Category Archives: Strategy

Great Deal on a New Space . . . Now We Must Move! Five Recommendations

Situation: The Company has taken advantage of favorable lease rates to secure a larger space. How can they minimize work flow disruption during the move?

Advice from the CEOs:

  • Plan the move in detail: electrical, intranet and telephone needs; office space and facilities; design or production space and facilities.
    • If you can’t move everything over a short period of time – a 3-day weekend – consider moving in steps – a series of discrete moves over time, each with its own requirements and timetable.
  • If you carry inventory, pre-build inventory to see you through critical steps of the move.
    • If you have a major customer with strict delivery deadlines, try to negotiate a delivery window during which you can conduct the move.
    • Determine if there is seasonality to order delivery that makes a particular time of year more convenient to move critical operations.
    • Custom work will require special planning.
  • If you plan to upgrade equipment, consider purchasing, installing and operating the new equipment in the new location instead of your existing location.
  • If you will be leasing the new facilities – maybe even if you are purchasing – ask the new lesser or seller to provide cash to:
    • Finance delayed shipments at a price discount,
    • Cover expenses of the move and outfitting the new location to your needs.
  • Consider converting to a wireless intranet and telephone system to avoid the expense of wiring the new facility.
    • Look at plug and go options.

Key Words: Planning, Location, Work Flow, Inventory, Technology, Customer Service, Logistics  [like]

Gee, I Like Your IP! Let’s Talk: 3 Steps to the Dance

Situation:  The Company is moving from a specialty solution to a complete solution. They have identified a partner with intellectual property (IP) that will help them fulfill this vision. How should the CEO approach this company to access their IP?

Advice from the CEOs:

  • There are two aspects of any deal: technical feasibility that will produce value; and the emotional needs of the principals.
    • The technical aspects are the most straightforward and easiest to value.
    • Frequently, a favorable deal hinges not on technical feasibility, but on the desires of the principals and their ability to trust one-another.
  • If you are convinced of the value, you must convince the other party that their best option is to work with you. Then you can negotiate the specifics.
    • Sell your vision: the technologies together are much more valuable than they are alone: 1 + 1 = 5!
    • If control of the technology is an issue, you must negotiate an arrangement where they are comfortable with your control.
      • Do you and the other party have a trusted advisor in common or is there an individual who is respected by both of you? This person can help communicate your good intentions.
  • If your best efforts do not produce an appealing arrangement, your fall-back position may be a partnership. If the partnership is backed by modest investment with options for future purchase, this may be another way to for you to eventually gain control of the technology.

Key Words: IP, Intellectual Property, Negotiation, Emotional Needs, Feasibility, Deal, Partnership  [like]

Working On vs. In the Business – Six Thoughts for your Staff

Situation:  The Company created five customer-centered divisions headed by Business Development Managers (BDMs) who oversee project management as well as business development in their markets. A year after implementation, the BDMs are more focused on managing their teams than on developing new business. How can we enhance focus on business development?

Advice from the CEOs:

  • Your BDMs are technicians; business development (BD) isn’t their strength.
    • People gravitate toward important/urgent activities in their comfort zone.
  • Supplement your staff with people who have a proven talent for business development.
    • You may not need 5 people – 2 or 3 may be sufficient to support the BDMs.
  • What if our customers demand technical expertise in business development personnel?
    • Make category expertise a requirement when hiring, in addition to experience in BD.
    • There are specific traits that characterize successful BD personnel. Specify these traits in your hiring process and verify these abilities in candidates both by testing for these traits and through reference checks. The Sandler Organization has good tests for BD talent.
  • The BDMs are responsible for coordinating bidding and pricing. Should this responsibility be handed over to the new BD personnel?
    • Not completely. You have two options.
  • Require BD personnel to coordinate with the BDMs when it comes to pricing and project delivery, and/or
  • If you determine that the BD personnel need to be able to negotiate pricing on their own, tie their commission compensation 100% to margin on projects bid.

Key Words: Sales, Business Development, Customer-Centered Organization, Hiring Requirements, Hiring Selection, Collaborative Sales, Compensation  [like]

My Worst Nightmare – Sell or Downsize? Fifteen Considerations (Part 2)

Situation: The Company is losing money and has been approached about a merger. The CEO’s ideal outcome would be to get cash on the table, integrate with the merger partner and continue business. The other alternative – downsizing – may hurt company morale. What are the best options available?

Advice from the CEOs:

  • The downsizing experience is wrenching, but results were far more positive than expected.
    • A 10% cut resulted in a 30% increase in productivity.
    • Employees once thought to be critical were not missed post-layoff.
    • The employees generally understood more about the situation than the CEO knew, and those remaining responded positively to a restructuring that allowed them to keep their jobs.
    • Some companies used a layoff as an opportunity to cross-train employees and increase company flexibility.
    • If concerned about loss of key talent, consider rehiring a laid-off employee on a consulting basis for a limited period.
  • Smoothing the layoff process:
    • Communicate with the employees. Let them know the truth, and share enough of the situation so that they understand.
    • Challenge employees to come up with ways to save money or make processes more efficient and cost-effective. This can have a remarkable impact.
    • Consider a cross the board salary reduction as a temporary alternative to layoffs.
    • Position as a layoff to restructure expenses – keeps you on the right side of employment law.
    • Obtain assistance from a personnel consultant who can help to handle the process effectively.
  • Summary: If you can save expenses, return to profitability and stay independent you will be happier than you may be post-merger.

Key Words: Merger, Negotiation, Ownership, Downsizing, Mitigation, Layoffs, Profitability  [like]

My Worst Nightmare – Sell or Downsize? Fifteen Considerations (Part 1)

Situation: The Company is losing money and has been approached about a merger. The CEO’s ideal outcome would be to get cash on the table, integrate with the merger partner and continue business. The other alternative – downsizing – may hurt company morale. What are the best options available?

Advice from the CEOs:

  • The realities of mergers:
    • 70% of mergers fail, and the merger process often leaves founders with a minority stake in the company.
    • Experience of others with partners has been disappointing – better to control your own destiny.
    • Look at all alternatives before you jump into a merger. You founded the company and have brought it this far. The company will be a different company following a merger, and not the company that you founded or have led to date.
  • Message to your potential merger partner:
    • Be a reluctant bride.
    • “We are making improvements to return to profitability and I’ve joined a board of CEOs who are consulting me through the process.”
    • If the partner sweetens the offer to keep the merger on the table, make sure that you get 51% of the merged company and retain control of your own fate.
  • Reconsider downsizing – Others have found the downsizing experience wrenching, but with far more positive results than they expected.
    • More on this in the next ceo2ceos blog.
  • Summary: look more closely at your situation before your jump into a merger. If you can save expenses, return to profitability and stay independent you will be happier.

Key Words: Merger, Negotiation, Ownership, Downsizing, Mitigation, Layoffs, Profitability  [like]

OMG – our Product is taking off! Two Considerations and Two Options

Situation: Demand for our product has increased, and we need to scale up production. We’re small, so how can we do this without killing the product?

Advice from the CEOs:

  • This represents a major change of mentality and culture. Essentially, you’re moving from a “handmade” process to a commodity volume process. You may also be moving from low volume/high margin production to high volume/low margin production – this will change you.
  • If you are sure that you will get the contract for long-term production consider establishing high volume production at a new site.
    • Rent/lease another facility. Also hire a different set of experienced people, and consider giving this facility a new name to suit the new team. This will help you to establish a new culture suitable to the new opportunity.
    • Ask for an option for additional space on the lease.
    • If things don’t pan out, look at this new space as the eventual location for your existing team.
  • Other options to consider:
    • Outsourcing to a 3rd party manufacturer. This is an option, unless you are an OEM outsourced producer yourself. Essentially you could be telling your OEM customer that they could go direct to another source at a lower price.
    • Establishing an overseas production capability – one where you own the facility and manage the QC. This will be a challenge if the customer wants to specify “Made in US”, or where quality concerns are essential.

Key Words: Production, Scale-up, Ramp-up, Outsourcing  [like]

Good News – Business is Building! Now, What to Pursue? Four Guidelines

Situation: The business climate is starting to improve. Opportunities are coming in. How do you decide what to do and what not to do?

Advice from the CEOs:

  • Talk to your customers. What do they value about your product/service and what is less valuable? Build on opportunities that customers value – which are consistent with your company’s strength and focus.
  • Consider a customer survey – Survey Monkey or a telephone.
    • If you don’t have in-house expertise to design and administer a survey, find knowledgeable outside resources.
    • Make sure that the survey questions will drive understanding of your focus.
    • If you are short of cash, at least get an expert to review the survey and administration plan.
    • Before you launch the survey to your full customer base, “test” it with a select group of customers – this will tell you whether it will produce usable information. If not, rewrite.
    • Have employees take the survey and predict how customers will respond. Compare these results with the actual results from customers. You may learn something!
  • Which opportunities will build sustainable recurring revenue vs. opportunistic (one-time) revenue?
    • Recurring revenue can be lower margin if the income stream is sustainable.
    • Balance efficiency and utilization. For example, fixed fee service contracts that renew consistently.
  • Judge opportunities against your “Hedgehog” as defined by Jim Collins in Good to Great:
    • What you are passionate about?
    • What you can be best at in your marketplace?
    • What you can measure by a single economic ratio?

Key Words: Customer Needs, Customer Survey, Business Opportunities  [like]