Tag Archives: Customers

Should You Combine Sales and Marketing? Five Points

Situation: A company is considering combining its marketing and sales teams. The company’s overall objective is to expand their marketing presence and to bring on new customers. Some team members believe that these two functions are distinct, while others believe that they should work in tandem or even be combined. What do others think about these options? Should you combine sales and marketing?

Advice from the CEOs:

  • The skill sets required to create and operate an effective marketing effort are different from those required to create and operate an effective sales organization.
  • Sales and Marketing are two different sides of the same coin – they complement each other but are distinct.
  • Direction begins with the CEO; however it is imperative to make certain that everyone in the organization buys into both this direction and the organization to achieve it.
  • Some feel that it is not a good idea to have one person covering the role of Sales and Marketing. Sales is tactical while Marketing is strategic. It is Sales’ job to implement the Marketing Strategy and report back what is working and what is not. Marketing’s job is to take the feedback from Sales into account and revise the strategy accordingly.
  • Challenges which can create a constant battle between marketing and sales are due to:
    • Lack of common direction, and
    • Poor or inconsistent communication between Sales and customer on one side and Sales and Marketing on the other.
    • These challenges need to be resolved to have an effective Sales + Marketing organization.

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How Do You Align Cash Flow with Growth? Eight Points

Situation: A Company is growing faster than its cash flow allows. This concerns the CEO because this growth involves promising technologies and products critical to the company’s future. What can the company do to improve current and new cash availability? How do you align cash flow with growth?

Advice from the CEOs:

  • Every growing company has experienced this problem and solved it; so can this company.
  • Grow more selectively. Review the available opportunities and select the most promising and profitable for focus. Restrict progress on less promising options for available time.
  • Search the Internet for books and resources that on this topic. For example, try “101 Techniques to Manage Cash While you Grow”.
  • There are experts, consultants and “Rent-a-CFOs” who specialize in this. Work with trusted contacts and/or search the Internet to identify appropriate resources who are familiar with the company’s industry and market.
  • Explain the situation and challenge to your vendors. Ask for opportunities to extend payments and “borrow” from them.
  • Explain the situation to customers and ask for better payments terms.
  • Borrow from an aggressive bank, factor payables, and/or find additional lending sources that offer attractive payment terms.
  • Be aware of and watch out for pitfalls that may cause serious problems. For example, an extended market contraction can leave the company stretched for cash.

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How Do You Address the Compensation Side of an Employee Development Plan? Four Points

Situation: A CEO has an employee who consistently performs above expectations. The employee has asked whether they could be rewarded for over-performance on customer retention and for gaining new business from existing customers. How can this be structured? How do you address the compensation side of an employee development plan?

Advice from the CEOs:

  • This is the type of employee that every CEO wants to see. Responding positively to the employee’s request is essential, and an opportunity to assure the employee’s loyalty and retention by the company.
  • One structure is bonus multipliers based on under or over performance. An example of the structure could be to assign and have the employee agree to a target for customer retention or new business acquisition from existing customers. Bonus is then impacted by their performance against this objective as follows:
    • Hit <85% of the target – no bonus;
    • Hit 85-100% of target – receive your standard bonus;
    • Hit 110% of target – get bonus times 10%
    • Hit 120% of target – get bonus times 20%
    • And so on.
  • This is just an example for the purpose of illustration. Variations on the original bonus plan can be negotiated with the employee, and adjusted over time to further encourage continued outstanding performance.
  • The multipliers do not necessarily have to be large, but are there to show that a certain level of performance is expected to receive this portion of the bonus. In addition, the employee can increase the bonus by overachieving their objectives.

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What are the Options for Your Next Phase? Six Suggestions

Situation: It’s a new year, and a CEO is thinking through options for the coming year and beyond. She has decided to leave her company and establish a new role and career for herself. Immediate concerns are funding the transition and entry into a new career. What are the options for your next phase?

Advice from the CEOs:

  • The area that can be built most quickly to provide income is a consulting practice based on the experience developed as a CEO and as a specialist leveraging past experience. Building a new practice is a big commitment. Make this the initial focus and get a few gigs to get the ball rolling. The company is an early option, as well as some of their key customers. These relationships are already in place.
  • On the academic side, investigate Executive Education programs in Business Schools. Here the clientele is different from normal undergraduate and postgraduate education – actively working managers and executives. For this audience the combination of experience as a CEO and academic credentials is advantageous. For this audience, a lack of credentialed teaching experience is largely counterbalanced by the weight of professional experience.
  • The Professor / Consultant track looks best if established as a 5-year plan.
  • While getting established in a new role there will be an initial challenge managing the time demands of teaching, research and developing a consulting practice. Think of this as managing the multiple functions of a company. It will be important to establish early priorities to accomplish the desired plan.
  • A professorship does not necessarily tie financially to current goals but can be an important strategic adjunct to consulting efforts. In a certain sense, teaching will have to be its own reward.
  • To the extent possible and depending upon how the board responds to the decision to leave the company negotiate the best possible severance package. This can tie into some of the suggestions, above.

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How Do You Hire and Retain the Right People? Four Suggestions

Situation: A CEO is concerned about employee turnover, particularly among promising younger employees. He doesn’t know whether these employees are different from past employees, or whether it is a function of the current economy and recovery. They look like a good fit during interviews and appear to fit well with the company when they come onboard. Yet, after a few weeks or months they leave. How do you hire and retain the right people?

Advice from the CEOs:

  • Ask other companies in your area whether they are experiencing the same phenomena, and what they are doing about this. Are their experiences similar? Why do they think this is happening? Have they developed successful strategies to stem the resignations?
  • Conduct follow-up interviews 3 months after the employees leave. Use an independent party – or at least a neutral party within the company – to conduct the post-departure interview. While there may be a variety of reasons why individuals leave, are there similar themes in their motivations?
  • Are employees being treated similarly to the way that Margery Mayer and others have discussed treating customers – are they being heard?
    • Ask and listen to their true motivations – perhaps they value the opportunity to take an extended vacation for a life experience more than they value a raise. Intel and other companies offer their employees an extended sabbatical after a certain number of years of service. The employee does with this time what he or she wants.
  • Host informal beer and pizza sessions with employee groups. Keep the mood relaxed. Let them open up and complain if they so wish. It’s far better to let them air these feelings with the CEO than as buzz within the office – particularly if the see that they are being heard.
    • It is important to follow up and respond to what is heard. Employees appreciate the opportunity to be open and honest, but only if they sense that their input is producing the changes that they desire.

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How Do You Prepare for Sale of the Company? Six Points

Situation: A company’s founder and CEO wants to sell the company. The company’s software is well-suited to current governmental priorities and should be of value to potential buyers. What are the best steps to take both to prepare for a sale and to sell at the highest price? How do you prepare for sale of the company?

Advice from the CEOs:

  • Add a person with connections to potential buyers to the board.
  • Look for an M&A specialist who knows the company’s market.
    • The right specialist will help validate the valuation of the company, review and identify potential purchasers, and make the inquiries that will lead to the sale of the company.
  • Investigate M&A cases in the industry and related technologies – both cases of firms like the company and cases of companies that may be suitors to determine their purchasing behavior.
    • This will help develop strategies to maximize the value of the company and the optimal bargaining position and will help prepare for negotiations.
  • Maximize the value of the company in preparation for the sale.
    • The fastest business growth may come from within the company’s current customer base – additional business customers where the company already has contacts.
    • Work up the food chain within existing customers to increase the company’s business within these companies.
  • Important preparations for a sale:
    • Assure that financial records are very clean. These are critical during the price-setting process and in negotiating the final price.
    • In computing company valuation, exclude the salaries of current principals to improve the income statement. These individuals will be replaced post-sale with lower-paid employees.
    • Continue to operate the company as though there will never be a sale. This maintains the value of the company regardless of what happens.
  • How open should be the company be – internally and externally – concerning a potential sale of the company.
    • Be as honest and open as is prudent. The biggest concern will be salespeople who may leave the company if they feel threatened by a sale, or who may stop selling because they do not want to try to explain the situation to prospects.
    • The other “at risk” group is developers, who may fear that they will be replaced or terminated following a sale and who may leave.

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Where Should You Focus for the Next Year? Three Points

Situation: A CEO has had to shift half of the company’s employees to part-time due to reduced business. This has hampered new product development. The situation has been exacerbated by slow payments from customers. Where should you focus for the next year?

Advice from the CEOs:

  • The company has a lot going on. Validate the company’s market potential for products in development, and start gearing up the marketing program so that it will impact this and next year’s sales.
    • Get a feel for how many customers want the new products in development. Invest in some market research to validate this.
    • The bottom line is that product development only pays if the company can sell a lot more product! The team needs to know whether customers for the new products exist, in what numbers, where and who they are, and their most critical needs. Without this market intelligence, the company is in no position to tell whether there is a market, nor is the company prepared to address it.
    • Assume that there is a market, that it can be quantified. Once the company knows who and where the customers are and knows their most critical needs, the next step is to prepare to attack this market. This is not something that is done in 1-2 months, after the product is ready to sell. The company needs to be starting now if marketing is to be initiated in 6-8 months.
  • Past practice has been to split R&D costs with the customer. The company has the expertise, the customer the money – this is close enough to 50/50. There is no need to show them the numbers. R&D should not be funded through future sales but should be making money now.
  • One project has been taking so much attention that it is hobbling the company. The company is so focused on getting this “just right” for the customer that sales and market development have been neglected.
    • For the next 3 months, focus on completing this project, getting it out the door, and getting the company’s focus back on growth. A sense of urgency is needed!

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How Do You Construct a Business Acquisition? Five Essential Points

Situation: A CEO has an option to purchase another company with whom they have a long and good relationship. A smooth transition will be important. The owner’s relationship with their customers is central to their success, as is his employees’ knowledge of their key accounts. How does the CEO assure that these relationships are retained? How do you construct a business acquisition?

Advice from the CEOs:

  • Based on the CEO’s responses to the Forum’s questions, the owner of the other company needs this deal more than the acquiring company needs him. This creates a strong bargaining position.
  • The owner of the business is the business and the key to a smooth transition post acquisition. Retaining his ongoing involvement – at least for a reasonable period – is essential to gaining maximum value from this acquisition.
  • The value of this business is its people: the owner’s relationships, and both the owner’s and his employees’ knowledge of their key accounts. His employees know the inner workings of their customers’ businesses. These are the relationships and the knowledge needed to assure that the acquisition is profitable post-close. Retention clauses and penalties must be part of the agreement.
  • If the owner wants 50% of the net income generated from his piece of the surviving company during a transition period, this is fair. However, the financial and operational details of the transition and his share of the income must be spelled out in the agreement and the agreement must assure that there is proper follow-through to qualify for the payments.
  • The income from the owner’s accounts must support his salary. However, even with this the owner will still cost the acquirer time and energy. Plan for this and budget for it in the agreement.

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How Do You Choose Between Opportunities? Six Points

Situation: The CEO of a software company has been presented with two opportunities by a large customer – international expansion to support their sales and creation of a data warehouse facility. The company has the option of pursuing either or both. The customer is not offering up-front cash to support either opportunity. Should they pursue either or both? How do you choose between opportunities?

Advice from the CEOs:

  • Keep pursuing both opportunities and establish a series of decision points which will yield either a Go or No-Go decision on each. The big question is to determine how either will support company growth.
  • The customer is interested in both opportunities so ask them for assistance such as: removing barriers, client referrals, or some form of cash or investment.
  • For either opportunity to succeed requires a high level of internal buy-in and support from the customer.
  • If the company can afford to be aggressive now, this is a great time to move.
    • Look carefully at the ROI on each opportunity under different scenarios.
    • Do background work with potential clients to validate each market opportunity.
  • Specifically to International Expansion
    • Buy-in from the customer’s head of international sales is essential – without this it will be difficult to establish a solid relationship with the international sales team. Lack of this support will be a No-Go sign.
    • Can the customer provide office space, access to their infrastructure, administrative support, assistance in gaining necessary licenses to do business, etc. during start-up?
    • Could this venture be undertaken through a joint venture with an established international company? This would save start-up costs and allow validation of the opportunity before risking the company’s investment.
    • Execution will require a large-scale effort – both time and money. Include both in the Go/No-Go calculation.
  • Specifically to the Data Warehouse Facility
    • A competitor’s right of first refusal on this business is a barrier. However, the opportunity may be viewed as too small for the competitor. Is it possible to buy rights from this competitor?
    • Ask the customer to transition their customers to your company and its product.

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How Do You Evaluate a Potential Partnership? Five Factors

Situation: A software company is developing a new solution for their B2B market. The CEO has been in discussion with a potential partner to assist developing this solution. The question is whether this partner is the right partner. Is it smarter to complete development as a partnership, or on their own with the aid of subcontractors? How do you evaluate a potential partnership?

Advice from the CEOs:

  • Is the potential partner also a competitor? If so, is the partnership arrangement on or off the core focus of the company’s business. Is there potential for future development in the partnership, or is this just a one-shot opportunity?
  • What would a new partnership look like? Ask the following questions:
    • What is the long-term vision for the company?
    • Does the partnership fit this vision, and under what terms?
    • Is the potential partnership “sticky”? Will it bring in business that can be nurtured and developed under the company’s shingle?
  • Until answers to these questions become clear, soft pedal the partnership opportunity and plan for the company’s future.
    • Take advantage of situations that the partner presents as they benefit you, but do not let these become a distraction to the company’s focus unless the partner is open to working with you as a partner rather than as a source of bodies and skills.
    • Put a deadline and milestones on the partnership relationship. If they don’t pan out, walk.
    • Don’t burn bridges, if the partner takes off, then jump back in more strongly, but on terms that benefit the company’s strategy.
  • For the immediate future and until the situation becomes clear don’t let people become idle. Unless something develops quickly be ready to redeploy them.
  • An alternative is to stick with the company’s current customers and expertise. This involves investing resources and focusing R&D on solutions for these customers. If the market remains substantial and current customers are the largest players, this has the greatest potential for growing the company’s business.

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