Category Archives: Strategy

How Do You Bridge a Short-Term Cash Crunch? Three Options

Situation: A technology company has grown rapidly over the last year. Two customers representing a significant share of business have temporarily reduced orders for one quarter, resulting in a cash crunch until these orders resume. How do you bridge a short-term cash crunch?

Advice from the CEOs:

  • Do you feel relatively secure that once the quarter is over these orders will resume and your cash crunch will be resolved? If so, ask your bank to increase your cash line. Explain the situation, the companies involved, their order history and the expected timing until you get your next payments. A letter from each company saying that they plan to resume orders will help your case. Be aware that the bank may request a personal guarantee to substantially increase your credit line.
    • If you have to personally guarantee a line of credit extension, make sure that you see this as an acceptable risk, and that you can trust the customers to come through with their orders as promised.
  • If you produce products or subcomponents critical to these customers, ask whether they will extend a bridge loan or make a payment against future orders to assure their place in your production queue once their orders resume. You may have to escalate this request within the customer companies if you are currently dealing with purchasing personnel or lower level management.
  • Can you redeploy excess labor to other projects during the cash crunch? You will have to do this carefully so that you can rapidly redeploy these resources to priority projects once a large order comes in from one of these customers.

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How Do You Introduce a New Solution Without Asking for a Change in Behavior? An Approach

Interview with Kiran Kundargi, CEO, Apsora

Situation: A company seeks the best way to introduce a novel health monitoring solution. The challenge is that people don’t want to change their routines. If you can creatively fit into existing routines with minimal behavior change this facilitates adoption. How have you introduced a new solution without asking for a change in behavior?

Advice from Kiran Kundargi:

  • As the population ages health care costs rise. A solution that can reduce healthcare costs while allowing more seniors to remain in their homes this can significantly reduce health care costs. The sticky part is making this solution a part of the elder’s and their family-caregiver’s daily routine.
  • Our solution is to seek the low hanging fruit – post-hospital discharge recovery at home. Seniors who have been discharged from the hospital following treatment or surgery often receive strict instructions to take their medication, adjust their diets and engage in regular exercise. This requires changes in the senior’s routine, and non-compliance is a leading cause of readmission.
    • Effective October 2012, Medicare will stop paying hospitals for readmissions that it deems avoidable. This forces hospitals to take a more active role in follow-up care following discharge. Our online health monitoring service, Nclaves, provides a low cost solution.
    • Nclaves facilitates communication between the elder and his or her children and grandchildren using Internet and hand-held technology. This enables family to help their senior comply with post-hospital instructions.
  • We approach this opportunity in four phases.
    • We start by using the Internet. We have made our solution easy for physicians and hospitals to find. Internet activity is supplemented with presentations to monthly meetings in hospitals. By acting as an information resource on the change in Medicare regulations, we can introduce our solution to those who will suggest it to patients. Early adopters will enable us to build case studies demonstrating both technical viability of our solution, benefit provided to patients, and impact on readmission rates and cost of care.
    • Next, we will approach large employers. Employers understand that increases in hospital costs will adversely affect the cost of insurance benefits for their employees. We want them to include Nclaves as part of their employee health and wellness programs.
    • The third step is insurance companies. These companies have the leverage to specify and suggest options to both patients and providers.
    • Our final step is broad market acceptance. Once both payers and providers are on-board, we will be ready to work through alliances, the Internet and broader public relations and advertising campaigns to build market acceptance.

You can contact Kiran Kundargi at kkundargi@nclaves.net

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How Do You Update Your Accounting System Without Losing Data? Four Thoughts

Situation: A company has used the same accounting system for over 10 years. The current system produces information quickly and easily, and empowers management and sales to make good decisions. However, it doesn’t respond to customer information requests as well as newer packages. What are best practices for updating your accounting system without losing data?

Advice from the CEOs:

  • One option is to keep your legacy system, but migrate to a user-friendly platform designed to work with a CRM system that can better meet customers’ needs.
    • Keep both systems up live until you no longer need the old system, except as an archive of your historic data.
    • Be sure to cross-train other employees so that your current system doesn’t become worthless if your key administrator gets hit by a truck.
  • Before you decide which direction to pursue, ask what your employees like the current system.
    • What do they find most useful?
    • What accounting features do you need to support your growth plans?
    • What key functions of the current system would you have to emulate?
    • How expensive is it to maintain your current system?
  • Is your business so unique that no off the shelf alternatives exist?
    • Could you adopt an 80-90% solution and customize the rest?
    • It may be difficult to do this on your own. Look for a consultant with a background in accounting applications to analyze your needs.
  • If you feel that you must make a change, but are not ready to do so, develop your solution gradually.

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How Do You Grow Without Losing Control? Five Factors

Interview with Kelly Masood, President, Intilop, Inc.

Situation: An emerging company is gaining traction as it moves from early adopters to mainstream. They need to continue to develop new technologies, while bringing down the cost of existing products. This is a delicate balancing act for a small company. How do you grow without losing control?

Advice from Kelly Masood:

  • It’s important to maintain momentum and continuous improvement. From a practical standpoint, we do this by applying common sense to our technical discipline. Common sense, here, is a relative term. It isn’t really taught in school at any level, but is gained through experience. This is the true expertise of the CEO.
  • The delicate part of the balancing act is the mix between developing new technologies and building an effective business model. An effective business model is built on innovative and cost effective products and sustainable profitability. Since new technologies go through development stages, it is important to create break points where you transition from development to productization to marketing and sales. Continuous improvement in existing products based upon customer feedback and new product ideas for future developments are crucial aspects of a successful business model.
  • If you want to minimize outside funding and investment you have to watch cash flow and development expenses. Revenue from existing products is the key. When you don’t have resources, you become resourceful. If the team is dedicated to producing innovative and good products that make business sense, they figure out how to accomplish it without cutting corners.
  • To mature your team over time you must keep them motivated, occupied and adequately compensated today while inspiring them to make it big in the future.
    • You maintain interest through the pursuit of new technology and the learning associated with it. Engineers like to see their designs work and turned into a product that creates value, is used and is appreciated.
    • Keeping the team occupied and challenged starts with choosing the right talent in the first place and then getting them to focus on building great products.
    • Compensating them with a fair salary means locally competitive rates, sweetened with stock options to provide great upside potential.
    • For us, retaining great employees is about enabling them to innovate products that will find broad market acceptance.

Key Words: Early Adopter, Mainstream, Develop, Cost, Continuous, Improvement, Common Sense, Business Model, Cash Flow, Expense, Price, Retain, Employees, Off-shoring

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How Do You Revamp Your Lead Generation Process? Three Keys

Interview with Mari Anne Vanella, CEO, The Vanella Group

Situation:  High tech companies need a more effective, higher level approach to prospect accounts. This means capturing sales intelligence more meaningfully, and aligning marketing approaches with customer needs based on prospects’ experience. Traditional transactional lead generation methods must be replaced by a deeper methodology that enables salespeople to speak to the personality of the business buyer. If all of this is true, how do you revamp your lead generation process?

Advice from Mari Anne Vanella:

  • Executives are so busy that their schedules are overloaded. If you want to reach them, you must engage them at a meaningful, more situationally fluent level.
    • Executives aren’t disinterested in new vendors and opportunities to gain efficiency or save money; they’re just hard to reach. Therefore, it is critical to develop sufficient knowledge prior to initial contact so that you can quickly engage the prospect, and equally quickly re-engage them on follow-up calls as they progress through your sales pipeline.
  • Companies must mature beyond volume-based marketing and sales. The traditional model calls for up to three or so telemarketing center contact attempts to a large number of leads.
    • Current research indicates that 80% of leads are matured into prospects after 5 or more contact attempts. More effective approaches call for 7 to 10+ contact attempts to reach busy executives and managers. This requires greater skill and persistence than the traditional approach.
  • Re-engineer the process through which you contact leads and follow-up on prospects. Most deals fall out of the pipeline through mismanagement.
    • The focus of sales and marketing transformation should be on new metrics to boost success rates, as well as communication skills and pipeline management.
    • It is critical to understand the individual buyer’s purchase process. Sales close at varying rates. This requires listening closely to the prospect’s timeline and the next steps in his or her consideration process. If you agree on a follow-up date, honor it. Attend to the smallest details.
    • A lost deal calls for a deeper de-brief than a simple note of “sale lost” or “lack of prospect interest.” Marketing needs to understand why deals don’t happen to optimize processes.
  • The implication of these observations is broad. Most sales and marketing teams are held strictly to results, expressed as numbers that can be taken to management and the Board. This serves a function, but if it dominates sales and marketing processes it may undermine results. Understanding the realities facing prospects calls for a more technical marketing organization and an empathetic customer approach based on an intense understanding of the prospect and their needs.

You can contact Mari Anne Vanella at marianne@vanellagroup.com

Key Words: High Tech, Customer, Intelligence, Methodology, Revamp, Lead, Generation, Prospect, Volume-based, Telemarketing, Pipeline, Follow-up

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How Do You Know Your Team Can Handle Planned Growth? Six Steps

Interview with Gene Tange, President, PearlHPS

Situation: An acquired company is poised for dramatic growth. The corporation that acquired them has questions about the current team’s capability to realize planned growth, and achieve their financial and operational targets. How can they assess whether the existing team is up to the task?

Advice from Gene Tange:

  • Think of this as an assessment process that accurately predicts the ability of the leadership team to realize planned outcomes while maturing key business processes. The leadership team is tied to both financial and operational outcomes that cover competence, continuity and alignment. This enables proactive management of organizational changes to support planned growth of the business. A real life example will illustrate the steps of the process.
  • The starting point was whether the current CEO had the right compliment of skills and capabilities to lead a high performance team. Could this leader see beyond the current stage of growth in terms of the talent and processes required for growth? Could he build a high performance team, align them and retain them to achieve results?
  • The CEO then laid out the future state organization. The essential question was whether he had teams of leaders in each of the key functions to assure success.
    • Specifically, the Product Development Team generated a competitive analysis comparing the current product with all others to assure a 2 year competitive advantage.  They were also tasked with improving cost of manufacturing.
    • The Sales Team installed an integrated CRM system to support large orders, including internal cross functional communication to increase customer visibility and satisfaction scores.
    • The Operations organization moved from a traditional batch manufacturing process to a state of the art, focused factory organization, eliminating WIP, reducing operational costs and increasing the speed of order to delivery.
    • Finally, the Finance and Administrative functions were assessed.
  • As a result, in 16 months the company grew 5x in revenue and increased margins. Time from order to delivery was reduced by 16x. Headcount was reduced while shipping volume increased by 5x.
  • A disciplined assessment process that predict business outcomes and ties your talent to the bottom line can provide a significant advantage in today’s highly competitive environment.

You can contact Gene Tange at gtange@pearlhps.com

Key Words: Growth, Experience, Assess, Capability, Processes, Predictive, High Performance, Competence, Continuity, Alignment, Organization, Structure, Manufacturing, Sales, Marketing, Customer Relationship, Finance

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When Do You Decide to Expand Your Office? Three Options

Situation:  A company signed a 3-year lease a year ago, assuming that this would accommodate their needs. Growth has been much more rapid than anticipated, and they’ve outgrown the space. Should the company expand or move now and run the risk of over-purchasing new space, or should they wait until actual growth requirements are more apparent?

Advice from the CEOs:

  • The answer depends on the risk that you are willing to take as a company. When you signed your lease you took a risk based on your expected 3 year needs. The current situation is no different. Analyze your current growth trajectory and take a comfortable level of risk.
  • Options will vary depending on whether the move is relatively high or low cost, and what space configuration you need.
    • Determine whether you have a high or low cost to expand or move – equipment, communications, wiring, etc.
    • If your costs to reconfigure space and move equipment are low, then the risk is relatively low beyond your new lease obligations.
  • Talk to your landlord.
    • With the amount of space currently available in Silicon Valley and the Peninsula, your landlord may have alternatives that are attractive to you.
    • Look for a solution that allows you the space you need under a comfortable risk scenario, but which also gives you options to expand into adjoining space as need arises.
  • Also talk to a broker about what kinds of space are available at what rates, and what incentives may also be available.
  • Short-term, consider leasing excess space from your neighbors as you consider alternatives.

Key Words: Office, Space, Lease, Growth, Risk, Cost, Landlord, Broker

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What is Your Opinion of Maintenance Agreement Models? Four Thoughts

Situation: A plumbing company wants to broaden their market and is intrigued by building maintenance agreement models. They have looked at one franchise offering that would cost $120K in purchase and monthly fees the first year. The up-front investment per new customer would be $10-50K with no guarantee of closing a maintenance contract with the customer. What are the pros and cons of maintenance agreement models

Advice from the CEOs:

  • Don’t look at just one company’s maintenance agreement model. Investigate companies that provide similar services.
    • Ask the company who their principal competitors are, and what companies have similar or differing models.
    • Investigate each of the competitors. One of them may be more appealing for a company your size.
    • If the company is unwilling to share this information, be VERY careful.
  • You should be able to talk to the franchisees since you would not be competing in their territories. Tell them you are evaluating the company and its model and want to learn about their experience. Ask about training, processes and procedures, and any upside or downside that the current franchisees have experienced.
  • As you evaluate this and other offerings, calculate worst case scenario in terms of risk and expense. Is this something that you can afford? If not, the model doesn’t look good.
    • Can you write in exclusions to your maintenance agreements to limit your liability for large ticket items?
    • Analyze the potential of your market. Conservatively estimate the number of clients that you could generate, and what you would earn. Do a cash flow analysis of your upfront expenses, risks and revenue.
  • Watch for red flags in the agreement models. For example, in one model the vendor is responsible for the maintenance of a building; however, they can’t require any tenant to use their services. This means that they would effectively be guaranteeing the work of other companies, or the impact of this work on the building’s services, with no control over the quality of the other companies’ work. This could expose them to significant potential losses.

Key Words: Maintenance Agreement, Franchise, Investment, Pros, Cons, Red Flag, Due Diligence, Worst Case, Scenario, Market Potential

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How Do You Increase the Strategic Focus of a Board? Four Guidelines

Situation: A company has a board which is uncomfortable with strategic issues. Faced with a strategic decision, they gravitate quickly to tactical issues. What can you do to increase the Board’s strategic focus?

Advice from the CEOs:

  • Change the focus of your Board meetings.
    • Change the agenda of Board meetings. Start with a review of the Strategic Plan and progress toward meeting the objectives of the Plan. Over time, input to the Plan grows as Board members become more comfortable with the strategic issues addressed in the Plan.
  • Develop a Board Charter and annual objectives for the Board as a whole.
    • If you have an individual on the Board who models or nearly models the behavior that you wish to see in the full Board, ask this individual chair a Board subcommittee to work on the Charter. Devote time at Board meeting to discussion of the subcommittee’s recommendations.
    • Develop annual objectives for the Board, including both global objectives and specifically how you want individual members to contribute. Outline your most important expectations of the Board, what you need from them, and ask them to develop objectives to meet these needs and expectations.
  • Start to proactively educate your Board on how they can be most helpful to the company.
    • Gather benchmarking data from similar companies. Educate the Board on best Board practices.
    • Look at the best performing companies in your industry – preferably organizations that do not compete directly with you – and ask to attend their Board meetings as a guest. You may want to take one of your own Board members along. Look for practices that will augment your meetings.
  • Augment the Board with individuals who will help to steer it toward the strategic focus.
    • As you begin to bring the right talent to the Board, recommend the creation of Board subcommittees to work on key strategic areas. At meetings, after the Strategic Plan update, the Subcommittees can formally present their updates to the Board for discussion and consideration. Choice of subcommittee chairs is important to success.

Key Words: Board, Strategy, Tactics, Agenda, Charter, Objectives, Accountability, Best Practices

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How Do You Plan Spending – to Backlog or Sales Forecast? Five Suggestions

Situation: A company had several huge orders last year but ended the year with a low backlog. Sales forecasts are rosy, but acceptance of proposals and initiation of work is hard to predict because the company’s products are just a piece of much larger projects with variable timelines. How do you plan spending in this environment – conservatively to backlog or more aggressively to the sales forecast?

Advice from the CEOs:

  • It is important to understand the magnitude of difference between spending under the two scenarios. For example, if a conservative spending plan means major cuts to product lines or business compared to the more aggressive plan, then analysis and what if scenarios are more complex,
  • What are the company’s cash-flow and debt situations. If you are cash-flow positive with little debt, this increases flexibility. Another consideration is the company’s attitude on debt.
    • Be wary of the healthiness of an unused credit line. Companies have seen unused credit lines cut and accounts cleared when they have started using the lines after a long dormant period.
    • Exercising the credit line may increase flexibility.
  • Look at your approach to forecasting and spending. How far out do you forecast? How effective have past outgoing forecasts for several quarters been, and what confidence can do you have for the next quarter, the quarter after, and the quarter after that?  If you are reasonably confident one quarter out, you can plan spending on this. If you can adjust spending relatively quickly this gives you more leeway.
  • Establish leading indicators to improve future forecasts.
    • What is your win/loss record on proposals, and a conservative estimate of what this ratio means for revenue?
    • Other examples include sales calls to new customers versus new key customers won, and similar sales metrics. These metrics can help to govern expectations based on sales forecasts.
  • If your sales team is not performing, look at changes to sales management. This may wake the team up and prompt them to go the extra mile for contacts and contracts.

Key Words: Forecast, Backlog, Spending, Planning, Cash-flow, Debt, Credit Line, Confidence, Indicators

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