Tag Archives: Milestones

How Do You Evaluate Financing Options? Seven Key Points

Situation: A start-up company needs to raise cash to fund the achievement of key milestones. The founders have evaluated private equity, angel, and venture capital financing options. They believe that at their stage of development an angel is the best source of funds. What guidance can the group offer for negotiating with a private financier? How do you evaluate financing options?

Advice from the CEOs:

  • The important questions to answer are: who is the angel, what is the angel’s motivation, and what does the angel bring to the table?
  • What is the angel bringing to the table?
    • Is it money and connections? Who and how many people will be involved?
    • Do these individuals bring the expertise to take business to the next level and beyond?
  • Identify the strengths and weaknesses of the angel’s organization. Ask about other companies that the angel has financed. Talk to those companies about their experience with the angel.
  • Ask how long the angel plans to stay connected to the company.
    • Is the angel committed for the long-term or looking for a quick profit or exit and sale?
    • What happens after the angel leaves?
  • Validate statements made by and the experience of the angel.
    • How may IPOs has the individual or group been involved in?
    • What existing contacts do they have with additional potential funders or buyers?
    • Vet all of the claims and statements made by the angel.
  • Evaluate equity vs. cash funding and the prospects and terms that accompany future funding rounds.
  • What is the company’s long-term strategy?
    • Do the founders want to stay the course long-term or is it sale of the company to another entity?

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How Do You Manage Major Projects? Seven Points

Situation: A company conducts both engineering feasibility studies and development projects. These are high budget projects and must be managed diligently to prevent cost overruns. What have others done to assure that projects are planned and managed to budget? How do you manage major projects?

Advice from the CEOs:

  • What is the structure of most contracted projects?
    • Most projects are fixed price. They come from feasibility studies which are essentially “marketing” for future sales. Typical terms are 30% up front, with the other 30/30/10 upon achievement of milestones and completion of the project.
  • Get complete buy-in from the customer as part of the initial negotiation.
  • Stay ahead of expenses by billing in time to maintain positive cash flow from the projects.
  • Structure pricing so that custom work is profitable if the project mix is 50/50 custom vs. standard work.
  • Push-back if the customer wants to reduce project cost up-front.
  • Carefully document work papers – above what is required by the contract. Get buy-in for this in advance, during the initial negotiation.
  • Once the feasibility study is completed, revise the scope and deliverables of the work agreement based on findings from the study.
  • Separate the “concept” phase from the execution phase and charge a premium for the concept work.
    • Position this as a value to the customer.

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How Do You Supervise Without Being Bossy? Six Points

Situation: A CEO has received feedback “through the grapevine” that some of his employees consider him to be bossy. This isn’t the image that he wants to cultivate. Instead he aspires to be a collaborative CEO who is approachable by employees. Have others encountered this situation and If so, what have they done? How do you supervise without being bossy?

Advice from the CEOs:

  • When you hold morning update meetings keep them short and to the point.
    • Review updates on an exception basis. Go down the list and ask whether there are any challenges that need to be addressed to assure that deadlines are met. If on track, then no need to discuss, unless an individual anticipates a challenge coming up.
    • Don’t try to solve specific issues during the meeting – this wastes the time of those not involved in the issue. Schedule follow-ups to address challenges or just continue the meeting with a couple of people who have issues and who can assist each other in developing solutions.
  • Do 1-on-1 checks at end of day, as necessary.
  • Manage by walking around. When visiting specific employees ask: How are you doing?
    • If they are struggling, ask about the problem. Listen and perhaps suggest the next step. Take care to watch any body language for signs of discomfort that suggests that the individual is struggling.
  • When planning a project set milestones and timelines for each project.
  • When following up, ask how the individual is doing on their segment of the project and whether they have the resources that they need – including time and knowledge.
  • Have employees build the schedule for the project – assuring that their timeline meets the company’s delivery schedule. Ask for commitment to meet the timeline and hold them accountable for meeting it.

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How Do You Change the Company Structure to Support Growth? Ten Points

Situation: A CEO is concerned that her current company structure may not be set up to support envisioned growth. She is not sure how to differentiate managers from developers. She also seeks guidance on how to evolve the CEO role. How do you change the company structure to support growth?

Advice from the CEOs:

  • How do you differentiate and select managers versus developers?
    • Use an organizational development process to facilitate this selection.
    • First, outline the organizational structure that will evolve as the company expands. Share this with key staff and listen to their input.
    • Next, with key staff, determine the metrics. For example, what revenue or net profit before tax milestones will trigger the addition of managerial staff.
    • For each managerial position create a position description and a list of talents and skills that a candidate for that position should possess. Review these with staff and adjust with their input.
    • Let the company know the plans for the organization, and the positions that will be created as the company hits the milestones that will trigger growth. This will prompt anticipation of the opportunity and professional growth for staff that will accompany expansion.
    • Schedule a 1 or 2-day planning meeting with staff to discuss how to develop and improve both the organizational structure and operations. Continue this discussion in staff meetings at least quarterly.
  • The CEO’s role within the company.
    • The first question to ask is “what do you enjoy?” Is it being CEO, or is it leading the development teams? These are different roles.
    • Look at immediate needs. If the CEO is doing the books, it may be time to either choose or hire a COO – someone who can handle accounting, HR, and all the back-office functions.
    • Up to this point, the company has had a flat organization. The difficulty with this is that the first real crisis will take up so much CEO time that the company will fall behind in key areas currently overseen by the CEO.
    • Maturing the organizational structure is the right way to go. It will remove CEO from a “doer” role and allow the CEO to take the “leader” role – moving from working IN the business to working ON the business.

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Do You Have Control of the Numbers? Four Points

Situation: A company has a good accounting system, but the CEO is concerned that they are not making the best use of metrics to drive the business. He senses a lack of shared understanding of key metrics and goals. He senses the appearance of financial disarray, despite his clear grasp of the business. Do you have control of the numbers?

Advice from the CEOs:

  • A good accounting system may be in place, but if it is not being used to drive the business and monitor the achievement of milestones then the company is not gaining the best advantage from it.
  • If there is a sense of financial disarray, this suggests that the company lacks financial metrics. Employees and managers may be doing their jobs, but without financial metrics it is difficult to tell how well they are doing their jobs.
  • Start with basic metrics:
    • Where are sales coming from?
    • What is the profitability of sales by customer segment and product line?
    • What is the company’s profitability?
    • What are the profitability trends of the company and key segments of the business?
  • Once a company is tracking these metrics, it is easier to focus managers and employees on products, product development, operations, sales and marketing issues that are most essential to the company’s success.
  • The company needs the equivalent of a CFO. This means a financial person, not an accountant. An individual who knows how to look at the numbers. A CFO will help the company to
    • See the strategic trends in the business,
    • Uncover the best opportunities for growth, and
    • Understand the greatest potential threats to growth of the business.

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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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Should a Start-up Focus on Team Dynamics? Four Thoughts

Situation: An early stage company is wrestling with team dynamics and coordinating the achievement of critical milestones. The strategic picture seems to change on almost a daily basis. New employees who have big company experience want to see formal job descriptions and role definition. Older employees are jealous of the attention that newer, more highly qualified employees are receiving. Where should the CEO be focusing. How should she be handling these challenges? Should a start-up focus on team dynamics?

Advice from the CEOs:

  • At this point, the company is in start-up stage. The most critical issue isn’t team dynamics, it’s getting a product to market and demonstrating that you can sell it. If you don’t have a product, you don’t have a company.
  • Your top 4 areas of focus for the next 3-6 months should be:
    • Get the product out.
    • Close 3-4 good customers – preferably customers that you can reference.
    • Securing the funding – partnership or investor – that will get you to your next key milestones or to positive cash flow.
    • Build your organization and keep planning.
  • As an early stage company, distinct roles and job definitions make no sense. Your strategic picture is currently very dynamic. You need good people who can flexibly wear several hats and fill diverse roles.
    • If employees with big company backgrounds press you on job descriptions and role definitions, tell them that as a small company you must be quick on your feet, and that you need them to fill flexible roles. As you grow beyond 35 employees then roles will start to become more clarified. Ask for their patience.
    • If they continue to struggle with loose role definitions, then they aren’t the right people for an early stage company.
  • Employees who started with you early were great for the beginning. However, they may not be the best for you long-term. They may feel hurt as newer employees with deeper expertise and resumes start to replace them. In the interests of the company, the game is not longevity with the company; it’s about quality and putting the most competent people in the most critical roles.
    • If you are playing pick-up basketball, you play with whoever comes along.
    • If you decide to form a team and to compete, you need quality players. Some of your pick-up players won’t make the cut and need to go find another pick-up game.

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How Do You Make the Most of Changing Your BHAG? Eight Points

Situation: A company recently changed their BHAG (Big Hairy Audacious Goal) to focus on premium customer acquisition, but as a small-to-medium sized company has a 3-year focus instead of the typical 10-20 year focus of a larger company. They want to make this a company-wide effort. How do you make the most of changing your BHAG?

Advice from the CEOs:

  • First, it is measurable and specific – grow to 10 times your premium current customer base in 3 years. Your marketplace is changing quickly, so a shorter-term BHAG makes sense. Call it your 10/3 Program or 10/3 Challenge.
  • Is it too shallow? No – this is something that people can rally around. It represents significant company growth.
  • What happens when you achieve the goal? Celebrate in a big way, and then set the next BHAG.
  • How do you create excitement? Every time you hit a milestone, bring in pizza, or conduct a special event. Celebrate.
  • Success = Change. What does that next milestone mean for the company and your capabilities? This isn’t just about new clients, but also includes scaling your delivery systems and customer service. Rally your non-sales staff around these important tasks.
  • Create milestones not just around sales numbers but also around timelines. Tie incentives to achievement of BHAG milestones.
  • Conduct a company meeting to announce the BHAG, and announce progress in future company meetings.
    • Progress against milestones.
    • Share pipeline data to maintain excitement.
    • Develop scale-up programs and share progress of non-sales departments as they ramp up services.
  • Think about building a competition around the goal. As long as this fits your culture it can add excitement to achieving both milestones and the BHAG itself.

Note: The term ‘Big Hairy Audacious Goal’ was proposed by James Collins and Jerry Porras in their 1994 book entitled Built to Last: Successful Habits of Visionary Companies.

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How Do You Fund a Start-Up? Four Suggestions

Situation: Early stage companies often find it difficult to raise funds from traditional sources. An experienced CEO wants to help certain new companies of which she is aware in two ways – assisting them in receiving funding, and then helping to assure that they reach key milestones.  What is the best way to profitably address this ambition? How do you fund a start-up?

Advice from the CEOs:

  • Build relationships with a few select sets of local investors – venture capitalists, angels, and private investors – with whom you have strong credibility. For a retainer or fee, agree to bring them a number of new pre-vetted companies in the next year, and post-finding, help the companies to succeed and hit milestones. From the companies that you bring to funders, ask for equity in return for securing funding and providing guidance.
  • Put yourself in the shoes of the person who will pay you – what do they want and how do you deliver this for them? Develop statistics from your past successes that highlight your capabilities. Don’t be shy about your accomplishments.
  • What are you passionate about? If the answer is development – linking technology entrepreneurs to strategic partners and then being an accountability partner to assure that milestones are met – this will be your focus and your pitch to both funders and tech companies.
  • Your value is linking the entrepreneur to the funding source and being an accountability partner.

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How Do You Improve Planning and Execution? Three Factors

Situation: A company wants to develop a better planning and execution process. Historically they have been poor at meeting goals and objectives. What are the most important factors that improve planning and execution in your company?

Advice from the CEOs:

  • Take the advice of Jack Stack in his book The Great Game of Business. When building a plan, do it as a company-wide exercise.
    • Make sure that all of your departments are involved, each has direct input into the development of its own goals, and each understands that they are fully accountable for the achievement of their own goals.
    • Also do this in open session, and assure that each department has the input of other departments whose activities are critical to the completion of each goal.
    • This assures that different departments are working in alignment and not against each other.
    • Finally, make the process interactive and add some fun so that everyone is engaged.
  • Milestones and meetings are critical. Each department develops quarterly goals to support the plan, and department heads meet bi-weekly to monitor progress and prevent conflicts. Revisit the plan on a quarterly or semi-annual basis to adapt as necessary.
  • Focus the plan on one-year performance – with quarterly objectives – but forecast financials and broad metrics out 3 years to assure that the 1-year plan supports long-term objectives.

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