Tag Archives: Focus

How Do You Best Exploit a New Opportunity? Three Observations

Situation: A service company has developed the capacity to produce and sell a product. The CEO is considering two options for this new opportunity: create a separate entity for the new business or run the businesses in parallel under the current umbrella. How do you best exploit a new opportunity?

Advice from the CEOs:

  • Option 1: Create separate entity for the new business while the existing business continues in parallel.
    • How big is the potential win? The current company competes successfully for about 10% of the market. The new capability would allow the company to potentially compete for 100% of a larger market.
    • How different are the two opportunities? The current business requires specialized talent – it is a low volume, high margin business. The new opportunity is the reverse – high potential volume but lower margin. It is a more generic market with fewer specialized needs.
    • The separate entity option provides the most flexibility. The current model already functions well. A spin-off provides an additional option without losing what already exists.
    • Bring in another individual to develop and run the new entity. It’s a different game and requires a different focus. However, it will be a great opportunity for the right person.
    • The spin-off model will be more sustainable under separate management than under the current company.
  • Option 2: Operate both businesses under a single entity.
    • This option looks like a double compromise – it alters both the company’s current strengths and the fundamental business model.
  • A long-term alternative is to look for a financial acquisition for the current company. It produces good net margins, has good cash flow, a and spins off cash. This can be valuable to a financial buyer.

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How Do You Expand Business Development Efforts? Four Thoughts

Situation: The CEO of a software company needs to increase revenue to cover expenses. He doesn’t want to cut salaries because if employees leave it will be hard to find replacements with the required skills. The better solution is to increase revenue. How do you expand business development efforts?

Advice from the CEOs:

  • Look at the markets which are growing rapidly:
    • Gaming. This is currently a good investment area. Large casinos are spending heavily on high end projects, and people just keep gambling!
    • Medical imaging. Potential targets include:
      • Pharma and Biotech R&D and Marketing/Sales – the ability to show how a drug binds with the cell receptors and how this impacts the cell is interesting to both groups. Also look at Medical schools. This is where you find the top researchers and they love teaching and presentation aids.
    • Military markets, particularly simulation spaces and unmanned vehicles. They value realistic simulated environments. Also look at training programs that value visually intensive simulations including marine and naval applications, aircraft, and battlefield simulations.
  • Consider the company’s business focus and strategy. How can it move from a “next project” model to a recurring revenue model? Is it possible to write client agreements to include a piece of the recurring revenue stream from client products?
    • Look at what the company does and package this as a product/service vs.an hourly problem-solving model. Focus on where the market is going. For example, iPhone apps – cheap to the customer, so millions buy them People now interact differently using electronic media. This opens new options.
  • What is the company’s key focus – Product Leadership, Operational Excellence or Customer Intimacy? How is the company’s differentiating strength presented consistently to client audiences?
    • It is important to clearly define the company’s niche – what makes it truly different. The communication must be clearly understood both by the engineers, and the business development and marketing people.
  • Invest additional funds in business development – with payments highly weighted on success.

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How Do You Maintain Focus on Quarterly Objectives? Three Ideas

Situation: The CEO of a service company is focused on growth, which is driven by new contracts. This, in turn is driven by new sales contacts per week. Sales staff are paid on commission. The CEO wants to assure that quarterly objectives are met to grow the company. How do you maintain focus on quarterly objectives?

Advice from the CEOs:

  • Track and publish progress against weekly, monthly, quarterly metric objectives and key drivers.
    • Post charts around the office to maintain staff focus on objectives.
    • Put up whiteboards that show individual metrics as well as daily “top 3” focus items.
  • Identify key market sectors where focus will pay off for the company.
    • It’s OK to take a generalist approach as the company develops a new market sector. This helps to learn the dynamics of that sector.
    • As sector market penetration grows, develop functional or sector specialties.
  • Identify and focus on the gaps to company success.
    • Monitor and generate incentives to increase sales activity. The more fun that is involved in this, the faster the company will close the gaps.
    • Focus marketing on developing more prospects. Brainstorm creative marketing approaches that will generate prospects. Create a competition to develop the best new ideas with incentives or prizes to celebrate the most successful ideas.
    • If additional resources are required, currently beyond the company’s budget, investigate adding commission-driven contract resources with strong incentives for identifying new prospects and landing new clients.

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How Do You Expand Your Market-Base? Six Suggestions

Situation: The CEO of a service company needs to expand its market base due to concerns that a significant service and referrals partner may decide to stop working with them. A break-up would have significant impact on salaries, effort and focus. The company’s priority is to expand client growth to minimize the impact of a break-up. How do you expand your market base?

Advice from the CEOs:

  • To expand or build a market requires a champion. Someone like the company’s founder who has the passion and contacts to build new business.
  • Second, incentives must be established to reward success bringing in new clients. These incentives must have teeth – no success, no incentive. No safety valves.
  • Third, create a plan to support the new business development – including marketing, event attendance, etc.
  • Initially, be selective and target just a few highly desirable new clients to test and refine the client attraction model before expanding to the broader potential client audience.
    • Build a set of case studies of services and results for new clients.
    • Track and prove out the profitability and workability of this model.
  • How should the effort to expand the market base be constructed?
    • Start with preparation. Research the current prospect list to assure that they are good prospects. Also look at the current company culture – do the company’s strengths align with what is needed to attract and serve new clients?
    • If the research shows that a significant number of prospects are different from current clients, think of this as a new channel. Create a different business unit to specialize in serving these clients. Hire a team to focus exclusively on the new client group, with proper incentives tied to achievement with these prospects.
  • Another company had a similar choice. They created a program to increase their market base and went after it with full focus. It took five years to accomplish vs. the two years that they had planned. Nevertheless, the results have been worth the effort and expense. If the company believes in the model, invest in it.

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How Do You Diversify Your Customer Base? Four Suggestions

Situation: A CEO is concerned that too much of her company’s business is focused on two few customers. The loss of a single large customer can potentially mean a significant hit to revenue and profitability. How do you diversify your customer base?

Advice from the CEOs:

  • If current cash flow is good, the company should consider purchasing diversity by buying a company.
    • Consider acquiring a supplier that is in good shape, but with lower margins. They will have the infrastructure to run their own operation, and the purchasing company will have the additional profitability to make the combined entity more interesting.
    • Given the company’s existing cash generation potential, there are creative ways to finance such an acquisition.
  • Why is this a good strategy?
    • Purchasing another company can instantly expand the customer base.
    • Diversifying the company opens additional options to build long-term sustainability.
    • A purchase strategy can bring in a ready-made and smoothly running infrastructure in the form of the purchased company.
    • Diversification can boost the value of the combined company on a more diversified business base. It might allow the company to combine low volume, high profit lines with high volume, lower profit lines. There are advantages to each of these business models.
  • Where can such a company be found?
    • Look both inside and outside of the current geographic base.
    • A candidate could be a higher volume but lower profit supplier of one of the company’s current customers that does not compete with the company’s current offering. Alternately, look at companies with more diversified customer bases in a related industry.
  • Look at the niches that the company’s current customers serve.
    • What similar niches exist? Are there acquisition candidates there?
    • Look at the functionality that the company’s products add for its clients. In what other industries would similar functionality be of value?
    • As these questions are asked, look for candidates that have complementary customer sets, customer bases, and geographical reach.

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How Do You Stay Focused When It’s Busy? Five Points

Situation: A CEO and his COO find it difficult to focus on core tasks when business is booming and everyone is busy. The company is small but has been very successful. However, the pressure of simultaneously attending to key customer relationships, training new people, and formulating plans is overwhelming. How do you stay focused when it’s busy?

Advice from the CEOs:

  • If the CEO and COO are doing a mix of corporate and project tasks, the first step is to delegate so that top staff focus on strategic areas rather than execution.
    • Over the next week, keep a record of what the CEO and COO are doing. At the end of the week sit down and determine which activities were corporate activities, and which should have been delegated to staff.
    • As an example, training of new personnel should be a key role of someone else. The CEO and COO will be involved, but only tangentially. The bulk of onboarding should be handled by staff.
    • Similarly,restrict sales activity of the CEO and COO to high level discussions and decisions.The rest should be handled by sales staff.
    • What must the CEO and COO be involved in?  Intellectual property development, high level decisions about new service offerings, high level decisions on business expansion opportunities, and occasional oversight of company operations.
  • It is important to focus. The first priority should be the company’s principle revenue stream.
  • The second priority should be new service offerings which are central to efficient delivery of the primary revenue stream.
  • Meet with top staff and develop a five-year vision. The order of priorities that are developed will determine where to focus.
  • In the process of developing priorities, ask the following questions:
    • What do you love and what do you need to love?
    • Analyze the comparative importance and urgency of each activity of the CEO and COO. Which require top level input, and how much? Which are better delegated to staff?

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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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How Do You Expand the Sales Funnel? Six Solutions

Situation: A company has strong technology and good top customers. However, the CEO is concerned that the company is too dependent on a few large clients. She wants to increase business among mid-tier clients. How do you expand the sales funnel?

Advice from the CEOs:

  •  Get very crisp in identifying who your core customer is and focus on them near term. Look at what you offer that your competition can’t match and create appealing offers for new clients.
  • Simplify and clearly define your market position.
    • Here’s an example: First to market with the best, smallest, fastest solution.
    • This clearly defines who you are. Focus the company on delivering this.
  •  In each high potential market find one company to whom you can offer a significant advantage.
    • Their current market position might be number 2, 3 or 4. Offer them a solution to gain an advantage on #1 and shift the playing field. This is a win-win for both you and them.
  • Horizontal business expansion could be the best near-term strategy. This lets each vertical market solve their own problems of technology direction, logistics, etc. Seek customers who have the resources to manage this in their respective market places.
  • Tailor contract minimums and pricing according to customer order commitments. Be willing to sacrifice price and some margin for committed purchases that match your timelines and resources.
    • Buyers often overstate their anticipated needs because they don’t want to be caught with short supply.
    • You can meet and promise lower prices for higher volumes because they rarely order them. However, combine this commitment with higher prices for the lower volumes that they are more likely to order.
  • Look across markets and focus on promising targets.
    • Use a call center to queue up prospecting telephone calls.
    • Have sales people conduct scripted qualification calls with prospects by telephone.
    • Only send sales people out to talk to qualified prospects. This saves travel expense and increases the productivity of in-person sales calls.

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How Do You Establish Performance Metrics? Three Guidelines

Situation: A CEO wants to establish baseline metrics to evaluate company performance, and guide both planning and operations. Without baseline metrics it is difficult to compare the impact of options that the company faces. What are the most important areas to analyze, and what do other companies measure? How do you establish performance metrics?

Advice from the CEOs:

  • Start with the basic divisions of the business. As an example, take a company which has three arms to its business – products that it represents for other companies, products that it distributes, and custom products that it manufactures to customer specifications.  
    • For each of these lines track gross revenue, profit net of direct costs, FTEs necessary to support the business, number of customers, net profit percent, net profit per employee and net profit per customer.
    • Calculate these metrics on at least a quarterly basis for the past 2-3 years to set a baseline and a chart of historic trends.
  • Once you establish a baseline, chart current performance on at least a quarterly basis and look for trends and patterns.
    • Where is your greatest growth and greatest profitability – not just on a global basis but in terms of profit per customer and profit per employee?
    • If you’ve included your full costs including the costs of the FTEs to support each business, then the analysis should show you where you want to invest and what it will cost you to support additional investment.
    • Do a similar analysis of costs per line to further support investment analysis.
  • This analysis will help to evaluate whether it is better to purchase another rep line, or whether you would be better off investing the same funds to grow custom business.
    • Similarly, it will demonstrate on what kinds of customers and products you want your sales force to focus to grow profitable business and will help you to establish objectives based on anticipated revenue or profit per new customer that sales closes.
    • Finally, it will highlight potential vulnerabilities such as the impact of the loss of a key customer in one portion of the business.

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How Do You Prepare for an Acquisition? Six Suggestions

Situation: A company is purchasing another company to expand its product offering. The CEO is concerned that the employees need to stay focused through the closing date. He is also concerned about retaining key employees both of his company and the company that he is buying. How do you prepare for an acquisition?

Advice from the CEOs:

  • Until the deal closes, don’t change anything about your current direction.
  • As you negotiate and move to close, be mindful of competitive bids.
    • This will help to keep the deal in place.
    • It may also open the option to put together the deal and then seek competitive bids to fund the deal through private equity groups.
  • Get three second opinions – learn what could go wrong with this deal so that you can plan and anticipate.
  • To assure that you retain key staff take the following steps:
    • Hire consultants: HR, financial, see what they recommend.
    • Offer key employers favorably priced options for a combined minority position in the company. This offers them an upside and will be an effective retention package.
  • What else can be done to retain key employees.
    • Let them know how this acquisition will position the company as the Dream Team company in your space.
    • Explain how this acquisition gets the company closer to a true exit strategy which will be financially beneficial to them.
  • If you can assure key employees that they will not experience any change in their job, title, responsibilities or compensation, retention may not be an issue.

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