Tag Archives: Experience

How Do You Terminate a Founder? Four Suggestions

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Situation: One of the founders of a company heads business development. This individual had no prior experience in business development, and no other skills to offer the business. Over the last two years he has generated only a fraction of his salary in new or additional business. The CEO has concluded that it is time to hire a business development professional; however, the Board is reluctant to act. What are the steps that you would take to let a founder go? How do you terminate a founder?

Advice from the CEOs:

  • Because the individual in question is an owner, the situation is delicate. Staff relationships are involved as well as morale. Therefore, it is essential that you create a convincing case for replacing the individual and show that this is the best for the business. Don’t rush the process. However, once you’ve built a solid case for what needs to be done, act expeditiously.
  • Start by evaluating and documenting what the individual is doing to develop new business. Count customer connects per day. Set a baseline expectation and measure against this. Look at the pipeline. Historically what does your new business funnel look like – contacts, presentations, evaluations, closes. How does this individual’s pipeline stack up? What are his business advancement and close ratios? How do these compare with industry standards?
  • For the individual: Demonstrate that his performance is penalizing his own return as an owner. Create a spreadsheet that shows: (1) The current situation, and his return as a shareholder from current results; (2) hire two effective business development people, how could this change his return? (3) Show the individual a graceful way out – one that works for him.
  • For the Board: if the current direction is negative, create a model that shows your current direction and the break even implications. Present this analysis to the Board to show that the company needs a change.

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How Do You Move from Early Adopter to Mainstream? Seven Thoughts

Situation: A company has established market leadership in an emerging market. When you innovate in a niche, focusing on early adopters, you eventually run out of early adopters. The challenge is broadening the appeal to a larger mainstream customer base. How do you move from early adopter to mainstream?

Advice:

  • The challenge is both messaging and cultural. In messaging, you must support the new norm. This means convincing the customer that if they are not with you, they’re being left behind. You need to demonstrate that your established, proven solution is the new norm.
  • The cultural challenge is maintaining a culture of innovation and attracting the right talent while becoming a mainstream company. An attraction to new talent is that you are cutting edge – changing the world. This aura is critical to a start-up. You must maintain this innovative culture as you become the market leader.
  • How do you overcome these challenges? Finding people who’ve been there and done that increases the odds in your favor. We hired a marketer who had helped take another company through the same transition.
  • Hire for excitement, energy and enthusiasm. Quickly remove new hires that turn out not to fit. Maintain a freedom to fail atmosphere. You need people who will take risks, but who will also step back and quickly change direction when the risk isn’t productive. Decision-making speed is a great advantage of small companies.
  • Create an organization that celebrates innovation. Institute “Hack Days” when employees are free to work on projects of their choice. A new product that brings business audience targeting to social media came from a Hack Day project.
  • Keep everyone informed. Conduct company-wide daily stand-ups. Individual updates are quick – 30-45 seconds. This fosters open communication and awareness, and surfaces issues before they become problems.
  • Weekly, send out full disclosure emails including key financial metrics, successes and failures. Monthly conduct executive-only stand-ups. These are longer, but updates are quick and focus on progress to goals, as well as next month’s goals.

Thanks to Russell Glass, of Bizo, Inc. for his contribution to this article.

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How Do You Negotiate a Challenging Merger? Six Points

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? How do you negotiate a challenging merger?

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, whoever is the chairman of the combined company will call the shots. If the head of the other company is chairman, you will have little recourse if he decides to fire you.
  • In the current case, 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.

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How Do You Select Good Business Developers? Five Thoughts

Situation: A company wants to expand its business development staff. What is your experience, and what has worked best for you in selecting among business development candidates? How do you select good business developers?

Advice from the CEOs:

  • The first priority is your compensation plan for the new person. There are three basic compensation schemes: High Base/Low Commission, Medium Base/Medium Commission, Low to No Base/High Commission.
  • Choice between these options depends on your own philosophy, as well as common practice within your industry. Compensation is central to candidate selection. The CEOs recommended asking candidates about their own preferences for compensation. If they prefer Option 1, don’t hire them – they either lack experience or confidence. Ideally they prefer Option 3 – they can make more money, but cost you little unless they perform. If they prefer Option 2, probe. They may be good but face personal obligations that make it difficult to choose the high risk/high reward option. Ask about past compensation and performance. Verify any claims made during the interview.
  • You want to structure sales compensation so that non-performers leave of their own accord – without costing you dearly in time or money.                                              
  • What are the most important traits to seek in a good B.D. candidate? Understanding of customer’s requirements as well as purchase behavior and understanding of your product or service.
  • How do you find candidates? Use a Head Hunter who knows your industry and competitors. Use written tests to evaluate the individual’s traits. Let the hunter find and screen prospects and present the top 2-3 to you as a test of their skills.

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Can Marketing Partnerships Work Well? Five Considerations

Situation: A company has the opportunity to form a marketing partnership with another company. The primary potential benefit to the company is gaining access to new customers. On the other hand, partnerships may bring complications. What is your experience with marketing partnerships? Can marketing partnerships work well?

Advice from the CEOs:

  • Marketing partnerships can certainly work, provided that both parties see benefit to the relationship, and –  more importantly – both parties are committed to make it work.
  • 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? 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 to take into consideration. 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.
  • Monitor 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 backup 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.

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What are the Three Clarities that Every Start-up Needs? Three Points

Situation: Starting a new venture is a daunting task. You must determine market need and land your first few key customers on a tight timeline and budget. What are the most important areas of focus for the start-up CEO? What are the three clarities that every start-up needs?

  • The answer lies in the Three Clarities.
  • Clarity #1 – Deep Knowledge of Customer Pain Points. Your eventual success is not about the technology – it’s your ability to understand and address the needs of your customer. Research and talk to potential customers. Ask them about their pain and problems. What makes their job or lives difficult? Learning these facts takes time, patience, persistent questioning, and open listening both for what they are saying and what they are not saying. Once you have a clear idea about their need and can succinctly define it, you must determine whether your capabilities can address the customer’s need. Avoid talking about your product or solution until you clearly understand the customer’s need.
  • Clarity #2 – Understanding the Purchasing Behavior. Once you have identified your target customer, their need and your ability to meet that need, you must understand their current purchase behavior. Have they ever bought from a startup before? What happened when they did? Are they happy or unsatisfied? Where are the gaps in satisfaction? Particularly for a start-up without established credibility, it is critical to identify those purchasers who will take the risk to buy from a new company. From what you find, determine how you will frame a personal relationship with the likely buyer – how you will frame both your solution and the buying experience. Build a psychographic of the buyer so that you can quickly determine likely customer candidates.
  • Clarity #3 – Understanding the Decision-Maker’s Sense of Urgency. Who makes the purchase decision? In B2B sales is it the CEO or someone further down the organizational chart? Who approves the purchase budget? Why now? Do they have their ”hair on fire” so a decision must be made now? The essential question is: what are the alternatives to not having your solution?

Thanks to Naeem Xafar of Blitzerrmobile.com for his contribution to this article.

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How Do You Design an Effective Sales Model? Eight Points

Situation: A company is in the process of building an inside sales program to complement their outside sales capabilities. What are the most important strategic components of an effective sales model? How do you design an effective sales model?

Advice:

  • In a marketing/sales system, marketing is the precursor to everything. If you can’t effectively deliver your message to your audience, you have no lead generation machine and sales must resort to cold calls. In today’s online world, two of the key components of a marketing system are email and online campaigns, combined with tools for rapid and responsive follow-up.
  • In an effective system, the inside sales team has primarily responsibility for following up on leads. This team’s role is to qualify the prospect responding to the company’s marketing outreach. Is this person the right buyer for their company? If not, who is?
  • A strong rapport between inside and outside sales is important. If this isn’t present opportunities are being lost.
  • Has the company allocated an adequate budget to fund an outreach strategy? If not, when will they?
  • The most critical aspect of the inside sales rep’s role is to be an effective filter in collecting and passing data on to the field sales force.
  • Many inside sales reps fail because their performance is measured on the number of calls made, not on the quality of the calls, information gathered, closure rates, and the value of closures. Effective incentives for inside sales are based on the quality of data gathered and on the success of field sales in closing the leads they receive from inside sales.
  • The effectiveness of outside sales comes down to choosing the right people. The 80/20 rule applies here. Typically, one out of five field sales reps hired is truly successful, one is marginal, and three don’t make it. Hire based on past experience selling to the company’s target customer groups, subjective elements aligned with company culture, and careful reference checks.
  • For the CEO, attracting and hiring good people this individual’s most important role. 

Thanks to Sanjay Sathe, President & CEO, RiseSmart.com for his contribution to this article.

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How Do You Respond to a Price Cut Request? Six Guidelines

Situation: One client of a company represents a majority their revenue. They have multiple contracts with this client. A new purchasing agent in that company is on a mission to reduce purchasing costs and claims that other suppliers cost less. How do you respond to a price cut request?

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, look for opportunities to reduce your overhead so that if you must cut prices to retain the business you can afford it.
  • There are 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 the PA can negotiate savings from 30% of the suppliers, it’s a big win. Get your ducks in line so that you aren’t part of that 30%.

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How Do You Build Meaningful Social Media Participation? Seven Thought Starters

Situation: A company has built a good online community. Between their site and newsletter, they are contacting tens of thousands of executives weekly. The CEO constantly seeks new ways to encourage active participation in the discussions. What have others done to effectively build regular participation in discussions? How do you build meaningful social media participation?

Advice:

  • Know your audience and focus on topics that engage people. For example, one company does a semi-annual compensation survey. This generates great response when the results are published.
  • Another company has found that they learn more from mistakes than they do from success. People love to talk about business blunders, particularly if the discussions include well-intentioned humor.
  • Reach out to individuals with interesting backgrounds, experience and situations. Encourage them to post, or feature them in a discussion.
  • Another company sends out weekly emails with titles and synopses of articles posted in the last week. This enables newsletter recipients to quickly scan topics and click on those of interest.
  • A common challenge is filtering posts which are trivial, self-promoting and lack relevance to the focus of the site.
  • The bottom line is that there is no magic bullet. Social networking sites are rapidly evolving so it is important to continually seek creative additions. This takes time, work and investment.
  • Consider your own experience. What has drawn you to a social networking site? What have this site done to effectively build regular participation in meaningful discussions?

Thanks to Ken Ross of ExpertCEO, Inc. for his contribution to this article.

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What are Best Methods to Develop Your Staff? Three Thoughts

Situation:  A CEO wants to build her team, identify leaders within the company, and develop managers. How have others done this? What are best methods to develop your staff?

Advice of the CEOs:

  • A valuable resource is “First Break All the Rules” by Marcus Buckingham. Among Buckingham’s findings are that great leaders are different from great managers. Good leaders are outgoing and goal-oriented whereas good managers are people-oriented. Expecting good leaders to be good managers and vice versa is not effective. Only the exceptional individual exhibits both sets of talents. The traditional business structure assumes that talented people will want to “move up” the organizational chart. The reality is that some people are very good at a particular level of responsibility, and are happiest with this responsibility.
  • How do to enhance your team’s leadership and management capabilities? Evaluate your team for candidates who possess the qualities of leadership or management. Tailor your training to enhance the natural strengths of your candidates. Draft agreed upon written responsibilities and performance objectives with each of your candidates. Regularly follow up and provide feedback. Establish trial projects for new candidates that will allow them to experience additional responsibility, and allow you to see how well they perform. Make small steps at first. If the individual demonstrates talent, make successive steps more challenging.
  • Look at your organizational chart. Does it provide room for both leaders and managers? Does it provide room for the skilled role player who thrives in a particular role? If not, how will you fix it?

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