Category Archives: Strategy

What Impact Will Rising Interest Rates Have on Business?

Situation: A CEO notes that the national debt has nearly doubled over the last 8 years and the Fed is talking about raising interest rates. It’s not clear what impact the debt, or rising interest rates will have. Has this impacted your business and how are you coping? What impact will rising interest rates have on business?

Advice from the CEOs:

  • Impact on business and customers.
    • The prospect of either rising interest rates or taxes increases uncertainty – customers are taking longer to make purchase, expansion and other decisions.
    • Companies are not spending the cash that they have out of concern over possible future expenses or the possibility of a downturn. Large companies have trillions of dollars of cash on hand. Some of this is held off-shore because of the tax consequences of repatriating the funds.
    • Lack of consumer demand holds back investment in production expansion.
    • Feeling of loss of control.
    • More concentration of wealth in fewer hands.
  • Other impacts
    • More people, old and young, are opting out of the business economy.
  • What are you doing to cope?
    • More involved in collections to keep this under control.
    • Delayed payments from big customers are part of the problem – conservative financial management.
    • Manage liquidity and cash – cash is king!
    • Adjust lifestyle and delay purchases – for example buy smaller cars.
    • Scrutinize contract terms – especially AR.
    • Scrutinize our business model. For example look at subscription models or Great Game of Business models.
    • Utilize those who are normally unemployable but trainable for repetitive task jobs. They work hard and produce good work.

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How Do You Test a New Service Delivery Model? Seven Thoughts

Situation: A company targets mid-sized clients with pricing that is similar to its competitors. They believe that their principal differentiation is their relationship with their clients. The problem is that this is also what all of their competitors claim. They are considering testing a new pricing concept – a monthly fixed fee that will provide a pre-negotiated set of services at a favorable discount, with a weekly presence in their clients’ offices. How to you test a new service delivery model?

Advice from the CEOs:

  • This looks like an appealing concept. With this arrangement there is no clock ticking and the client may view your various services as a more open menu of options available to them.
  • Another company has a similar relationship with their CPA firm and have both enjoyed this and are using more services from this firm.
  • Just a regular presence in the office is worth the retainer.
  • Another appeal is that this allows regular participation in management and Board meetings.
  • Another CEO offers a similar program for her professional service company’s clients and have found it successful.
  • Since there appears to be strong support for this model within the group, what is the best way to implement this new offer?
    • Negotiate an initial monthly rate for a set level of services as a retainer without a clock.
    • Agree to a periodic review and adjustment of services and pricing – perhaps quarterly – based on the time and services that have been provided during the preceding period.
  • How do you sell this program to those within your own company who are skeptical?
    • Try the program with three clients on a limited trial basis and measure it.

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How Do You Boost Morale in a Branch Office? Five Solutions

Situation:  A company started a new branch office last year. This office started with three people and has remained at that level with some turnover. Morale is low because the branch office team doesn’t feel supported by the home office. The CEO is concerned that this could kill the branch office if it is not fixed.  How do you boost morale in a branch office?

Advice from the CEOs:

  • The problem is most likely the home office, as they assert. There have been few visits from home office personnel – particularly the company president. In addition, they are being criticized in weekly reviews for not hitting the same metrics as the company’s established operations.
  • Remediate this situation by scheduling weekly executive visits and monthly visits by the president until things are up and running and there is a track record of profitability.
  • Clarify your expectations to everyone – this is a new office running to different metrics until they establish themselves. Once they are established, they will run to the same metrics as everyone else. Coach the heads of other divisions that the new office needs support, not criticism, until they establish themselves.
  • Allow the branch office to bid low for market share until they are established in their new location for a period – at least 6-12 months. Create a different set of metrics for a start-up office, and review these during weekly sales meetings.
  • The role of management is to show the colors in the new location and manage peer feedback from established locations. Help them win! Establish start-up metrics like lunches with potential clients to establish relationships. Since the branch office is generating business for other locations, create separate general performance metrics from territory specific metrics for this office and show both in staff meetings.

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How Do You Create Management Alignment? Five Suggestions

Situation:  Top managers of a company are all very experienced.  All want to drive the company – but each in their own way. Overall objectives are not significantly different but the path forward varies considerably among the managers. Is this situation common? Should the CEO be doing things differently? How do you create management alignment?

Advice from the CEOs:

  • Strong differences among strong leaders are common. This is not necessarily a cause for concern or a problem. Rather, it means that you have a lot of options to help address opportunities or solve issues.
  • When you hire bright, talented people with good ideas, there will always be differences of opinion. This is healthy. You need this, particularly when sailing uncharted waters.
  • As CEO, sometimes you need a strong critic on your team to moderate your inclinations. Just because you are CEO doesn’t mean that you always have the answer. Rather, allowing the answer to come from the team strengthens the team as well as commitment to execution.
  • How do you leverage the strengths of this team to create the best future for your company?
    • First, assure that the broad roadmap is clear and that everyone agrees on this.
    • When addressing a choice, opportunity or challenge lay out the situation in broad terms. Allow all of the managers their say, and facilitate the discussion to identify commonalities and differences. Confirm the commonalities, and dig into the differences to understand the perspectives of each. Digging into differences can identify roadblocks as well as alternative options. Keep the discussion open instead of trying to drive toward a single, quick solution.
    • Summarize the options presented. If there are multiple alternatives, do a ranking exercise to see if one rises to the top. Be sure to credit the managers for their ideas and creative input.
    • In each situation there is a final decision maker. All must respect that after you’ve listened there will be a decision and that decision will be executed. Allow them to execute and focus on results.
  • Be consistent and always be who you are.

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How Do You Create a Bias for Action? Five Recommendations

Situation:  Much of a company’s work is non-standard. Each customer’s solution is individualized. Finding the best solution in each case frequently requires a stretch. The CEO’s approach is to simplify the problem to its essential components and from this develop a unique solution. However, several of the staff responsible for developing solutions shy from this approach when confronted with a new challenge. How do you create a bias for action?

Advice from the CEOs:

  • Company culture is defined by the CEO. In this case you wish to establish a culture of innovation. This might be defined by the phrase “we don’t do simple things.” This means that you need innovators or creative people in the problem solving positions.
  • Consider breaking the roles apart. You need experienced and balanced but creative people to develop the unique solutions. People like yourself. On the other hand, you need methodical, reliable people to put the solutions into effect. These two roles usually require teams of different personalities. They don’t conflict, but are different.
  • Look at Landmark Worldwide as a resource for your staff. Landmark specializes in teaching people to expand their horizons. This doesn’t mean changing who they are, but facilitating their ability to team with others with different but complimentary talents to achieve original and effective results.
  • To help the team understand what you want to accomplish, bring in an organizational development consultant to help communicate your vision and assist with culture transformation.
  • It is important to recognize that these individuals are likely as uncomfortable with this situation as you are. This realization helps to craft a win-win solution that will strengthen the company.

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How Much Do You Share with a Potential Acquirer? Nine Points

Situation: A company has been approached by a larger company that may be interested in acquiring them. The prospective acquirer is a current customer. Absent an extraordinary offer, the company isn’t interested in selling. Nevertheless, a conversation could be valuable. How much information about the company should the CEO share now? How much do you share with a potential acquirer?

Advice from the CEOs:

  • The key term here is potential. At this point, there is no commitment, and you really don’t know the other company’s motivation. As you start this process, don’t share confidential details about your plans or prospects, or your pipeline. Just broad information. If things get serious, slowly open the kimono.
  • Make sure that you have an NDA in place covering anything that they ask you to disclose for this possible transaction.
  • Given your current situation, a standard offer probably won’t be appealing, so be open to a creative option.
    • Decide ahead of time what your price is. If they are in the ball park, keep talking.
    • For example, Say you want $XX. Would you be attracted to 50% of that now, 50% later? Under what terms?
  • Put a low valve on future payouts, particularly if you are not in a position to call the shots.
  • Be open and creative. You never know what can happen. You could sell to them now at the right price. Then, if the acquisition doesn’t work out, buy the company back in 2-3 years at a discount!
  • If you get into higher level negotiations, employee retention will be critical. Make provision for this as part of the deal.
  • Hire a disinterested professional negotiator you who you can trust.
  • If things get serious, bring in an investment broker to assist. It will cost you 5% but they are helpful in the negotiation and could bring in competing suitors to up the ante.

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How Do You Focus Your Sales and Marketing? Eight Thoughts

Situation: A company has a technology road map and a flexible set of technical capabilities. To date they have elicited broad interest from a variety of different markets. They currently don’t have the resources to pursue a large number of different markets, and will likely need their next round of funding within the next year to year and a half. How do you focus your sales and marketing?

Advice from the CEOs:

  • A race to generate interest from a number of markets is a valid strategy at this stage of your development; provided that you raise or generate the cash to survive. This caveat describes your critical challenge – determining how long you can afford to maintain and fund a broad strategy.
  • Look at your burn rate and timeline. Pursue options that will generate cash before your next round of funding. Your top objective is to validate your ability to generate revenue prior to your next round.
  • You haven’t yet found the fish. You are fishing and have nibbles but no bites. Look at what your people are doing and start to eliminate options that are less likely to pay off both short and long-term.
  • To preserve development cash, create a new rule. Any project that you accept must come with development dollars. This will eliminate some smaller prospects and targets but will help you to focus on others which are more immediately promising.
  • When one company was in this position, their rule was that the first PO gets the engineers. No PO, no commitment of resources.
  • Another’s company’s policy is that they don’t work for free.
    • A softer version is to give the prospective client 30 days to produce an LOI for the proposed project or you will go elsewhere.
    • Even better is an LOI and $50K up front.
  • A third company’s strategy from the beginning was always to hunt for elephants – even when they had no money. This has worked well both short and long-term. It represented the level of faith that they had in their technology and capabilities.
  • The team needs to hear this message from you.

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How Do You Evaluate Marketing Partners? Six Observations

Situation: A company is interested in partnering with a larger company to market a suite of services. They have identified two good candidates. They haven’t worked with partners in the past and are curious about how other companies work with marketing partners. How do you evaluate marketing partners?

Advice from the CEOs:

  • The danger of working with a single marketing partner is that all of your eggs are in one basket. Your success in this relationship will depend upon the success of the marketing partner. This, in turn, will depend on the amount of attention that they pay to marketing your services, and on how actively their sales department sells your services. The danger to you is loss of control over the marketing and sales process.
  • Another company had a similar situation several years ago. At that time, the advice of the CEOs was to not select an exclusive partner, but instead to work with two different marketing partners, even though they are competitors. The company followed this advice, and it has worked like a charm.
  • Start with a position that you want a non-exclusive relationship. If a potential partner insists on exclusivity then ask for fixed guarantees of business and fixed minimums.
  • Other companies around the table work in partnership with competing companies all of the time. All of the partners value the services that these companies provide, and the relationships are harmonious.
  • If a possible partner insists on an exclusive relationship, another alternative is to split territories and supplement your agreements with most favored nation clauses.
  • Going back to the original question, provided that the terms offered by the marketing partner/partners are favorable, you won’t really know how they will perform until you establish a relationship and monitor it over time. Exit clauses and conditions will be an important part of any marketing agreement.

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Do you Merge, Sell or Keep the Company? Nine Factors

Situation: A company has been approached by an international firm with an existing West Coast presence that is interested in expanding its US operations. A Letter of Intent is in place but will expire in weeks. The LOI is of interest because the company has cash flow challenges. The CEO seeks advice on whether and how to proceed with a sale or merger, or whether to continue as an independent entity. Do you merge, sell or keep the company?

Advice from the CEOs:

  • This is a personal decision. Do you want to be your own boss or to become an employee? It really is a question of what you want.
  • If you are burned out, there are advantages to having a boss, at least in the short term. However, 2 to 3 years out you may tire of this.
  • While cash may be tight, you can address this with other measures.
    • Can you save money by reducing office staff (hours or people) short-term until your cash flow improves?
    • Talk to private investors – offer up to 9% interest on a note. The company is a going concern and therefore likely to be able to pay off the note. You may be able to negotiate a note at a favorable rate.
    • Negotiate a 5 year note, with interest only payments for the first 3 years; sweeten the deal with an offer that if you get new business worth $X during the period of the note, you pay them Y% of upside.
    • You have revenue-producing business and receivables. Factor your receivables to raise the cash that you need. Adjust your prices to cover the cost of the factoring discount.
    • If you have the margins, or can increase prices to produce the margin, offer discounts for early payment of accounts receivable.
  • If you decide to sell, avoid a contract that takes away your flexibility to maximize your future payouts.
  • Can you be confident that the buying firm will survive until your payouts are completed?

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How Do You Evaluate Business Opportunities? Five Guidelines

Situation: A company is planning for growth and is considering several business opportunities. None are fully baked, but broadly speaking the CEO is interested in a list of pros and cons that will help her team to evaluate the opportunities before them. What questions should the management team be asking? How do you evaluate business opportunities?

Advice from the CEOs:

  • Which of the opportunities do you find exciting? Which opportunities ignite your passion? Which opportunities would be exciting to pursue on a daily basis? Use this to create your first cut.
    • When you meet with your team, prompt discussion by asking: why do you come to work each day? What drives you now?
    • Now look at each of the opportunities that you are considering. Which opportunities best reflect your answers?
  • Rank the opportunities in terms of probability of success. For each, do a SWOT analysis – how does each address your current strengths, weaknesses, opportunities and threats? How could each make the company stronger or address potential threats that you foresee?
  • Which opportunity provides the best segue to your long-term strategic opportunities over the next 2-3 or 3-5 years?
  • On a personal basis, how important is power and authority to you? What about the personal and work time that is available to you? What is your role, as CEO, in each opportunity? For each opportunity, does this role reflect your personal priorities? Finally, what is your ideal opportunity, in personal terms?
  • Once you have evaluated all of your opportunities – including your personal ideal opportunity – perform a weighted scoring of the opportunities to test your assumptions. Among the opportunities available, which is closest in score to your ideal opportunity?

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