Category Archives: Sales & Marketing

How Do You Improve Infrastructure to Manage Cash Flow? Seven Points

Situation: A CEO wants to improve management of his company’s cash flow. While this is particularly important during times of tight cash and rapidly changing market conditions, the CEO wants to know what others focus on when monitoring cash flow in their companies. How do you improve infrastructure to manage cash flow?

Advice from the CEOs:

  • Track project mix and margin contribution both in part and in total. To accomplish this estimate relative contribution margins of different project types.
  • Adjust sales targets and commissions to emphasize projects with higher contribution.
  • Segment the company’s business model by margins, overhead, and cash flow. Set targets and drive focus on profit per “X” (selecting the proper indicators).
  • Analyze contribution per direct cost factor, for example per engineer on payroll.
  • Develop detailed cash budgets on a monthly or even weekly basis when times are uncertain. For example, inflows and outflows by major category tracking actual cash receipt or disbursement.
  • Start with broad projections, and refine the analysis over time as the company better understands the factors that drive cash flow and profitability.
  • As understanding improves, formulate value propositions for salespeople which reflect the most advantageous cash flow contributors of the business.

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How Do You Manage Major Projects? Seven Points

Situation: A company conducts both engineering feasibility studies and development projects. These are high budget projects and must be managed diligently to prevent cost overruns. What have others done to assure that projects are planned and managed to budget? How do you manage major projects?

Advice from the CEOs:

  • What is the structure of most contracted projects?
    • Most projects are fixed price. They come from feasibility studies which are essentially “marketing” for future sales. Typical terms are 30% up front, with the other 30/30/10 upon achievement of milestones and completion of the project.
  • Get complete buy-in from the customer as part of the initial negotiation.
  • Stay ahead of expenses by billing in time to maintain positive cash flow from the projects.
  • Structure pricing so that custom work is profitable if the project mix is 50/50 custom vs. standard work.
  • Push-back if the customer wants to reduce project cost up-front.
  • Carefully document work papers – above what is required by the contract. Get buy-in for this in advance, during the initial negotiation.
  • Once the feasibility study is completed, revise the scope and deliverables of the work agreement based on findings from the study.
  • Separate the “concept” phase from the execution phase and charge a premium for the concept work.
    • Position this as a value to the customer.

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What are the Basics of a One-Page Sales Plan? Four Points

Situation: A CEO wants a simple, one-page plan for her sales organization to help coordinate the company’s sales and marketing efforts. The objective is to boost revenue growth and market penetration with consistent sales messaging. What are the basics of a One-Page Sales Plan?

Advice from the CEOs:

  • The key elements of construction are: research, identification of revenue sources, and construction of a Road Map.
  • Three Examples of a One-Page Sales Plan are:
    • The Customer Survey-based Sales Plan – Ask the top 15 customers what the company’s current share of wallet (SOW) looks like and what they need to do to gain additional SOW. Use the responses to identify additional revenue sources and construct the Road Map.
    • The Service Extension Sales Plan – Construct a grid representing the company’s products and services currently offered to potential customers – particularly the company’s top customers. Create a separate grid showing services that the company does not currently offer and ask customers what the company needs to do to make those services appealing to them. Use the information gained to construct the Road Map.
    • The Current and Potential Revenue Sales Plan – Construct a grid representing the customers and markets currently served and by what product or service. Look at additional customer markets not currently served. Estimate the size, new business closure rates, and the total potential market opportunity. Use the information gained to construct the Road Map.
  • The advantages of a One-Page Sales plan include:
    • One page simplifies the process.
    • Summary of current and new targets.
    • Easy to track and measure.
    • Increases the chance of success.
    • Key people get on the same page.
    • Filters out undesirable customers.
    • A plan that can be completed and implemented quickly, cost effectively with a high ROI.
  • Additional Observations:
    • The company’s principal challenge is prioritizing business opportunities. Creating an “Ideal Customer Profile” helps to produce the desired result.
    • The company has limited resources to invest in new projects. Using an effective, low-cost tool helps to maximize the impact of investment.
    • The ideal customer profile will change over time based on the business environment and the company’s long term goals.

How Do You Design an Effective Sales Compensation Plan? Three Steps

Situation: A young company is redeveloping its sales department and wants to develop an effective sales compensation plan. What advice do members have for the company on effective sales comp packages? How do you design an effective sales compensation plan?

Advice from the CEOs:

  • The first step is to develop broad outlines to the plan:
    • What salary range is the company contemplating? What can the company afford?
    • What skills beyond the ability to sell will be required? For example, will the sales person require technical skills in addition to sales skills? Or will the sales person need engineering design assistance both in making the sale and in providing service post-sale?
    • Who will be the ongoing contact for the customer once the sale is made? Will this be the salesperson, or will ongoing customer contact will be managed by engineering?
    • The higher the skill level and both sales and post-sale responsibilities, the higher the potential salary.
  • Once the broad outline is decided, set parameters and objectives for the position. The compensation plan should reflect and be consistent with these.
  • Third, establish the behaviors that sales people are expected to exhibit. Any compensation plan should reinforce the behaviors desired by the company.
    • If salespeople are expected to bring in high margin business, focus and scale compensation based on the margin generated by the sale.
    • If an objective is to avoid customers who are bad credit risks, then pay sales people on collected funds rather than on invoiced business.

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How Do You Motivate Employees to Ask for Referrals? Four Points

Situation: A company has been growing nicely, but could always use additional business. Employees are very customer service focused – a key differentiator for the company – but do not ask current customers for referrals. This is problematic because management emphasizes the importance of asking for referral business. How do you motivate employees to regularly ask for referrals?

Advice from the CEOs:

  • Talk to the employees one-on-one to determine what would motivate them to ask for referrals. Also ask what prevents them from asking for referrals. It could be that they do not ask for referrals because they see themselves as customer-focused and interpret asking for referrals as not customer-friendly.
    • The reality is that if it is done the right way, it can be flattering to a customer to be asked for a referral.
  • Conduct a customer satisfaction survey – include a question as to whether the customer would refer the company to other potential clients.
    • If the answer is yes, ask for an introduction to target customers that the company seeks.
  • Think about the approach of a company with a cure for cancer. Imagine that this cure could work for any type of cancer at any stage. The job is to pick up the phone, call people and ask them:
    • First, whether they or someone that they care about has cancer?
    • If the answer is “yes”, would they be interested in a cure?
    • If this were the case, would they have a problem calling people with this message?
  • In fact, the company’s product or service is the cure for the needs of both current and potential clients, just as if they had cancer. An important part of the job is to ask current customers whether they know others who would benefit from the company’s services.
    • If employees don’t believe this, they are representing the wrong product or service.

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How Do You Minimize Hiring while Launching a New Market? Five Points

Situation: A company is planning to expand operations into a new geography. The CEO wants to avoid hiring a new sales person out of the main office as they make this move because he wants the expansion to fund itself. How do you minimize hiring while launching a new market?

Advice from the CEOs:

  • Start by profiling the ideal customer for the new geography.
    • The definition should include business sector, company size, current capabilities in terms of the service provided by the company, and openness to working with outside service providers.
  • Consider a satellite office or franchise option. The two key employees to staff the office will be an engineer and a principal manager for the office. The principal manager will be the sales person.
  • Target initial clients that meet the profile of the existing business but in the new geography.
  • Use what has been learned over the years in the principal location to build an effective culture in the new location. Select key people for the new location that would fit well into the current location.
  • How can the principal manager network in the new location to attract clients?
    • Clubs
    • Organizations
    • White Papers
    • Advertising and Mass Mailing
    • Author a book or be featured in a chapter of someone else’s book
    • Generate partnerships or affiliations for business development

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What is the Role and Value of an M&A Consultant? Four Points

Situation: The owners wish to sell a company. One option is an M&A consultant to assist with the sale. The CEO wants to know about others’ experience. What is the role and value of an M&A consultant?

Advice from the CEOs:

  • The first step is to assess the strengths and weaknesses of a consultant to determine their value.
    • The cost of an M&A consultant is inexpensive relative to the value of the business.
    • Accounting rules and M&A practices of public companies do not always apply to private companies. Valuation is affected by variations in profits year-by-year, so consultants typically use 3 to 5 year historical results for comparison against industry standards.
    • Technology companies may have a different value than service-oriented businesses, particularly if significant IP is involved. Look at the creativity of potential consultants’ solutions.
  • Consultant alternatives:
    • Business brokers, accountants, and valuation specialists can all offer valuations.
    • Investment Bankers who charge an upfront fee may be more strategically oriented. Typically, the more strategic the valuation exercise, the more dollars involved.
  • Be cautious in choosing a consultant.
    • Many business owners spend a lot of time and money with accountants and lawyers when they could save by working with a business broker paid on a commission basis.
    • Business brokers are skilled at getting business sold – however the deal is not necessarily in the best interest of the owner. Brokers are paid by commission and so may not have the best interests of the owner at heart.
  • What should you look for in a consultant?
    • Maximization of sale value with a minimal tax exposure.
    • A consultant who will help the owner figure out what they want from their business and exit – who will help to establish owners’ exit objective, a key to a successful exit.
    • A consultant who will help choose the right team of advisors.

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How Do You Fund Growth Strategically? Five Approaches

Situation: A CEO is looking at a significant investment in capital equipment. Being considered are not just the cost of the investment, but the opportunity cost of not making the investment and the impact that this will have on the business. An additional consideration is the business mix of the company and whether to shift focus from low volume/high margin to low margin/high volume products. What tools have others used to assess these trade-offs? How do you fund growth strategically?

Advice from the CEOs:

  • Review the company’s approach to contracts. It may be desirable to revise the approach in light of the new objective. The switch from low volume/high margin to low margin/high volume products impacts not only production but also marketing, sales, finance and accounting.
  • Price some early new contracts below market to finance the additional equipment expenditures, as well as to test market response to the new offering. This will help to identify additional adjustments that are needed for the new approach and offering to succeed.
  • Structure the financing options for equipment purchases creatively, for example by allowing for participation by customers and investors.
  • Watch changes in working capital at all times and keep it under control. Working capital is a commitment of resources just as is buying equipment or facilities.
  • Consider all resource commitments as investments, regardless of the way the accountants deal with them as in expensing vs. capitalizing these investments on the balance sheet. For example, a marketing program is an investment even though it will show up as an operating expense. Make sure that this can be justified in terms of future cash flows expected.

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How Do You Hire and Retain Good Salespeople? Ten Points

Situation: Many companies struggle to find good salespeople. They find that few of those they hire last very long. Some individuals don’t have the skills to sell, others find the job more difficult than they anticipated, and some leave for better pay at another company. How do you hire and retain good sales people?

Advice from the CEOs:

  • Hiring salespeople is most important job a company or owner has, yet it often receives the least attention.
  • Determine what the company needs the person to do.
    • What skills do they need? Is past experience aligned with the company’s needs?
    • Do they have experience in the company’s market.
    • How much can the company afford to pay?
    • Is the pay offered market competitive?
    • What is the pay scheme: salary, salary plus commission, commission only or commission only following a learning period?
  • Advertise
    • Use internet portals, referrals, ads in the local paper or recruiters.
  • Review resumes for basic qualifications and weed out all that do not meet those qualifications or who lack experience in sales.
  • Test or screen applicants using an instrument such as: Identity Compass, Sales Skill Assessment Scorecard, The Caliper Profile, Sales DNA, DriveTest, SalesGenomix, DISC, Myers-Briggs, Grit or Objective Management Group (OMG).
  • Bring interesting applicants in for interviews.
    • Are they relaxed and comfortable with those who interview them?
    • How do they react to pressure?
    • Do they seem to be a good match with the company culture?
    • Are they comfortable with the company’s philosophy, size, reputation, and products or services?
  • Check references – not just those provided, but talk to companies where they’ve worked in the past.
  • Call customers with whom they’ve worked.
  • Remember that past performance does not guarantee future results

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Should You Combine Sales and Marketing? Five Points

Situation: A company is considering combining its marketing and sales teams. The company’s overall objective is to expand their marketing presence and to bring on new customers. Some team members believe that these two functions are distinct, while others believe that they should work in tandem or even be combined. What do others think about these options? Should you combine sales and marketing?

Advice from the CEOs:

  • The skill sets required to create and operate an effective marketing effort are different from those required to create and operate an effective sales organization.
  • Sales and Marketing are two different sides of the same coin – they complement each other but are distinct.
  • Direction begins with the CEO; however it is imperative to make certain that everyone in the organization buys into both this direction and the organization to achieve it.
  • Some feel that it is not a good idea to have one person covering the role of Sales and Marketing. Sales is tactical while Marketing is strategic. It is Sales’ job to implement the Marketing Strategy and report back what is working and what is not. Marketing’s job is to take the feedback from Sales into account and revise the strategy accordingly.
  • Challenges which can create a constant battle between marketing and sales are due to:
    • Lack of common direction, and
    • Poor or inconsistent communication between Sales and customer on one side and Sales and Marketing on the other.
    • These challenges need to be resolved to have an effective Sales + Marketing organization.

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