Tag Archives: Growth

How Do You Raise Capital for an Expansion? Five Guidelines

Situation: A company needs to expand to meet growing demand and has opportunities to expand in several locales. They can finance this expansion through bank loans, or by selling either a minority or majority interest in the company. How do you raise capital for an expansion?

Advice from the CEOs:

  • Minority shareholders have appeal. Just be aware that they have rights. If they own interest above a certain percentage, they gain legal rights such as the ability to force liquidation. Research this percentage, and figure out a percentage of minority ownership that will work for you. Based on this, look for a minority partner who will give you the capital to expand for ownership below this threshold.
  • Consider a hybrid solution combining a smaller loan with sale of a limited percent of the company.
  • This is a risk equation.
    • The loan option is risk / reward for long term profit. You may have to secure the loan with personal assets.
    • On the other hand, selling a minority interest could set you up for life.
    • Look at both options, plus your personal goals and decide which combination of risk, reward and personal security fits you best.
  • One sale option is a phased buy out.
    • Example: sell 30% now, with options under conditions that you accept, to buy a larger share of your company later.
    • Continue to involve the key stakeholders in these discussions.
  • Assure that you secure your own future, and then secure the future of other family members.

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How Do You Maintain Momentum as You Grow? Seven Factors

Interview with Ishveen Anand, CEO, OpenSponsorship.com

Situation: Emerging stage companies that get early traction must maintain momentum and strong growth. This is particularly true if the company is competing in an established industry where innovative and new solutions are not the norm. Early adopters fall back into old, comfortable habits. Filling the pipeline with new prospects takes a lot of energy. How do you maintain momentum as you grow?

Advice:

  • Find a familiar, respected example of an existing service that is similar to yours. Match.com is widely recognized. We use Match.com to describe how we connect athletes with potential sponsors. Our service is free in the early stages and focuses on introductions. It costs nothing unless the parties decide on a deal. It’s up to the parties to decide whether to go out, form a relationship, and later end up together.
  • Map the stages of a sale for your offering, and select progressive KPIs that represent these stages. For example, early on it may be users. Later it becomes messages between users. A sale is closed when messages produce deals. Once you have progressive KPIs you can focus on tipping points between the stages and facilitating movement from user to message to deal. Set metrics and timeline objectives at each stage of the transaction.
  • Closely monitor conversation rates between users, messages and deals. Watch the momentum of conversion between the stages and test interventions that positively impact this momentum.
  • Match social media channels to the personalities of each of your stages. Twitter is a great metric of sales success and LinkedIn helps us to understand the reach of OpenSponsorship. Instagram is a great tool for those selling products, so slightly less relevant to us, but still necessary. Use the appropriate channel that will best bring potential users into your sales stream. An advantage of social media channels is that these provide additional insight into your transaction stream and what users are saying about you.
  • Understand what’s right for your users. Early on you look for elements that will create buzz and feed viral growth. Target special events and opportunities which offer high visibility. For us, a big event will be the 2016 Olympics in Rio de Janeiro. For another company it may be a large convention like CES or SxSW. Plan in advance and make the most of these opportunities.
  • Know your users’ seasonality. What are their peak purchase seasons? Do they have special seasons? What are their off-seasons? How can you take advantage of this knowledge to offer them new opportunities? Populate your web site with the right pages and social media marketing efforts linking to these pages to drive usage and business year-round.
  • Important pieces of momentum are staffing and investment. Early on, these seem almost like distractions to a CEO. The CEO is more engaged in the product or service being provided. However, personnel and fundraising decisions critically impact the future of the venture and must be taken seriously. Success will depend upon the CEO’s being able to move seamlessly between conversations about product and service, staffing and fundraising.

You can contact Ms. Anand at [email protected]

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How Do You Emerge from the Recession Stronger? Five Actions

Situation: A company is encouraged by signs of a strengthening economy. They want to encourage their staff to prepare for growth and new opportunities. The CEO is curious about what other companies are doing to prepare their staff so that they emerge from the recession stronger than they were in 2008. How do you emerge from the recession stronger than you were before it began?

Advice from the CEOs:

  • One company is organizing company meetings at each site to outline their high level plans so that all managers know the plan and vision:

o    General company direction

o    Market and opportunity

o    The plan – where they are, what they’re going to do by when

  • Another company conducts a general employee meeting every two months. At the last meeting:

o    They cancelled the 20th day off without pay – and celebrated!

o    They compared revenue growth now versus last year, focusing on the positive upside and company’s potential.

o    They explained why they are now recruiting, and reinforced their business model.

o    They had kept up marketing and sales during recession and these are now paying off.

  • Another is reinforcing the belief that they will stay lean and mean.
  • Another is Increasing update communication frequency and assuring that managers are updating their teams. This maintains the soft reasons for people to stay onboard, and to stay excited.
  • What not to do: do NOT allow cuts that were made to survive destroy the long-term workable business model.

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How Do You Move from Manager to Strategist? Four Suggestions

Situation: The CEO of a small-to-medium business wants to reduce day-to-day management activities and spend more time focusing on new opportunities. How do you shift focus from management to strategy and how do you identify the right person to take on the management role?

Advice from the CEOs:

  • As CEO your primary focus needs to be on the future more than the day-to-day. As a smaller company, the management role needs to be filled by an individual with broad multidisciplinary experience. To replace yourself, you need a Renaissance person – someone with industry knowledge and experience who buys into your business model.
  • As you evaluate candidates, look for attitude, not resume.
    • Analytical skills are critical – mental capacity.
    • These need to be complimented by guts – emotional intelligence.
  • Your current business is not the business that you and your co-founders started. It is a larger entity, more solid, and you need to bring in people who can take it to higher stages of growth. Finding the right person to fill your role is a long-term process.
    • Bring in 3 to 4 solid candidates as employees in important roles. Test them with challenges to see who can grow into the larger role of company manager.
    • Look for people who can grow your downstream businesses as candidates to manage the full business.
  • In the current market you have time on your side. While hiring is improving in some regions, there are still many more candidates out there than available jobs. This is unlikely to change soon.

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How Do You Manage Change? Four Perspectives

A company is experiencing change in both organizational complexity and culture as it grows. Employees feel that the company doesn’t have the same team atmosphere that it had when it was smaller. How do you manage change associated with growth and new opportunities?

Advice from the CEOs:

  • Change is an inevitable part of growth. Employees need to understand this simple fact. Change is tied to: age and stage of growth, changes in leadership, performance challenges, changes in customers and competition, and changes in the working environment. For example, the simple addition of Millennials to the employee pool will change the nature of a company.
  • What else do we know about change? That it is: an opportunity, filled with uncertainty, complex and disruptive.
  • Typical responses to change from staff are: denial, resistance, anger, fear, confusion, being divided about the impact of change, and chaos. It is important to understand this and to communicate to employees that their reactions are normal. They will also get over these reactions as they adapt to new conditions.
  • Denison Consulting has developed a model that represents four factors – Mission, Consistency, Involvement and Adaptability – with measures under each factor. The model provides a visual representation of how the organization currently measures up in each of the twelve factors, and provides a clear and understandable map of where the organization needs to focus to make the changes required to survive and thrive.
  • Special thanks to Paul Wright of Denison Consulting for his input to this discussion.

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How Do You Adapt From Sales to CEO? Five Perspectives

Situation:  A company’s CEO came from sales where she excelled in building relationships with important customers. As CEO she must adapt to new responsibilities. This seems to be working, but she misses her sales role as the face of the company to customers. She wonders whether this is normal. How do you adapt from sales to CEO?

Advice from the CEOs:

  • First, congratulations on your new role and responsibilities. It is clear that your Board saw your potential and has rewarded you with a new opportunity. You have a lot to feel good about.
  • Second, adapting to new roles is a necessary pain of personal growth. The company needs a different you now. Everyone in the room has gone through the same emotional trauma – and survived! You will, too, in your own way.
  • In your sales role self validation came from your ability to convert customers, satisfy their needs and solve their problems. As CEO, self validation must now come from managing, coaching and motivating others, not from doing the job yourself. Your new customers are internal as well as external. Many of the techniques that worked in sales can work in your new role. Look for potential wins and take pride in these just as you did in sales.
  • You are still the face of the company, but now in a bigger role. Enjoy this and leverage it for the benefit of the company. Take pride in team wins just as you did previously in personal wins.
  • You will never find someone just like you or who does the job the way that you would! Accept this, accept that others will add value different from your own, and that this has benefits. The more you can help others win the more success you will experience.

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How Do You Manage A Late State Private Tech Company? Four Topics

A late stage private high-tech company wants to know what questions are most critical for managing the next stages of growth. This includes factors that can help differentiate good opportunities from poor ones. What questions would you ask about managing a late stage private high-tech company?

Advice from the CEOs:

  • Team
    • Never compromise on your team. Is this a team of individuals who will be effective together, and can you make changes where necessary to build and manage the team that you need?
    • There is no room for someone who is not a cultural fit – do the team members work well together and does everyone see and support a win?
    • Who are the key stakeholders, and what drives them? Are these drivers compatible or in conflict? Can you bridge potential conflicts, or will they defocus your efforts?
  • Market & Strategy
    • Are your market projections realistic or fluffed?
    • Will your value proposition appeal to a large enough market to justify the investment of time and resources?
    • Is there a strong, realistic plan?
    • If you do a full SWOT (strengths, weaknesses, opportunities, threats) analysis, is the net positive?
  • Finances & Capital markets
    • Are the revenue and financial projections done correctly and achievable?
    • Raise money when you can, not when you need it – will the timing of your deal or opportunity, given existing financial markets, allow you to raise the funds necessary to bring the opportunity to fruition?
    • Is there openness to all potential capital or financing options? Financing is a personal relationship – how strong is the relationship?
  • Boards & Governance
    • Investors are investors; don’t overestimate their industry savvy. Are they aligned or in conflict? Are they fresh or tired? Will they support your efforts, and do they have the ability to generate extra funds as required?
    • It is impossible for a CEO or deal to be successful without the full support of the board – will you have full board support for your opportunity?
    • Is there clear differentiation between governance and management?
  • Looking over these questions, is the balance positive or negative? That balance will help you to accurately assess whether a given strategy or opportunity makes sense for the company.

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What Leading Sales Indicators Are Effective? Four Suggestions

Situation: A company has experienced low sales early in its peak season due to bad weather. The CEO wants to develop additional leading indicators that will help predict whether sales will recover prior to the end of the peak season. What leading indicators have you found effective in predicting seasonal sales?

Advice from the CEOs:

  • Access to benchmarked research can be helpful, especially industry reports that cite growth indicators. Some industry report producers can generate drill-down reports of their base data for a fee. This allows you to tailor your own study based on their data.
  • Depending upon whether you set revenue projections by brand or product line, look for indicators within brands or lines that will provide you with clarity on sales projections. An example is product reviews in relevant newsletters, provided that these have effectively benchmarked to sales results in the past.
  • In addition to new leading indicators for existing products, there are a number of ways that you can reduce the impact of seasonality on your cash flow. These include: investments that will lead to future income streams; new product placements to compliment or extend current lines; new key customers or outlets through which you can expand your market; and increasing sales calls to create new demand. Also, use the current season to establish additional benchmarks that will be useful in future years.
  • Other tactics include evaluating in-house versus contract production of your products to improve your margins, and strategies to improve up-sales from medium to premium products where margins are better. You can also focus on smaller independent outlets rather than national chains which are dominated by national brands, and also regional explore private label opportunities.

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How Do You Update Your Accounting System Without Losing Data? Four Thoughts

Situation: A company has used the same accounting system for over 10 years. The current system produces information quickly and easily, and empowers management and sales to make good decisions. However, it doesn’t respond to customer information requests as well as newer packages. What are best practices for updating your accounting system without losing data?

Advice from the CEOs:

  • One option is to keep your legacy system, but migrate to a user-friendly platform designed to work with a CRM system that can better meet customers’ needs.
    • Keep both systems up live until you no longer need the old system, except as an archive of your historic data.
    • Be sure to cross-train other employees so that your current system doesn’t become worthless if your key administrator gets hit by a truck.
  • Before you decide which direction to pursue, ask what your employees like the current system.
    • What do they find most useful?
    • What accounting features do you need to support your growth plans?
    • What key functions of the current system would you have to emulate?
    • How expensive is it to maintain your current system?
  • Is your business so unique that no off the shelf alternatives exist?
    • Could you adopt an 80-90% solution and customize the rest?
    • It may be difficult to do this on your own. Look for a consultant with a background in accounting applications to analyze your needs.
  • If you feel that you must make a change, but are not ready to do so, develop your solution gradually.

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How Do You Know Your Team Can Handle Planned Growth? Six Steps

Interview with Gene Tange, President, PearlHPS

Situation: An acquired company is poised for dramatic growth. The corporation that acquired them has questions about the current team’s capability to realize planned growth, and achieve their financial and operational targets. How can they assess whether the existing team is up to the task?

Advice from Gene Tange:

  • Think of this as an assessment process that accurately predicts the ability of the leadership team to realize planned outcomes while maturing key business processes. The leadership team is tied to both financial and operational outcomes that cover competence, continuity and alignment. This enables proactive management of organizational changes to support planned growth of the business. A real life example will illustrate the steps of the process.
  • The starting point was whether the current CEO had the right compliment of skills and capabilities to lead a high performance team. Could this leader see beyond the current stage of growth in terms of the talent and processes required for growth? Could he build a high performance team, align them and retain them to achieve results?
  • The CEO then laid out the future state organization. The essential question was whether he had teams of leaders in each of the key functions to assure success.
    • Specifically, the Product Development Team generated a competitive analysis comparing the current product with all others to assure a 2 year competitive advantage.  They were also tasked with improving cost of manufacturing.
    • The Sales Team installed an integrated CRM system to support large orders, including internal cross functional communication to increase customer visibility and satisfaction scores.
    • The Operations organization moved from a traditional batch manufacturing process to a state of the art, focused factory organization, eliminating WIP, reducing operational costs and increasing the speed of order to delivery.
    • Finally, the Finance and Administrative functions were assessed.
  • As a result, in 16 months the company grew 5x in revenue and increased margins. Time from order to delivery was reduced by 16x. Headcount was reduced while shipping volume increased by 5x.
  • A disciplined assessment process that predict business outcomes and ties your talent to the bottom line can provide a significant advantage in today’s highly competitive environment.

You can contact Gene Tange at [email protected]

Key Words: Growth, Experience, Assess, Capability, Processes, Predictive, High Performance, Competence, Continuity, Alignment, Organization, Structure, Manufacturing, Sales, Marketing, Customer Relationship, Finance

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