Tag Archives: Leverage

How Do You Purchase a Company as a Non-Owner President? Four Points

Situation: The President of a company has a long-standing relationship with the Chairman and Founder, who is also the principal owner of the company. The President joined the company at a time that the Chairman/Owner thought that he was terminally ill and needed an individual who could take over operations as well as leadership. Since then the owner has fully recovered and wants to retake control. The President would like to buy out the owner. How do you purchase a company as a non-owner President?
Advice from the CEOs:
• What role has the President played so far? The President has advised the Chairman on how to grow the company and is leading this growth through developing key customer relationships.
• What is the owner currently doing? The owner has fully stepped back into his prior role, and is micromanaging all aspects of the business, effectively shutting out the President.
• The best way to avoid a situation like this is to negotiate the full deal, including transition of authority and terms of transition of ownership, up front before the signing of an employment contract. Not having not done this, the President currently has no leverage.
• The best option at this point is to have a conversation with the owner and to see whether the owner is open to a transition of either power or ownership. If the owner is not interested, the President may want to consider other opportunities.

[like]

How Are You Preparing for Next Year? Two Approaches

Situation: A CEO and his team are preparing for next year. There is a lot of uncertainty as to how the year will unfold and what the economic and financial environment will look like. What are others doing to plan for next year and beyond? How are you preparing for next year?

Advice from the CEOs:

One company built a 5 year plan to 2028 about a year ago.

    • They are now reviewing the plan. Their core has been growing faster than anticipated as a result of the new sales effort. For next year and beyond they are revisiting the plan and revising it both to take advantage of the new sales effort and to leverage this success into other areas.
    • Within the plan, priorities for growth have been identified, and the company is on target to double the size of the company in 5 years.

Another company established a Strategic Priority Team a few months ago.

    • They started by setting goals for 2025 to 2030. They followed this with a plan for what they need to do year by year until 2030 to realize this plan. They recognize that there may be speed bumps along the way but have established the internal discipline and capacity to address these.
    • Within the plan, they are looking at expanding ther facilities in 2nd half of 2026, and plan to double both their space and staff over the planning period.
    • An additional area where they will focus is their current and new business development effort.

[like]

How Do You Preserve Exit Strategy Value as a Minority Owner? Five Points

Situation: A company has been in business for 38 years. The majority owner founded the company. One of two minority owners has obtaining her share position through sweat equity. Another minority owner is on the Board but is not involved in the day-to-day operations. There are buy-sell agreements in place to preserve the interests of the three owners. In the case of an exit how do the minority owners preserve the value of their shares of the company? How do you preserve exit strategy value as a minority owner?

Advice from the CEOs:

  • Details of the current arrangement:
    • All partners are currently capped at 33% ownership.
    • The expectation is that in 10 years the two minority owners will buy out the principal owner and split ownership between themselves.
  • It is far better to negotiate potential ownership position up front – at the time of entry into a business, rather than along the way. As this apparently was not the case the minority owner has two points of leverage:
    • The minority owner has a good relationship with the principal owner, a very important factor, and the owner cares about the minority owner.
    • As the minority owner develops a track record of success, this should be leveraged in addition to the relationship to assure that the interests of the minority owners are preserved.
  • Additional key points of leverage of the minority owner asking the question:
    • The option to walk away as principal manager of the business if not happy with the situation.
    • Upside value of the company.
    • The desire of all owners to maintain their current life-styles, which are dependent on income from the business.
  • Separate management and control of the business entity from day-to-day operations. These are distinct and different areas of focus.
  • Another option to consider is the use of insurance policies to fund a buy-out of the majority owner.

[like]

How Do You Increase Employee Engagement? Six Suggestions

Situation: A  CEO wants to increase employee engagement throughout her family-owned company.  Performance is frequently poor, employees sometimes treat each other badly, and employees rarely put out the extra effort that could make a difference. What have others done to turn around a poor company culture? How do you increase employee engagement?

Advice from the CEOs:

  • To add some energy, for example to the accounting department, bring in AccountTemps for 3 months to bring everything up to date. This will help to establish a new level of expectation within the company. AccountTemps can also produce templates that will make it easier to stay up to date in the future. This will send a message to employees that the company is willing to invest to create new standards.
  • For those who are managing underperforming areas, link their pay to performance.
  • Leverage promising young employees by giving them more responsibility in their departments. This may facilitate a shift of resources to areas of the business needing attention.
  • Have employees make customer phone calls – to current and former customers – with instructions to listen to what the customers have to say about the company’s product and services.
    • Collect and use this information to foster a customer-oriented mindset.
    • Encourage employees to take pride in the final value delivered (or not delivered) to the customer.
  • Consider a second “Founding of the Company.” An event that will wake everyone up and reinforce both the value that they represent for the company and the company represents for them.
  • To increase cohesion within the company, create an event to bring everyone together, and help them to see and value what employees share rather than what makes them different.
    • Ask employees to put up photos of themselves at age 4-6. Ask those with children to add pictures of their kids as well. Conduct a contest is to match the photo to the employee.
    • Use special events to build a team focus at work. Examples are a company picnic with a 3-legged race or a movie and pizza at 6:00pm.

[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]

Is Team vs. Individual Project Responsibility More Effective? Four Thoughts

Situation: In the past a company assigned R&D projects to individual employees who were responsible for shepherding the project through to completion, seeking input from others as necessary along the way. The CEO has instituted a new system built around teams of specialists. In this new system the team is responsible for the project, not just an individual. This leverages people to do more with fewer resources, seems to be increasing throughput rates, and may reduce the impact of the departure of a single individual. Is team vs. individual project responsibility more effective?

Advice from the CEOs:

  • This seems a positive move, particularly if the groups seem to be responding positively.
  • Factors that will help:
    • Assure that there are strong leaders within the individual teams; leaders who are sensitive to individual team member’s contributions and needs.
    • Try the following theme – there is no “I” in Team, but there is an “I” in Win. Individual contributions still play an important role and must continue to be recognized.
    • Be proactive and sensitive to difficulties arising within particular teams. Work actively to resolve these difficulties so that they do not harm the team.
  • Another CEO has successfully used teams in development projects. When it comes to bonus time, she assigns a lump total bonus pool to the team, and asks them to come up with the distribution scheme within the team, subject to management review. The review is to assure that nobody on the team takes advantage of the others.
  • Immerse yourself in the literature on team structure and dynamics, to understand both the benefits and pitfalls of team management. This will help the company move smoothly through the transition.

[like]

How Do You Align Company Culture? Three Approaches

Situation: A company purchased another company one year ago. While the two organizations complement each other in terms of market coverage, their cultures differ. What are the key cultural issues that the CEO should consider as they work to bring the two companies into deeper alignment? How do you align company culture?

Advice from the CEOs:

  • What are the differences between the cultures of the two companies?
    • The purchasing company’s culture is characterized as tech-savvy. They work easily across time zones; have high team autonomy; and pool back-office responsibilities and the associated expenses for more consistent management across projects. While their overall revenue is lower, they have higher revenue per revenue-producing employee.
    • The acquired company’s culture is not tech-savvy. They make little use of email or technology; have little long-distance communication or experience working across time zones; a top-down decision and management structure; and expenses are managed at the project level with little consistency in expense handling between projects. They have no HR function.
  • Look at the core values that drive each company. Compare and contrast these.
    • Are there complementary strengths on which to build synergy?
    • Are gaps in one company complemented by strengths in the other?
    • Usually, the acquiring company has to opportunity to dictate the culture of the combination. With shrewd positioning, strengths of the acquired company can provide benefits to the combination.
    • Perform a values analysis of the two companies and look for opportunities to leverage value strengths across the two companies.
  • Look for an informal opportunity to have a conversation with the principles of both companies about their motivations for agreeing to the acquisition. There are two basic options:
    • Integration and growth or diversification and investment.
    • If the purchase was for integration and growth, then the acquirer will likely want to instill their values into the acquired company.
    • If the purchase was for diversification and investment, then the acquirer may be willing to allow the acquired company considerable autonomy. However, strategies and plans should be probed to provide clarification.
    • Understanding these factors will help to determine which values and strengths of each company to combine into a unified culture.

[like]

What Is Your Exit Strategy? Three Options and Approaches

Situation: Every CEO needs an exit strategy, if only for the good of the business because the future is uncertain. In this case, the Founder CEO wants to reduce her involvement in the business over the next 3-5 years. Her company has an offering that addresses domestic and international concerns about global warming. The CEO seeks help evaluating options. What is your exit strategy?

Advice from the CEOs:

  • The CEO sees several strategic options. Which option is more likely to yield results in a timeline that fits a 3-5 year exit strategy – a major international push, a partnering strategy, or leveraging current business to gain additional sales and market share by tweaking the current product line?
  • International Strategy.
    • The company needs international partners, not just a sales presence. This will require substantial time and upfront commitment from the CEO, not just a salesperson.
    • Where and who are the predominant businesses in the international markets under consideration?
    • Can an international strategy be executed and produce fruit in time to complement the exit strategy?
  • Partnering.
    • Partner with a hardware company to increase visibility and usage.
    • Partner with some of the top prospects for an exit strategy.
  • Focusing on the Product Line.
    • Employ customer shadowing to better understand how customers currently use the software and what challenges they encounter or opportunities they see – involve marketing, and R&D, not just the sales team.
    • Reposition the current offering to take advantage of opportunities.
    • Simplify installation and implementation.
    • Look at the product development strategy. Can revenue be bumped or upgraded from renewal customers? Are there options for “deluxe” versions with a premium price for upgrades, that become the following year’s standard upgrades?
  • Gather the company’s team and work through the scenarios for these options. Once this is done, prioritize them based of timeliness and potential impact on the bottom line and company valuation.
  • Also look at the Board structure – are there gaps in regulatory or sales and marketing expertise. What about adding someone who has connections to a key customer base?

[like]

How Do You Transition to a New CEO? Four Strategies

Situation: A company founder was advised by her Board to help them hire a CEO with more experience to run the company. This new CEO is now in place. As the founder gains more experience, the Board has indicated its willing to consider her as CEO. How do you transition to a new CEO?

Advice from the CEOs:

  • Become the fire hose! Build a tight relationship with the new CEO and together build the future strategy that will enable you both to win.
    • Others will focus on past issues. Keep your approach and advice positive. Position yourself as a partner, not an adversary. Emphasize your supportive and collaborative capacities.
    • Become the new CEO’s go-to person: trustworthy, objective, knowledgeable, reliable. Nurture the development of chemistry with the new CEO.
    • When the new CEO asks what needs to be done, produce the plan. Leverage your knowledge and expertise to become his greatest resource.
  • Enlist the CEO’s support of one or more of the focused strategies that are already in play within the company. Build the support of the Board and focus on boosting company value to 2x sales. The Board won’t forget who produced the original initiatives.
  • You have more power than you imagine – both with the Board and the new CEO – due to your knowledge of the marketplace and the business. Use it wisely.
    • While there is a new CEO, the company has already been profitable and company operations are clean. The Board will remember this.
  • How do you boost the chances to eventually be named CEO by the Board?
    • Tie yourself very closely to the new CEO – be this person’s more important resource. Build and cement your position as his most important ally within the company. It will help you to gain his support for implementing your ideas.
    • Segue your relationship with the Board members to become the company’s next CEO.
    • At the same time, grow your successor within the company so that you will be ready to move up to CEO when the opportunity arises.

[like]