Tag Archives: Client

What Questions Do You Ask to Build an Exit Strategy? Five Topics

Interview with Norman Boone, CEO, Mosaic Financial Partners

Situation: Many entrepreneurs who started companies in financial services and other industries are now 55+. They may be ready to move on, but not necessarily ready to move out. What questions should they be asking as they plan their exit strategies?

Advice from Norman Boone:

  • The most critical question is what you want to do with the rest of your life. Most people don’t give this enough thought. It all starts with what is most important to you.
    • Start with a self-inventory assessment – what are your resources, options, and what do you want to do or accomplish?
    • Discuss with your significant other or partner what will work for both of you.
    • Answering these questions helps to lay out the alternatives. Now, thinking about your company, what is important to you? Is it legacy, the future of your employees and business partners, the future of your clients?  Does your business continue, or to you see a sunset?
  • If your business will continue, do you see an internal succession, or sale or merger of the company? If internal succession, here are the issues.
    • Who will be the new leadership? Do you have good candidates on staff, or do you need to hire someone who will take over?
    • Be careful not to expect your successor to be a mini-you. They need to be able to bring their own talents and perspectives to the leadership role, not try to duplicate you.
    • Do you need to beef up the training of current staff to increase their managerial capacities?
    • Is an employee buy-out an option? There is a variety of choices to investigate.
    • What will be your role during and after the transition? Will you accept that new leadership may take the company in new directions?
    • To be most effective, this needs to be a 5 or 10 year process. Ideally you will have two to four successor candidates to evaluate.
  • Do you sell to the highest bidder? Many of the questions here are like those above.
    • Will you sell to the highest bidder, or to the bidder who seems the best fit for your stakeholders and clients?
    • How much voice, if any, will you offer your employees and / or clients in the selection process?
    • What due diligence will you do on potential buyers?
  • Do you merge with a similar company?
    • If you can find a compatible merger partner the combination may be the best of two worlds.
    • What is the culture? If different, what will be the impact?
    • A merger of like companies may assume that the other party has a commitment to ongoing operation: but this is not guaranteed.
    • What will your role be, and what is the transition plan? How will you involve your key people in the transition?
  • The other option is to sunset the company. Here you must have enough in savings so that you can forgo future income from the business.
    • What about the other stakeholders and clients who’ve invested their careers and business in you?
    • Try to time your exit with the expiration of leases and other obligations to minimize exit cost.
    • How will you assist the transition of stakeholders and clients to new opportunities and providers?

You can contact Norm Boone at [email protected]

Key Words: Entrepreneur, Retire, Exit, Self-assessment, Options, Alternatives, Succession, Buy-out, Sale, Merger, Sunset, Staff, Stakeholder, Client, Plan, Control, Culture

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How Does a Tech Company Get Beyond Its First Partner / Client? Four Options

Situation: A company has a long relationship with its initial client, which provides the company with key intellectual property. This client handles all marketing, sales and distribution for the company’s principal products, but only accesses 20% of the market. The client is concerned about having its image associated with expansion into markets that the company wishes to pursue. How do you structure a deal that enables you to access the broader market without offending the client?

Advice from the CEOs:

  • The issues for the client are public relations and liability. They don’t want to be associated with certain segments of the larger market as it may compromise customer perceptions of their core business. Further, they want to be indemnified should they face damages from your forays into the larger market. It is important that you address their concerns.
  • Sit down with the key client. Pose a problem that will generate the solution that you seek and let them solve it on their own. Then seek an agreement with the client on carve-outs within the larger target market with which they are agreeable.
  • Build an external company with different branding to approach the larger market, without jeopardizing the relationship with the key client. If ownership and management of the two entities are the same be aware that this is a thin veil.
  • You may increase opportunity for success if you build your own successor product – one tailored for the larger market – while your key client is paying you for current business. Once the product is built, ask the client whether they want to be involved and if so, on what terms. This enhances your bargaining position and reduces your downside risk.
  • Expand your offering, where current products are part of a larger offering. You have two alternatives: go there anyway, or go there with the client. If the client decides that they don’t like what’s happening and opens the market this could be ideal for you.

Key Words: Client, Partner, IP, Intellectual Property, Image, Liability, Solution, External, Entity, Successor, Product

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How Do You Evaluate Tradeoffs Between Strategic Options? Six Suggestions

Situation:  A company’s primary objectives are to hone their business model and establish their first satellite office as a model for future expansion. An opportunity has arisen from a trusted source that could rapidly expand both business and opening of satellite offices by providing service to a single national client. How do you evaluate the tradeoffs between these options?

Advice from the CEOs:

  • What is the impact of this new option on client diversity? One of Porter’s fundamentals of strategy is to not have too much of your business dependent on any one customer.
  • What is the impact of this opportunity on your personnel, time and resources?
  • Are there areas in which this opportunity will save time and resources, for example by consolidating some back-office functions like billing and accounting?
  • If this opportunity will take an inordinate amount of time and focus, consider starting a new entity to take advantage of this opportunity.
  • Use a decision-making grid to evaluate the new opportunity versus your present strategy:
    • Identify the most important factors of both your current strategy and the new opportunity.
    • Weight the importance of each factor as a percent of with the total adding up to 100%.
    • Rank each opportunity against each factor.
    • Multiply the factor ranking times the weight for each ranking.
    • Sum the weighted rankings.
    • See whether the summed rankings support of contradict your gut feeling, and further analyze depending on the result.
  • Once you have identified the risks in this proposition, determine contract provisions that will reduce risks to acceptable levels. If the potential client is unwilling to yield enough of these points in the contracting stage to acceptably mitigate your risks, then walk away from the deal.
  • Don’t risk your entire company for one opportunity. Financial rewards are only a scorecard.

Key Words: Expansion, Options, Satellite, Office, Time, Focus, Resources, Trade-offs, Client, Diversity, Consolidation, Function, Corporate Structure, Factor, Weight, Rank, Contract, Mitigate, Risk

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How Do You Respond to Pressure to Cut Prices? Six Guidelines

Situation: One client represents a majority of a company’s revenue. They have multiple contracts with this client. A new purchasing agent is on a mission to reduce purchasing costs, and claims that other suppliers cost less. What’s the best response?

Advice from the CEOs:

  • Spend time with your true client – the employees and managers who have chosen your product. These people stand to gain the most from an ongoing relationship with you and may be able to reduce the pressure from purchasing.
  • Assemble testimonials and metrics from the client to show that you produce a better result at lower cost than they can get from other suppliers.
  • Simultaneously, reduce your overhead so that if you must cut prices to retain the business, you can afford it.
  • If you must cut prices, you have other options:
    • Reduce the cost of resources producing the product and service. Let your client contacts know that you are being forced to do this. This may prompt them to argue that they need more senior experience from your team at the higher rate.
    • Offer lower prices in exchange for higher volume and longer term purchasing commitments. This can lock out the competition by reducing the frequency of contract renewals.
  • Remember that the job of the purchasing agent is to reduce costs. The agent who is hounding you is hounding other suppliers as well. If they can negotiate savings from 30% of the suppliers, it’s a big win. Get your ducks in line so that you aren’t in that 30%.

Key Words: Purchasing, Contract, Purchasing Agent, Cost, Client, Customer, Metrics, Cutting Prices, Purchase Commitment  [like]