Tag Archives: Model

How Do You Terminate a Founder? Four Suggestions

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Situation: One of the founders of a company heads business development. This individual had no prior experience in business development, and no other skills to offer the business. Over the last two years he has generated only a fraction of his salary in new or additional business. The CEO has concluded that it is time to hire a business development professional; however, the Board is reluctant to act. What are the steps that you would take to let a founder go? How do you terminate a founder?

Advice from the CEOs:

  • Because the individual in question is an owner, the situation is delicate. Staff relationships are involved as well as morale. Therefore, it is essential that you create a convincing case for replacing the individual and show that this is the best for the business. Don’t rush the process. However, once you’ve built a solid case for what needs to be done, act expeditiously.
  • Start by evaluating and documenting what the individual is doing to develop new business. Count customer connects per day. Set a baseline expectation and measure against this. Look at the pipeline. Historically what does your new business funnel look like – contacts, presentations, evaluations, closes. How does this individual’s pipeline stack up? What are his business advancement and close ratios? How do these compare with industry standards?
  • For the individual: Demonstrate that his performance is penalizing his own return as an owner. Create a spreadsheet that shows: (1) The current situation, and his return as a shareholder from current results; (2) hire two effective business development people, how could this change his return? (3) Show the individual a graceful way out – one that works for him.
  • For the Board: if the current direction is negative, create a model that shows your current direction and the break even implications. Present this analysis to the Board to show that the company needs a change.

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How Do You Leverage Digital Marketing? Six Points

Situation: In traditional marketing, many marketers have been more focused on activity than results. In the digital environment, top marketing organizations need to become better at listening to their customers, watching them, and tracking their purchase decision behavior. What does this mean for the marketer? How do you leverage digital marketing?

Advice from the CEOs:

  • The digital world has changed marketing. The traditional marketing campaign was led by creative staff. Marketing was directed by media players and large publishers. Once a campaign was developed the pitch was “buy lots of impressions and customers will come.” During the dot.com boom and into the 2000s there was a shift to ROI – spend $x with Google, get y clicks that will yield z buying customers. This was transactional and could be expressed relatively simply.
  • Behavior has changed. The model has become more collaborative. A potential customer expresses interest and a need. A supplier offers a solution. The potential customer verifies and validates the offer through online communities – LinkedIn, Twitter, Facebook or other platforms, and may eventually make a buying decision based on what they find along the way.
  • The buying decision today is very different from the traditional offer-driven process. All of this can happen in minutes.
  • For the marketer, this means moving far beyond the simple advertisement. A presence is required on multiple social media sites, in addition to their website, to woo potential customers. This is expensive and requires a different level of resource commitment. Therefore, it is important to attribute the appropriate value to each online presence that the customer engages as they evaluate their buying choices.
  • This requires developing complex metrics, which change real time as customer behavior changes, so the marketer can track and understand customer behavior and adapt the offer to the individual needs of the customer. As individual consumers increasingly engage and employ new forms of digital technology the challenge to marketers only increases.
  • The digital marketer who will thrive will develop a sophisticated, metric-driven understanding of the multiple touchpoints and social interactions of a given transaction and will adapt new marketing approaches as the marketing environment continually changes.

Thanks to Vikas Sharan of Regalix, Inc. for his contribution to this article.

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How Do You Open a New Branch Office? – Five Analyses

Situation: A company plans to open their first branch office. There are considering several possible locations as well as the details that they should consider while opening in the new location. What are the most important considerations as they prepare? How do you open a new branch office?

Advice from the CEOs:

  • Perform a ROI analysis for the planned office. How will the ROI for the branch office differ from your primary office? Look for potential economies of scale in your business model. This may prompt a rethinking of how you generate your products or services.
  • Simultaneously, look at the potential costs per location and the level of business required to (1) break even and (2) to match/exceed home office return in the new location. As you consider different geographical locations, compare costs and potential contribution of each against the others’.
  • Decide whether you need to build full operations in your branch office, or whether you can use a distributed services model, working from a central hub that performs some operations that needn’t be replicated in the branch office as well as future branch offices.
  • Once these three analyses are completed, perform a make/buy analysis to determine whether you get a better return from setting up your own office or purchasing a local company in the new location, if one exists.
  • Lower risk by starting with a relatively low cost operation – essentially a satellite office with minimal staff. As the new office develops initial business, they can be supported by your home office operations. They will serve as local feet on the street to evaluate the true potential and local barriers to entry within the new market.

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How Do You Draft a Fair Partnership Agreement: Six Points

Situation: A CEO is negotiating a partnership entity. Her company will fund the entity, and the partner will earn ownership through sweat equity. How do you draft a fair partnership agreement?

Advice from the CEOs:

  • The most important factor is the ability of the two partners to create a successful venture.  Proof of ability to contribute needs to be a prerequisite to allocating ownership.
  • How does the sweat equity partner prove their capabilities? Create a schedule of milestones for the partner to earn ownership, based on mutually agreed objectives or revenue generation. The beauty of this is that you retain control until the partner has proven their value by delivering results.
  • The potential downside is long-term liability of the venture. The longer that you retain majority ownership, the longer you retain majority liability. Insure yourself against this liability.
  • Buyout clauses are important to retain your interest if the partner fails to deliver. Include a liquidation clause in case the venture fails.
  • While negotiating the agreement draw up a 6-month letter of intent. Specify what each side brings to the table and what each commits to deliver. Set clear, measurable, time-bound objectives. Negotiate fair protections desired by each party. Consider a consultant to facilitate settlement of areas of contention.
  • Theoretically, each party needs their own legal counsel. This adds expense but provides protections for each in the final agreement. Factor the cost of legal advice as well as consultant facilitation into your planning model.

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How Do You Finance an Early Stage Company? Three Considerations

Situation: The CEO of an early stage web company is looking at steep ramp-up expenses. Many companies have bootstrapped their way to success. However outside investment may speed the process. How have others evaluated these options? How do you finance an early stage company?
Advice from the CEOs:
• Raising money takes time and is a major distraction to the development process. The two big variables will be investor interest and the timing of investment. Talk to Angels and venture capitalists now. Start by presenting a broad outline of your technology and business model. Ask what they will want to see to offer you funding at different levels. This will give you a reality check as to investor interest in funding the company. It also creates a roadmap to funding if the response is positive.
• What is the company seeking – money or accountability? One CEO bootstrapped her company during the early stages, then looked for outside investment to gain accountability and advice – a whip to help move things along. This CEO found that investors brought few of the anticipated assets, and added a new level of distraction and pain.
• If you are looking for funding to purchase content to serve through your Internet portal, consider a more creative way to gain content. Can you use a Web portal through which your target audience provides both the content and the consumer audience in a marketplace exchange? Establish the audience and then add premium services to monetize the model. This can minimize your upfront cash investment requirements, and may create a faster track to positive cash flow.

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How Do You Position a Professional Services Company for Growth? Part 1 Three Suggestions

Situation: The CEO of a professional services company wants to position her company for growth. What suggestions do others have to assist her? How do you position a professional services company for growth?

Advice from the CEOs:

  • Focus on Dynamic Processes – The world and business environments are changing rapidly in response to economic, business and political stimuli. This places a premium on developing dynamic and highly adaptable business models. Companies that develop these models will have a much more sustainable competitive advantage than those who do not.
  • Leverage Information – Along with rapid change comes a great deal of new information. Companies with a sustainable competitive advantage will leverage information from both traditional and new sources to develop new opportunities and new applications for older but still valuable technologies and processes.
  • Be Sensitive to Cultural Issues – The expanding global economy means that customers, suppliers and employees will come from all over the world, bringing with them different cultural backgrounds. By adapting business models to address and respond to varying cultural needs – by celebrating differences instead of being inhibited by them – a company enhances its competitive advantage.

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How Do You Foster Productive Communication Within Your Company? Six Suggestions

Situation: A CEO is concerned that communication between employees is often non-productive. Individuals can be abrasive in their comments. This leads to loss of productivity because the individual criticized feels hurt and distracted. It also results in the formation of “subgroups” which conflict with each other. How do you foster productive communication within your company?

Advice from the CEOs:

  • Encourage tolerance of and sensitivity toward individual styles.
    • Identify the particular style of each individual. Assessment tools are helpful.
    • Admit that different individuals have different styles and that this is OK. Have a conversation with them so they are aware of this.
    • Always allow an individual one “charm” that is uniquely theirs.
  • Identify the motivations that drive each individual within the company.
    • Communicate with each individual in a way that recognizes and aligns with their motivation.
  • Focus on constructive communication aimed at helping the individual to strengthen performance. Build a foundation of fact to reduce the risk that what is said will be taken personally or interpreted as critical. Become the model for how others can effectively communicate with each other.
  • Meet others half-way.
    • Outline, test and agree on basic assumptions to get the conversation rolling.
    • Weigh the pros and cons of each suggested alternative.
  • Use employee reviews and compensation decisions as motivators.
    • Explain the company’s marketplace and plans vs. market practices. Get the facts. Know what each job typically pays and market balances between salary and incentive compensation.
    • Align the rewards offered with each individual employee’s motivations.
    • If an employee is not a 5 (on a scale of 1 – 5), explain what they need to do to become a 5.
  • Keep the annual retreat alive when everyone returns to the office.
    • Generate follow-up plans as part of the retreat. Include measurable objectives, responsibilities, accountabilities and timelines.
    • Identify solutions, not just problems.
    • When asking for recommendations, acknowledge each suggestion. Be prepared to implement what is suggested – in whole or as part of a larger strategy.
    • Recognize that the environment is in constant flux and that the company must continually adjust to adapt to changes.

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How Do You Unlock Your True Profitability with Sound Cash-Flow Trade-offs? Six Points

Situation: A CEO has her company on a positive growth track. The company has a solid customer base. Their products and accompanying services are increasingly well-accepted. She is ready to take the company to the next level of growth and profitability. How do you unlock your true profitability with sound cash-flow tradeoffs?

Advice from the CEOs:

  • Profit is different from cash flow. Make this distinction clear and act to boost cash flow.
  • Tracking Cash & Forecasting:
    • Watch the company’s bank balance. Frequently track cash inflows and outflows by period.
    • Carefully assess and project the pattern of customer buying habits and payment performance to develop sound revenue assumptions.
    • Compare the company’s margin dollars and billings with norms for peer group businesses.
  • Issues to consider in forecasting:
    • Hiring means commitment of future cash outlays. Consider contingent work force options.
    • Project and plan for future large payments (equipment, technology, marketing, loans, etc.)
    • Differentiate between investing in ongoing business capacity as opposed to incremental add-ons.
    • Look at cyclical trends and issues. Understand your customers’ purchase habits and patterns.
    • Develop likely “what if” scenarios (good and bad) and develop plans to reduce the impact of surprises.
    • Analyze the company’s business model and determine exactly how cash flows through the company’s operations.
  • Analyze important upcoming decisions: hiring equals investment; outsourcing equals expense. Evaluate needed support for each.
    • Differentiate investment versus outsourcing decisions. Smooth cash flow through selective outsourcing – especially when dealing with sudden or cyclical peaks. Avoid the risk of committing long-term resources by staffing up to address short-term peaks.
  • Focus on the opportunity cost of money. Add this focus to both planning and assessment.
    • Operate with a mix of other peoples’ money and ownership funds. The latter are more expensive than bank interest because the trade-off is what you could earn through alternate investments.
  • Fine-tune the company’s planning tools. Analyze budget and cash implications of alternate plans through detailed budget projections and follow-up by tracking cash expenditures.
    • Use Cash Flow Statements to analyze and project trends in investments, operations and financing and how each of these affects cash balances.

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How Do You Position a Company for Value and Growth? Six Points

Situation: A CEO wants to set up her company for long-term growth in value. The business has favorable margins relative to competitors and high cash flow. It is currently single-site but has a good model that could be expanded to multiple sites. How do you position a company for value and growth?

Advice from the CEOs:

  • Paint a picture of growth and cash flow. Use this picture to inspire both the home site and remote sites as they are developed.
  • Develop and demonstrate a Growth Model. It is important to demonstrate the success of the model so that it can be replicated in remote locations.
  • Get multiple sites up and running as proof of a profitable growth model.
  • As the company moves to a multi-site model, assure that each site manager has a financial interest in the success of the site. Develop a compensation system that rewards the manager for both growth and profitability. Develop a complimentary system that rewards key site personnel.
  • Develop additional products and accompanying services. These can be sold to current customers as well as new customers at the home and remote sites to boost growth.
  • As the model grows use the improved cash flow to buy other companies that are complimentary or expand the capacity of the existing company.

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How Do You Interview New Tech Hires? Four Necessities

Situation: A CEO wants advice on hiring new technical staff. Important considerations are cultural fit, identifying the characteristics of effective people, assuring that the right people are hired, and evaluating people for specifics tasks. In the past hiring technical people has proven challenging and poor hires have inhibited company growth. How do you interview new tech hires?

Advice from the CEOs:

  • It is critical to be clear on the factors necessary to be successful in the enterprise. Once these have been identified, align the factors with existing individuals in the organization as role models. Also align these factors with those who will be involved in candidate selection. This facilitates identification of good candidates.
  • Develop clarity on candidate evaluation. Identify and develop questions that will allow candidates to describe what is important to them and what they want to get out of their career choice.  In addition to specific knowledge, candidates should demonstrate a personal value system compatible with the company’s culture. They must also demonstrate a high energy level.
  • Once there is clear articulation of desired characteristics of candidates work with others such as college placement organizations, friends of the firm, Craig’s list, and so on to assist with candidate identification. A well written position description not only describes the type of individual desired, but also why someone would want to join the firm.
  • It’s imperative to be able to give a sales presentation on the company including specific reasons why people should join it. Avoid getting so wrapped up in the selection mode that you fail to recruit. Some who have done this were stunned to find that after they have made their selection the candidate was no longer interested.

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