Tag Archives: Access

What is the Best Way to Utilize Excess Year-end Cash? Three Perspectives

Situation: A company has excess cash at the end of the year. Options are to distribute the excess in bonuses following a challenging year, or to invest in the company. Two questions: how should the company structure a bonus distribution, and how would the company best invest the excess cash? What is the best way to utilize excess year-end cash?

Advice from the CEOs:

  • Evaluating bonus options.
    • One company uses a published step-function bonus program, with the steps tied to company profitability, and performance against individual objectives.
    • Include evaluation and scoring on company core values as part of the overall performance evaluation scheme.
  • What’s the best way to utilize the current cash surplus?
    • Use the current surplus to reduce debt or invest it in the future of the company. Build value. Retained earnings are fine even if the company’s accountant is concerned about tax consequences.
    • Consider purchasing life insurance, or other tax-favored deferred-compensation for partners and key employees. Cash bonuses get spent by recipients, whereas tax-advantaged deferred compensation programs build future value for the team.
    • Consider using the excess cash to buy the building.
      • The company can afford a sizeable down-payment.
      • Negotiate a favorable purchase price at a reasonable interest rate.
      • Doing this, monthly lease payments become monthly payments toward ownership of the building and additional value for the firm.
      • Consider purchasing the building under a separate corporate entity, even if ownership of this second entity is identical to current ownership. This may create tax advantages.
  • What do company owners keep in pay versus investing in the future?
    • Keep the cash needed to run the company, plus a bit. Focus on securing the long-term value of the company.
    • “If you take care of the company, the company will take care of you.”
    • If excess cash is invested in the firm, assure to retain long-term access to the value invested. There will be times when the company will need the cash.

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Where Should You Focus – Eyeballs or Dollars? Six Thoughts

Situation: A company sells personalized content as well as a tool kit. The long-term plan is to monetize storage of personalized content. When they speak to venture capitalists, the VCs advise them to focus on just building their user base and not to worry about revenue.  What would you do? Where should you focus – eyeballs or dollars?

Advice from the CEOs:

  • Take advice from venture capitalists with a grain of salt. Remember that their game is to fund companies that they like incrementally, taking a greater share of ownership of the company with each increment in funding. The more you lack revenue, the more you’re dependent upon them.
  • Gain traction by offering free content with up-sell opportunities for premium access.
  • The give-away strategy is a great model to build your initial user audience. Consider micropayment options for special features, content storage, and so forth.
  • Going slow and steady may not be the right model for this space. Company growth for a web-based platform is different from the typical bootstrap model.
  • It’s hard to get good advice for viral marketing opportunities from CEOs who have bootstrapped their companies. Look for other input. Seek the advice of CEOs who have been successful in the viral online marketing space and learn as much as you can about their business models.
  • Gaming is another opportunity – premium or virtual world sales.

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How Do You Simplify Access to Knowledge? Five Factors

Interview with John Kogan, CEO, Proformative

Situation: An organization that provides an online network for senior financial executives has an immense amount of content on its web portal. To improve the user experience of their target audience, they want to simplify access to this knowledge. How do you simplify access to knowledge?

Advice from John Kogan:

  • We have a rich portal with an immense amount of content potentially valuable to senior corporate finance[K1]  executives. We have many ways to access this content – perhaps too many. Our objective is to get the highest quality answers in front of the user with the least effort on their part. Google has done a very good job of pulling the best content to the top given a million possibilities to each query. If we can do this, we become the Google of finance and accounting!
  • Most people know what they want when they come to a site. We have started by creating a clean user experience to allow them that good “line of sight” to what they want.
  • Our objective is to help the user identify the right content with the smallest number of queries. From the user perspective, exposing the wrong content is a waste of time. We want to show them high quality, compelling content which directly addresses their need.
  • To develop quality content, you must have an open mind. It’s not about what we want to say, but understanding the user’s needs and addressing these. You have to be guided by the data to tell you what’s happening on the site and what the user wants to see, and then provide them relevant information.
  • Achieving this means that we must find people who are smarter than us in these areas and gain their input. In the end, your company is no better than the ideas that you can either dream up or gather from others. We constantly seek fresh perspectives from investors, advisors, users and potential users.
  • Finally, you must take action on the data you gather. Too many companies suffer from information paralysis. The solution is Vision plus Will plus Doing it!

You can contact John Kogan at [email protected]

Category: Strategy, Technology

Key Words: Strategy, Technology, Content, Portal, Access, Simplify, Knowledge, Google, User, Experience, Triage, Sticky, Relevant, Ideas, Execute

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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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How Do You Negotiate a Tricky Merger? Five Thoughts

Situation: A company is considering a merger. The other firm competes with customers who account for 25% of the company’s current revenue. How do you maximize the value of this merger to the company while mitigating the negative impact on current business?

Advice from the CEOs:

  • The maximum risk from the combination is loss of 25% of current revenue. The merger makes sense if you believe you will gain upside which more than counters this risk.
  • Both companies have brand equity. Maintain both brands and to continue to promote them. Maintaining both brands will buy you time to replace business which is potentially at risk.
  • Talk to customers and get their perceptions of the pros and cons of the potential combination. Ask about any concerns that they may have. Understanding the pros, cons and concerns will help you to mitigate negative fall-out.
  • Legally, in a 50/50 split, the Chairman will call the shots. You will have little recourse to counter the Chairman if he decides to fire you. This individual has built his company through previous mergers. Visit and break bread with those who were principals of these companies at the time they were merged or acquired. This will tell you a great deal about the individual with whom you entrusting your future. You will also learn what the others did during their mergers to help plan your own moves.
  • Give yourself a back door or Golden Parachute after six months if the merger does not go as you anticipate.

Key Words: Merger, Competition, Value, Mitigate, Upside, Risk, Market, Access, Brand, Equity, Customers, Pros, Cons, Concerns, Control, History, Golden Parachute

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