Tag Archives: Dynamics

How Do You Quantify Niche Market Potential? Five Suggestions

Situation: A CEO’s company focuses on a specialized niche market. One of his challenges is that there is little public or chamber of commerce information available on the size and characteristics of their market. How do you quantify niche market potential?

Advice from the CEOs:

  • Define the product / service very specifically. To narrow and refine estimates of market size look for the low hanging fruit.
    • What are the high growth segments of the target market?
    • What are the high growth industries of the target market?
  • To determine whether the market opportunity is $100M or $500M:
    • Define the company’s market more clearly – particularly the initial beachhead market where there is the potential to gain the most traction.
    • Recognize that there may be two markets: a high end market – relatively low gross sales dollars but high margins, and a low end mass market – relatively high gross sales but low margins.
  • Contact the originators of available market data to get their assumptions, comparative data and any other findings that may not be published but are beneficial.
  • Work closely with customers to build category / industry revenue estimates.
    • Segment the most active customers and increase the company’s share of their purchases.
    • Develop web site transaction capabilities to offer the company’s line as an adjunct to customers’ web sales.
    • Establish a Customer Council or Round Table to better understand the market dynamics and to differentiate the company within the market.
  • Sell the product and services’ features and benefits to the C-level, not just to engineers.
    • Sell to the CEO / CFO focusing on increasing shareholder wealth.
    • Determine a return rate for conversion to the company’s technology.
    • Reach out to professional segments that will naturally see value in the company’s process.
    • Seek an exclusive relationship with an industry leader to quickly launch new products.

[like]

How Do You Plan for Geographic Expansion? Nine Points

Situation: A service company wants to expand its geographic base. It promises a 30-minute in-person response time to clients. It has established deep penetration in its existing market and sees opportunity in neighboring areas outside of its current market. How do you plan for geographic expansion?

Advice from the CEOs:

  • In many respects, the company’s situation is similar to a franchise model. It has established a successful business model. The company has also optimized its model for staff, technology, procedures, accounting and service provision. This creates the opportunity to clone the current model in a new geographic market.
  • It is important to study the competitive landscape in adjoining or more distant markets.
  • Leverage current customer references. Create a client referral incentive program among current and new customers.
  • Target initial clients within the target geography as reference clients.
  • Use direct mail to potential customers.
  • Recalibrate the company’s search engine optimization to reach the new target geography.
  • Communicate the company’s points of differentiation. Highlight customer results in the existing market to potential customers in the new market.
  • Target companies that want and need the service that the company provides. These will most likely be similar to existing clients. Experience with existing clients will serve as reference points.
  • Successfully selling function, as opposed to brand, depends on a business model that matches business volume with capacity to provide reliable service. It also assumes that market dynamics in new markets will be similar to the existing market.

[like]

How Do You Keep Your Culture in the Face of Rapid Growth? Ten Points

Situation: A CEO’s company is facing rapid growth. The CEO is concerned that the cordial team culture that he has carefully nurtured will be strained as the company adapts to this growth. The present culture is characterized by lack of politics and truthful, frank communications. How do you keep your culture in the face of rapid growth?

Advice from the CEOs:

  • The company currently markets its culture, complemented by a solid history of performance. Clients receive highly personalized service at a competitive cost. This combination attracts and retains clients.
  • The company’s employees are a happy, competent group that enjoys what they are doing. This differentiates the company from other firms all by itself.
  • Identify the key attributes of the company’s culture. This will simplify internal and external communication when discussing what makes the culture special.
  • Use one several tools available to develop behavioral profiles of the current employees. This will help to understand how team members interact with each other. It will also help to build profiles for ideal additional employees as the team expands.
  • Hire an expert do a formal evaluation of the team around individual and group dynamics, as well as bottlenecks in the current structure and culture. This will help determine how scalable the company’s current culture is.
  • Grow at the rate the company’s culture allows, not at the rate that salespeople bring in new business. With gradual, careful growth size will less of an issue as it would be if the company were to simply grow as fast as possible.
  • The more the company grows organically – through additional business from existing clients – the fewer additional clients the company needs to meet growth objectives. This means adding fewer new employees to maintain target client/employee ratios.
  • If the plan is to grow larger, consider growing around core groups of 9-12 employees, perhaps in distinct locations with good communication between the groups. In the military, operating groups are 9 to 12 soldiers; the more specialized and highly trained the group the more it tends toward 9 soldiers instead of 12.
  • There is a Zen saying that a healthy tree grows as tall as it can. Use this as your guide.
  • The key role of the CEO is as CCO – Chief Culture Officer!

[like]

How Do You Construct a Deal to Expand? Three Areas of Focus

Situation: A CEO has an opportunity to combine with another business to expand their market geographically. A lead to work with the current owner to manage the transition has been identified. A second option is to bring in a new manager from the outside to manage the transition and the expanded business. How do you construct a deal to expand?

Advice from the CEOs:

  • Basics that are needed prior to initiating negotiations:
    • Define what the seller wants – both financially from the sale and in terms of ongoing involvement in and support of the business.
      • Without a lengthy transition period, the value of the business is not significant. The value is in the current owner’s relationships – both with clients and his team. It is critical to retain both.
    • The other big question is what the seller wants personally.
      • Is it legacy? Is it the opportunity to transfer knowledge?
      • The seller knows the CEO’s company and approached them about a sale. Play on this.
    • Are there potential complications to the deal?
      • Do any non-compete clauses exist with other companies?
      • Do other agreements exist that impact the value of the acquisition?
  • What other aspects of the deal does the group recommend?
    • Within the new organization, put the current owner under the recommended lead. This gives the lead more prestige and demonstrates trust. It also raises the bar for the lead.
    • A bonus is that the current owner and the lead get along. This will facilitate the current owner’s mentoring of the lead – like the child that he wishes would have taken over the business.
    • The current owner is a savvy businessperson, and the existing relationship between the seller and the lead will facilitate his ability to pass this knowledge on to the lead.
    • The current owner’s key assets are his connections and knowledge of the business. This will include subtle aspects to the business of which only the current owner is aware.
  • The option to bring in an outside office manager potentially complicates the situation.
    • Bringing in an outside office manager to manage both the lead and the current owner is the worst case – the most likely to blow up.
    • This arrangement puts the current owner two reports away from the CEO.
    • With an additional person involved, the personal dynamics become more complex. Keep it simple.

[like]