Tag Archives: Flexibility

How Do You Address a Customer-Supplier End Run? Three Ideas

Situation: A company’s top customer has approached one of the company’s suppliers with a request that the supplier sell directly to them rather than through the company. The supplier normally does not sell directly to OEMs, and has neither the sales force nor the customer service capacity to work with these companies. Nevertheless, following the customer’s request, the supplier has asked the company’s CEO for a meeting. How should the CEO plan for this meeting? How do you address a customer-supplier end run?

Advice from the CEOs:

  • You need well-placed advocates both within the customer company and your supplier company. These advocates can help you to better understand what is behind the customers approach to your supplier, and what the true issues are. You will also better understand how the supplier is reacting to this request.
  • Talk to the boss of the purchasing manager who initiated this and let him know how this will impact your ability to supply other critical parts for their operation.
    • Ask for fast track approval as a preferred supplier.
    • Try to cut this off before the supplier representative arrives for your meeting.
  • You know from your history with this customer that you have had to make frequent delivery adjustments to meet their needs. Further, as a value add you make modifications to the parts supplied to meet the customer’s engineering specs. This level of flexibility is not part of your supplier’s business model. When you meet with the supplier, paint a picture of the downside of working directly with this customer to convince them that they don’t want to take this business direct.

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Which is Preferable C or S-Corp Status? Six Suggestions

Situation: A company’s accountant advises them to transition from a C Corporation to an S Corporation. Remaining a C Corp would force them into accrual accounting with significant tax consequences. The accountant also advises that it is easier to sell an S Corp to a buyer, and S Corp status would relieve problems with retained earnings. Which do you think is preferable, C or S Corp status?

Advice from the CEOs:

  • Accountants disagree. Get a second opinion. Also consult a tax or corporate lawyer who will provide another perspective.
  • Another company looked at S vs. C status and found two key factors:
    • S Corp status is great if you expect to lose money for a few years because of the benefit that it can offer to personal taxes. Over the long-term you should look at the difference between personal and corporate tax rates and set your strategy so that it makes the most sense.
    • An S Corp cannot have non-U.S. shareholders.
  • There is more flexibility with C Corp status in your ability to grant options, sell shares, etc. For a suitor, purchase of C Corp shares prior to a full acquisition is like a date before deciding on marriage.
  • C Corp status is good if you are building an empire. S Corp status is better if want to have employee ownership under an ESOP as an option for exit.
  • Since taxes are a significant part of this decision, think carefully before you shift from cash accounting.
    • Once you commit to accrual accounting you can’t go back to cash basis.
    • To the extent have an accrued tax liability you can extend payment of this liability over multiple years.
  • You also may want to consider a hybrid accounting method:
    • Accrual for sales
    • Cash for service
    • Look at whether there are tax advantages to a hybrid model.

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Would You Dedicate Staff to a Single Client? Five Considerations

Situation: A company has received an inquiry from a large client requesting that they dedicate a significant portion of their staff to that client. The company hasn’t done this in the past, and the CEO seeks advice on the advisability of this choice. Would you dedicate significant staff to a single client?

Advice from the CEOs:

  • Provided that the terms offered by the client are favorable, the proposition may make sense. However, there are certain terms that you may want to assure are included in the contract:
    • In return for your dedicating choice staff to this project, ask for a substantial upfront payment – perhaps 50% of the total contract – to reimburse you for the opportunity costs that you incur committing your resources to the project.
    • Insist that the contract allows interchangeability of personnel if circumstances prevent initial personnel from continuing with the project.
  • Internally, work to assure that this project does not adversely impact your culture.
  • Talk to other companies that you know who have had similar arrangements with large clients. This will give you an understanding of the benefits and pitfalls of the arrangements.
  • Do everything that you can to assure that this project does not distract from your broader business strategy. Cash from the project may be nice, but if it inhibits your overall business strategy it may not be worth it.
  • If the employees assigned to this project are not happy with their assignment, the project may lead to unwanted turnover.

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How Can a Small Company Compete Against Bigs? Four Strategies

Interview with Sai Gundavelli, CEO, Solix Technologies

Situation: A company has top talent and a better technology solution. However their large competitors continue to compete by discrediting them – “nobody was every fired for choosing IBM!” How do you compete effectively against large incumbents?

Advice from Sai Gundavelli:

  • Invest in your product.
    • Work to attain best-of-breed status in your industry with a constant focus on and investment in building a great technology. Solix’s constant goal is to be the technology leader in information lifecycle management and Data Privacy.
    • Be organic and focus on integration, smooth operation and scalability. Build your system from the ground up. An organically designed solution where the pieces work seamlessly offers higher and more efficient performance.
  • Invest in alliances.
    • Solix continually invests in our partnerships, including our OEM relationship with Oracle Financial Services, and we have more such partnerships in the works that will help us expand our presence in the market. Partnerships increase your presence and visibility as you scale your own organization.
  • Focus your efforts.
    • We at Solix are 100% focused on our product, whereas our large competitors are juggling multiple priorities, like a juggler trying to keep a large number of balls in the air. While we are smaller, this allows us to more effectively focus our efforts without lots of conflicting priorities. We focus exclusively on information life cycle management and Data Privacy.
  •  Have others talk about you.
    • Solix’s answer to our competition is let our customers speak for us. We have many happy customers such as Honeywell, Duke Energy, American Tires, who are happy to participate in joint webinars and customer case studies. We work closely with them on the latest developments and direction and use their feedback to guide future product direction.

Key Words: Technology, Solution, SMB, Competition, Multinational, Incumbent, Product, Scalability, Flexibility, Alliance, Partnership, Focus, Specialize, Detail, Reference, Credibility

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