look for cultural synergy with the other company. Do your and their managers and employees “click” or are they oil and water? This is a gut assessment.
  • Is the quality of people in both companies complimentary? Is there similar drive for quality and attention to detail? Will technical integration be smooth? Are systems complimentary? At a minimum on both sides need to possess the right skills so that these factors won’t hinder the project. Are sales and marketing approaches compatible? Will teams be able to work together?
  • You need to have strategic commitment across both organizations. Partnerships don’t work if there is only alignment at the top. Executives can’t shove a new opportunity down the throats of those who report to them. There must be excitement about the opportunity across both sides of the partnership. There must be complimentary competencies, capabilities and commitment. Is there a clear understanding of the goals and objectives required to succeed? Reward structures and incentives must be aligned down through the two parties. Conflicts will lead to struggles.
  • There must be a strategic alignment between the two organizations so that both see the partnership as complementing their broader strategic plans. There must be a fundamental strategic win-win. The venture must be seen by each party as core to their business, plans and results. If this isn’t present, the collaboration can collapse when a better opportunity that comes along.
  • Look for some gauge that the partnership is as important to the other party as it is to you. What other partners do they have? Is the size of the opportunity enough so that you are assured of their ongoing attention?

Thanks to Jim Soss of Red Aril for his contribution to this article.  

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Can Marketing Partnerships Work Well? Five Considerations

Situation: A company has the opportunity to form a marketing partnership with another company. The primary potential benefit to the company is gaining access to new customers. On the other hand, partnerships may bring complications. What is your experience with marketing partnerships? Can marketing partnerships work well?

Advice from the CEOs:

  • Marketing partnerships can certainly work, provided that both parties see benefit to the relationship, and –  more importantly – both parties are committed to make it work.
  • Clearly define boundaries with the partner. If either company can perform a particular service, whose customers are who’s? Is there alignment throughout the partner’s organization regarding the partnership? Are their conflicting priorities within different branches of that organization? Test the waters ahead of time and assess how these will potentially impact the partnership.
  • There are potential pitfalls to take into consideration. What is the in-house/outsource attitude of the partner? If there are strong voices for in-house production or service provision, these will not be supportive of the partnership.
  • Monitor the quality of the partnership over time. Successful partnerships are based as much on friendly cordial relations as on business priorities. Are your business cultures and ethics compatible? Who is the champion for the partnership on the other side? What will happen if the champion leaves? Is there a backup champion?
  • Build an exit strategy into the partnership that will allow you to leave gracefully and mitigate financial or good will consequences if the partnership sours.

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How Do You Evolve from Doer to Leader? Four Thoughts

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 and to focus on planning for the future. How have others evolved in their leadership roles? How do you evolve from 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 continuing 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.

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What are the Three Clarities that Every Start-up Needs? Three Points

Situation: Starting a new venture is a daunting task. You must determine market need and land your first few key customers on a tight timeline and budget. What are the most important areas of focus for the start-up CEO? What are the three clarities that every start-up needs?

  • The answer lies in the Three Clarities.
  • Clarity #1 – Deep Knowledge of Customer Pain Points. Your eventual success is not about the technology – it’s your ability to understand and address the needs of your customer. Research and talk to potential customers. Ask them about their pain and problems. What makes their job or lives difficult? Learning these facts takes time, patience, persistent questioning, and open listening both for what they are saying and what they are not saying. Once you have a clear idea about their need and can succinctly define it, you must determine whether your capabilities can address the customer’s need. Avoid talking about your product or solution until you clearly understand the customer’s need.
  • Clarity #2 – Understanding the Purchasing Behavior. Once you have identified your target customer, their need and your ability to meet that need, you must understand their current purchase behavior. Have they ever bought from a startup before? What happened when they did? Are they happy or unsatisfied? Where are the gaps in satisfaction? Particularly for a start-up without established credibility, it is critical to identify those purchasers who will take the risk to buy from a new company. From what you find, determine how you will frame a personal relationship with the likely buyer – how you will frame both your solution and the buying experience. Build a psychographic of the buyer so that you can quickly determine likely customer candidates.
  • Clarity #3 – Understanding the Decision-Maker’s Sense of Urgency. Who makes the purchase decision? In B2B sales is it the CEO or someone further down the organizational chart? Who approves the purchase budget? Why now? Do they have their ”hair on fire” so a decision must be made now? The essential question is: what are the alternatives to not having your solution?

Thanks to Naeem Xafar of Blitzerrmobile.com for his contribution to this article.

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How Do You Change Culture Without Losing Key People? Five Points

Situation: A mid-sized Company is more than three decades old. The challenges are modernizing operations and updating company culture to keep pace with both competitors and customer expectations. The company also needs to diversify into new growth markets. Can they change the culture of the company without losing key people? How do you change culture without losing key people?

Advice:

  • Let people know that you value them. Consistently express your appreciation for what they do for the company, and don’t blame them for not being perfect. For them to be willing to grow as company culture changes, they need to feel safe – to understand that a change in culture does not mean the loss of their job.
  • Give employees consistent face time. Ask questions and seek their solutions instead of proposing your own. Involve them through collaboration. Tolerate the fact that their solutions won’t be exactly like yours.
  • Pick your battles. Select what you want to change and conserve your emotional capital. Think about what’s important and what’s not before you intervene. Let minor issues slide as long as they don’t impair schedules or performance.
  • Maintain an open door to all levels of the company. However, when an employee comes in with an issue or complaint, defer judgment to their manager. Never undercut your managers.
  • Your most important strengths will be patience and understanding. Stay mindful that change can be threatening, particularly if employees find it hard to see the big picture. Keep your themes and messages simple and repeat them as often as necessary to keep everyone focused.

Thanks to Cameron Tuck of ImperfectCEO for his contribution to this article.

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When Do You Focus on the Plan –  When Do You Adjust? Four Guidelines

Situation: The dynamics of an early-stage business require balance between focus and opportunity. Both are important in a dynamic business environment. The challenge is in the balancing act. When do you focus on the plan, and when do you adjust?

Advice:

  • Never allow friends to become statistics. Think of your customers as your friends. Often the most loyal and vocal friends were early adopters and got the company where it is today. They remain important participants in the conversation and should always be in focus.
  • When using social media to communicate to your audience, remember that this is a face-to-face conversation. This is a key point of focus. Remove as much friction from online interactions as you can. Make it as easy as possible for people visiting your web site to buy. This requires both live interactions with users and attention to detail. If a question keeps coming up, answer it; put the answer right up front on your web site where it cannot be missed. We’ve all made hundreds of tweaks, each tiny. Each has removed a point of friction. As the company grows it is easy to lose sight of these details. Never lose sight of details.
  • Much of what businesses face is transitory. It is important to stay nimble and not get stuck fighting the last skirmish. Early in our business history we found that a subscription service was difficult for institutional users like purchasing departments in schools to understand. We focused on fixing this.
  • Be careful not to chase bright shiny objects – opportunities that take you outside your principal market competence. Would you try to modify a hammer to put in screws? One company’s principal product is a communication device for kids with verbal challenges. Some have suggested that it could also be a teaching device. In the future there may be room in the company’s plan for a teaching device, but this will be addressed as its own market and application when the company is large enough to diversify.

Thanks to Phil Bookman of Assistyx for his contribution to this article.

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What Are The Keys to Negotiating an IP Acquisition? Six Considerations

Situation:  A Company is interested in acquiring either the intellectual property (IP) of another company or the company itself. The target is a minor division of a larger parent company. The CEO contacted the parent and confirmed their interest in a deal. What are the keys to negotiating an IP acquisition?

Advice from the CEOs:

  • It is essential to assure your rights to both current IP and future enhancements. This applies whether you or the parent is the final holder of the IP. Look for clear language as to what constitutes base IP, derivative IP and extensions of the IP. You want to preserve your interest in future derivatives and extensions that you create.
  • There is a material difference between your position and that of the parent of the IP. If the parent retains the IP, they also gain certain rights to IP extensions based on the current IP. If you own the IP, their potential rights to future IP are lost. If the parent feels that the IP has strategic value – whether or not they are currently taking advantage of it – this will be one of the more difficult aspects to the negotiation.
  • Are there options besides acquiring the IP? The parent can grant a fully paid license to the technology, with access to the people and assets, waiving residual rights to future IP extensions, and no restrictions on transfer. Another option could be a one-time royalty fee, which is a perpetual license.
  • As you perform your due diligence, try to get a sense of the parent’s motivations and concerns for entertaining your interest in the acquisition. This will help you to frame a deal that works for both parties.
  • If the parent has been an active licensor or seller of IP, look for lawyers who know the company. Try to secure one of these lawyers as counsel for your negotiation.
  • From a liability standpoint, it is better to buy or license the IP and technology than the company. Liability travels with the company. Part of your negotiation will be who inherits any carry-over liability.

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