Category Archives: Strategy

Do You Need To Rely on Venture Capital Funding? Three Questions

Interview with Charles Bellavia, CEO, ElectraDrive

Situation: High tech entrepreneurs frequently see venture capital funding as a quick route to enabling their ventures. However VC funding is highly variable by tech sector and company cash needs, and few companies are ever funded. Do you need to rely on VC funding and what are the alternatives?

Advice from Charles Bellavia:

  • The first question to ask is what you want from VCs. In the past they brought both contacts and funding. Now, generally, they just bring funding. So ask three questions.
  • Can you fund the company out of your own pocket?
    • Far more companies are funded by founders, friends and families than by VCs. However self-funding demands conditions.
    • Cofounders should have alternate income sources so that they can operate without salaries for periods of time.
    • Watch the life stages of start-up cofounders. Avoid joining a start-up when your kids need your attention, especially during their teen years. Can you forgo regular income if you are paying for college? If an annual 2-week summer vacation is important, don’t join a start-up.
  •  What is the minimum funding needed for the company?
    • What funding do you need just to prove your technology and generate cash?
    • Focus is key. People will suggest variations. You have to know your path and whether variations will help or distract.
    • Stay with your core idea and think in terms of product generations. Build fitting variations into future plans if they will delay initial launch.
  •  How do you keep project workers motivated?
    • Plan for turnover. Know who is key to the project, and where you need back-ups.
    • Start-up life is all consuming. When the picture on the wall is crooked, everyone jumps to straighten it out.
    • Have fun and make it fun. This needn’t be expensive, like parking lot pot-luck barbeques with a CD deck and music.
    • Be generous with simple, low cost recognition. Acknowledge employees for who they are and where they came from. This is especially important when you have diverse employees and builds camaraderie. One company has pot luck lunches and employees are asked to bring their national dish; the food is wonderful and helps employees to appreciate one another.

You can contact Charles Bellavia at cfb@electradrive.net

Key Words: Funding, Venture Capital, VC, Bootstrap, Self-fund, Friends, Family, Income, Salary, Founder, Life Stage, Focus, Core, Iteration, Turnover, Fun, Recognition

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How Do You Fund Growth? Five Points of Focus

Interview with Hannah Kain, President & CEO, ALOM

Situation: While funding from banks and institutional sources has been challenging in recent years, growing companies need to fund their growth. How have you funded your company’s growth?

Advice from Hannah Kain:

  • We focus on frugality and prevent wWhile funding from banks and institutional sources has been challenging in recent years, growing companies need to fund their growth. How have you funded your company’s growthasteful spending. However we invest in tools that enable staff to purchase wisely and stay ahead of customer demands. We also collaborate with vendors to manage costs.
  • As a result, the last two years have not forced us to change how we fund growth. We are getting large contracts and work globally to solve customers’ logistics challenges. Our challenge has been moving from centralized distribution to strategically placed centers around the globe, increasing inventory costs and cash needs.
  • Where we have changed is in how we negotiate terms and credit with our customers. We manage vendor accounts payable to maximize cash flow while treating them as business partners. This requires close vendor communications to assure that everyone’s needs are met.
  • We have been cautious with our banks and seldom dip into credit lines. Managing vendor payments has been more effective.
  • Essential to vendor communications are open sharing of information and goal setting. We work to create a team atmosphere. This is similar to what we do in our offices. In our experience, instilling the right culture is far more powerful than financial incentives.
    • We share information through all-hands company meetings and regular updates so that everyone gets the full picture.
    • We also share information with our vendors so that each side is aware of the other’s needs.
    • We create an annual one-page business plan for the company, and parallel plans down to the supervisor level. Performance against plans is updated regularly to assure that we remain on top of situations.
  • We focus training on new tools. Our staff gets technology they need to be successful.
    • We generously provide technology to our employees, provided that they give a logical business rationale. This includes home computers, iPhones or Applets to help them do their jobs.
    • Similarly, when a vendor or customer asks for a service improvement or a new service with a good business rationale, we invest to support this.
  • These methods have allowed us to finance most of our growth internally.

You can contact Hannah Kain at hannah@alom.com

Key Words: Funding, Bank, Institutional, Growth, Spending, Tools, Empower, Customer, Demand, Costs, Vendor, Cash, Needs, Terms, Credit, AP, Partner, Payment, Information, Sharing, Goal, Culture, Performance, Technology, Service

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What are Best Practices for Emergency Preparedness? Three Guidelines

Situation: Local and world events continually remind us that both nature and events are unpredictable. At any time we may have to deal with emergencies including water, fire, earthquakes, and the possibility that we or our employees may not be able to get to or communicate with our offices for a period. It is prudent for all of us to have plans in place that will enable us to deal with emergencies. What are best practices for emergency preparedness?

Advice from the CEOs:

  • You must have an extensive business continuity plan. This includes:
    • An outline of potential situations that you may face in your locations, potential losses associated with these situations, and plans for responding to each.
    • Redundant remote data back-up.
    • Manufacturing continuity planning.
    • Personnel contingencies.
    • Alternate vendor and service arrangements.
  • Drafting a full emergency plan takes time and work. However, it is essential. Start simply:
    • Look at the obvious risks in your locations.
    • For each, develop your back up or continuity strategy and start to put it in place.
    • Let the list of contingencies grow with time as you recognize more risks.
    • Start this exercise NOW.
  • Once you have a plan, drill the plan. Make sure that your people know what to do in each case so that if something happens they are prepared. It is amazing how this can build the confidence of your employees that they will be able to handle emergency situations.

Key Words: Emergency, Preparedness, Plan, Best Practice, Continuity, Data Back-up, Contingency, Confidence

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What is Your Experience Outsourcing to Eastern Europe? Five Factors

Situation: A company is in contact with an Eastern European company that seeks outsourced business from the US. The CEO seeks guidance on challenges managing as well as formalizing this relationship. What is your experience outsourcing to Eastern Europe?

Advice from the CEOs:

  • Location in Eastern Europe is important. There have been concerns with both corruption and IP protection in Russia. Some other Eastern European are more aligned with US/European values and farther up the ramp as outsource partners.
  • Experience of other US companies suggests that your spec must be written much more tightly than if you were doing the work here. If you can’t write a tight spec on the work, don’t outsource it!
  • Contract outsourced work on a fixed fee basis with the bulk of payment due on completion. This helps to assure that you receive timely delivery and the quality of work required.
  • Set up thresholds for the circumstances to engage an outsource partner.
    • Say one US worker is economically worth 5 foreign workers in your domain. Do you have enough work to support this?
    • Determine who will manage the outsourced work. A European is fine, as long as they have experience managing outsourced work.
    • Someone on your team will become their Project Manager. This can be VERY time consuming.
  • Consider setting up an offshore company to shelter some of the revenue from the outsourced work.
    • You want to locate the offshore company in a tax-free country, and to have them handle the funds connected with the outsourced work.
    • The contact in the tax-free country will likely be an accountant, lawyer or both. There are many reputable individuals who do this in tax-free countries, but be sure to check references and background carefully.

Key Words: Outsource, Eastern Europe, Challenges, Manage, Relationship, Experience, Concerns, Alignment, IP, Corruption, Contract, Protect, Spec, Fee Basis, Delivery, Quality, Parameters, Tax Shelter

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What Have You Done to Manage Rapid Growth? Five Foci

Situation: A company has experienced rapid growth. This is creating stress for the staff and CEO, who finds it difficult to break away from the day to day to focus on strategy. Employees are not keeping pace with the evolving needs of the company and turnover has increased. What have you done to manage rapid growth?

Advice from the CEOs:

  • The first task is to improve forecasting of business growth, and the infrastructure needed to support this growth. This includes:
    • Regularly updating your sales and production forecasts.
    • Updating staff and training plans to meet growth forecasts.
    • Updating infrastructure and support plans.
    • Without these, the organization will whipsaw in response to market demands.
  • Take a critical look at your staff development plans and staff training.
    • Look at those areas that are most impacted by business growth. Determine whether you have the right managers and support in place.
    • Evaluate whether you have the right people and whether they have the skills to handle new demands of their positions.
  • Critically evaluate each now job that you take on. Assure that you have the staff and infrastructure to meet client demands.
    • Always assure that you deliver on your company’s integrity, reputation and core values.
  • In addition to addressing immediate needs, look at long-term plans strategically. Ask where you will be in 10 years. Articulate this vision in detail, and drive plans down through the organization. Make sure that everyone is on the same page, aligned with the same values, aiming at the same targets.
  • Also differentiate your vision from your mission:
    • You vision is a 10 year time frame, not one year.
    • Your mission is what you will be doing this year and in 5 years – the activities you will undertake to realize your longer term vision.
    • Fine tune your vision and mission and drive these through the organization. This will give you clarity on how you wish to do business and will help you to make hard choices as you handle rapid growth.

Key Words: Growth, Rapid, Stress, Focus, Turnover, Forecast, Infrastructure, Training, Support, Values, Staff, Development, Skill, Plan, Align, Vision, Mission

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In Challenging Times Do You Cut Losses? Three Considerations

Situation: A company lost money last year, but turned the corner with a profitable final quarter. One of the company’s divisions continues to lose money, though the losses are small compared to the total picture. The CEO is considering cutting this business. What factors should the CEO consider in making this decision?

Advice from the CEOs:

  • What expense factors contributed to the loss?
    • The biggest factor was allocation of vehicle and space expense. This division has seasonal revenue but carries the allocated expenses for the full year.
  • Make sure that your allocated expenses are fair to the business. Do overhead allocations reflect utilization? Unless closing the business eliminates vehicles or space, if you terminate this business these expenses will be borne by the rest of the company.
    • Study your allocations by shifting the allocation made to this business to other businesses. What is the impact on their profitability?
    • If you find that the current allocation does not reflect utilization and adjust accordingly, does the business still lose money?
    • If this division covers its direct expenses along with most of its allocated expenses, a small loss in this division may be preferable to a reduction in profitability of other businesses from closing the division.
  • How strategic is this division to the overall business mix?
    • Is this business essential to your product/service mix or just a customer convenience? If you terminated the business will customers be upset?
    • Do competitors offer this service, and would you be disadvantaged by discontinuing it?
  • What are the alternatives?
    • Can you raise prices to increase profitability and refuse business that does not meet this pricing?
    • Can you restrict the offering to less price sensitive customers?
    • Can you refer customers to other vendors or sub out this business?
    • Can you reduce the scope of the offering while adjusting pricing to enhance profitability?
    • Can you source other labor alternatives to reduce cost?

Category: Strategy, Service

Key Words: Profitable, Loss, Division, Business, Critical, Factors, Expense, Allocation, Seasonal, Overhead, Loss Limit, Customer, Price, Competition, Offering, Scope, Labor, Skilled, Contractor

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How Do You Bridge The Supply Demand Gap?

Interview with Jim Hogan, CEO, SView LLC

Situation: The rapid evolution of mobile devices creates new opportunities to build mobile enterprise application businesses. However for businesses there is no clear path to mobilizing business applications. How do you bridge the gap between supply and demand in mobile enterprise apps?

Advice:

  • There are three legs to the stool of a successful SMB business model: developer platform, go to market strategy, and licensing and maintenance sales strategy. There is a consolidation play available for a small company that can generate traction in all three.
  • As to developer platforms, Microsoft originally got traction for Windows by being maniacal about building great developer relationships. Over time they leveraged this and just got better and better.
    • There are several platforms available that show promise, including Rhomobile, Mobile Nation HQ, and Appcelerator.
    • All are small now – in the $1-20 million revenue range. Their principal challenge is identifying a viable go to market strategy.
    • Another platform that shows promise is IBM’s Eclipse IDE.
  • Next is go to market strategies. Yahoo recently launched a search engine for mobile apps in Yahoo for Mobile. This is important to the creation of a viable market place for apps regardless of platform. If a viable platform developer can do a deal to generate a market for business apps this will go a long way to developing a successful go to market strategy.
  • The third leg, development of a long-term licensing and maintenance sales strategy, will most likely occur through acquisition of a company with the first two pieces. The lead would be an initial developer platform but could spin off to others.
    • Apple has started looking into this play with its iCloud strategy; the challenge for Apple will be making it enterprise-friendly.
    • Who else could do this? RIM and Microsoft both have a long history serving business customers, huge customer bases and  and the marketing capabilities to support mobile business applications. The wild card may be HP – currently the largest hardware purveyor in the enterprise and consumer space, and with the new WebOs platform from their purchase of Palm
  • It will be fascinating to watch how this market develops.

You can contact Jim Hogan at jahogan@jahogan.net

Key Words: Mobile, Device, Enterprise, Application, App, Opportunity, Scalable, B2C, Gap, Supply, Demand, Developer, Platform, Go to Market, Licensing, Maintenance Sales, Rhomobile, Mobile Nation HQ, Appcelerator, Microsoft, Yahoo, RIM, HP, Palm

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How Do You Introduce New Information into a Negotiation? Five Thoughts

Situation: A company is negotiating an agreement to resell another company’s software. In due diligence the company encountered a customer who was offered a single user license for the same software at one-third the price that they have been asked to pay upfront. What is the best way to approach the vendor for additional information without divulging the source of his intelligence? Does this change the negotiation?

Advice from the CEOs:

  • There is no need to divulge your information source. Just say that you have done some research and quote the price that you found. Ask them to explain this to you. See how they respond. This may tell you a lot about how they operate.
  • What rights do you receive under the arrangement that has been offered by the firm? What exclusivity and guarantees will they offer? Will they write these into the agreement? How will they handle direct inquiries?
  • Perform a careful financial analysis of the opportunity. Model the market and the full cost of sales that you will encounter. What is customer purchase behavior? Is it changing?
  • Counter the vendor’s offer to you with a pay-down option that pays the vendor more over time, but allows you access to the software without a substantial up-front payment. This limits your exposure if sales do not ramp as you anticipate.
  • Visit the vendor and sit down with the President. See how this individual responds to your questions. You may get a much better deal through this approach than through the sales team. You also may develop other partnership options that can benefit you long-term.

Key Words: Reseller, Agreement, Price, Software, Due Diligence, Negotiation, Research, Exclusivity, Guarantees, Direct Inquiry, Analysis, Customer, Behavior, Counter, Visit

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How Do You Aggregate an Audience? Three Strategies

Interview with John Hollar, President & CEO, Computer History Museum

Situation: Traditional media for reaching audiences – television, newspapers – have broken down. Audiences are atomized and increasingly “what you want when you want it.” How do you aggregate an audience in this environment?

Advice:

  • Develop partnerships that align with you both in terms of audience and purpose.
    • We just finished a $20 million expansion. With 1.5 million technology workers in Silicon Valley, how do we spread the word?
    • We work with corporations in the tech sector, corporate alumni groups, tech retailers, convention centers, hotel concierges, and schools.
    • Our new campaign – Silicon Valley Starts Here – encourages Silicon Valley visitors to start their Silicon Valley journey with us.
    • School field trips are booked through the end of the year. Local foundations support transportation costs.
  •  Leverage the digital world to expand your presence.
    • Everything physically present in the museum is also available digitally to a global audience.
    • We use Facebook, Twitter and LinkedIn to generate viral networking.
    • Live events are captured in HD and broadcast through our YouTube channel to 2 million viewers.
    • We update our Facebook page and tweet daily. Facebook is fun and playful with “Today in Computer History” and Friday YouTube films.
    • Tweets include a quiz – “Who Am I?” – of famous figures in computer history with prizes.
  • What are the implications for companies and institutions?
    • We must embrace the notion of living in parallel worlds – having both a physical presence and a broader digital presence.
    • Expert knowledge is here, but we must be able to access an increasingly digital audience that is global.
    • Digital capabilities can’t just be bolted on to an old structure. This must be a marriage that connects our knowledge and expertise organically to our audience, their needs, and the knowledge and expertise that is happening in the world.

You can contact John Hollar at jhollar@computerhistory.org

Key Words: Media, Audience, Partnership, Purpose, Awareness, Campaign, Digital, Presence, Facebook, LinkedIn, Twitter, YouTube, Inflection Point, Digital Lifestyle

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When Do Marketing Partnerships Make Sense? Four Considerations

Situation: A company has an opportunity to form a marketing partnership with another firm. The primary potential benefit to the company from this partnership is gaining access to new customers. On the other hand, partnerships may bring complications. What is your experience with marketing partnerships, both positive and negative?

Advice from the CEOs:

  • Marketing partnerships can certainly work, provided that both parties see benefit to the relationship, and both are committed to make it work.
  • Be sure to 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? Or 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:
    • 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.
    • Watch 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 back up 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.

Key Words: Marketing, Partnership, Customer, Access, Pros, Cons, Benefit, Commitment, Support, Boundaries, Priorities, Pitfall, Quality, Relations, Culture, Ethics, Champion, Exit

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