Tag Archives: Reputation

How Do you Evaluate a New Opportunity? Five Views

Situation: A CEO has been approached about new opportunity. The company has been through some hard times, and the opportunity offers access to quick cash which would remedy the company’s debt exposure. A downside is that the deal would erode the company’s brand exposure because it would operate under another brand. How do you evaluate a new opportunity?

Advice from the CEOs:

  • Carefully evaluate how this opportunity will impact current operations.
    • What percent of time and effort will the opportunity require? Will it compromise the company’s current operations?
    • The appeal is access to quick cash. However, if the bottom line isn’t sufficient to meet the company’s needs, walk away.
    • Given that the project would be under another brand, why not spend the time and resources growing the company’s brand?
  • Is there anything that could make the opportunity more appealing?
    • See if the other company is open to offering a piece of the business after a period of commitment.
    • Management control. Assure that the company’s principals would have the autonomy to make it work.
    • The ability to keep the company’s name visible and prominently cited in all joint projects.
  • Look at this opportunity the same way that the company evaluates other opportunities.
    • Opportunity to build brand presence.
    • Assure that the proposed project meets the company’s current rates of return, or if not at least the current dollar return per project.
  • Is this a way to get into larger projects more quickly with reduced risk? If so, negotiate this into the deal.
  • Bottom line:
    • The company is emerging from hard times nicely.
    • The company is building a strong brand and reputation in its target geography.
    • Stay the course and trust in the company’s abilities.
    • Take on projects from this new opportunity only if they help build the company’s brand and reputation with less risk than is currently carried.
    • There is no reason to entertain this opportunity if it reduces the company’s brand equity and/or carries the same or more risk than the company’s current project mix.

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How Do You Optimize the Business Model? Four Suggestions

Situation: A company works on a project basis, and the CEO is concerned that the return per project is too low. She is looking for ways to boost the return per project without substantially increasing project risk. How do you optimize the business model?

Advice from the CEOs:

  • What are the risks and potential upsides surrounding the projects?
    • The principal risk is long-term liability, connected with residual liability following project completion.
    • This risk can be mitigated by purchasing a wrap policy; however, this can cut into the profit generated by the project.
    • It is possible to build scale more quickly with larger projects. The percentage return may be lower, but the dollars can be higher.
  • What are the principal components of the company’s time risk?
    • Higher cost of money and greater exposure to fluctuations in prices and interest rates over the project period.
    • This risk can be mitigated using financial derivatives particularly over longer-term projects.
  • How broad is the company’s geographical scope?
    • Currently customers are within a 30-mile radius of the company’s office primarily because company personnel are frequently at the client’s site.
    • This area will broaden as the company’s reputation becomes known.
    • Consider the creation of branch offices to extend the breadth of the company’s service area.
  • What are the key variables that the company faces completing projects?
    • Payment is not received under current contracts until a project is completed.
    • This can be mitigated by creating milestones with payments due at the completion of each milestone.
    • It may be worthwhile sacrificing a level of project profit in return for more frequent payments to boost the company’s cash flow.

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How Do You Foster Channel Development? Three Topics

Situation: A company has grown successfully designing and producing products for larger companies. In the process they have enhanced their own reputation in the industry. The CEO wants to boost growth by designing and marketing their own products. This will require the development of new marketing channels. How do you foster channel development?

Advice from the CEOs:

  • What are the initial steps?
    • Hire a commissioned salesperson with deep experience and contacts in in the company’s industry. This individual’s objective will be to seek new business opportunities.
    • Have top management, including the CEO, take a sales course – for example Dale Carnegie Sales Training.
  • What are the company’s objectives as it seeks to grow?
    • To feed the company’s ability to develop, produce, and sell their own proprietary products.
    • To create the capacity for the company to grow without relying on the efforts and success of current customers.
    • To develop pride in building a solid and lasting company that makes important contributions to technology.
    • To increase profitability and company value to benefit owners and shareholders.
  • What can be done right now, as the early steps are put into place?
    • Find ways to include pictures of company’s products in all company collateral – whether the company’s own or products developed and produced for others.
    • This may mean creating a small variation to an easily recognized existing product – without the customer’s logo – so that it becomes clear that the company is the source of these ideas and products without voiding existing agreements with key customers.

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What is Your 10-Year Growth Plan? Four Points

Situation: A CEO is building a 10-year growth plan for her well-established company. Options include building the company on its current track, growing through purchase of another company, or merging with another company. What are the most important considerations for each option? What is your 10-year growth plan?

Advice from the CEOs:

  • Considerations to start the process:
    • When acquiring another company or merging, the value is the reputation, relationships, and good will of the other firm. This may be more expensive but can provide a head start in the new market.
    • Perform an ROI analysis of build vs. buy. Estimate what it will cost to build. Compare this to what others are asking for their firms. In both cases generate a 5-year cash flow forecast. Discount future cash flows using the company’s desired rate of return – for example the company’s PBDI&T target – as the discount rate.
    • Also compare the relative risk of each option.
  • Build Option:
    • It’s not necessary to recreate the full home office operation.
    • Start small – sales, support, or maybe just an address.
    • Do the actual work at the home office until sufficient business is generated at the new site to support a larger local operation.
  • Buy Option:
    • Look for a company with a good local reputation, who shares the acquiring company’s values, but who wants to sell.
    • This option provides staff, relationships, and a reputation in place. They will already know the local code.
    • Structure a deal for long-term value to the owner. The ideal is to pay as much as possible with future rather than current dollars, with a premium for high retention of personnel and business
  • Spend some time in a new area and get to know it before deciding. If the company already does some business in the new locale, this simplifies the decision.
    • Some locales have been found by others to require a local head of the office who is from the area – who “talks the local talk and walks the local walk.” This will be the case whether the decision is to build or to buy.

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How Do You Find the Right Funding Source? Six Solutions

Situation: A company is short of cash and needs a source to fund their cash flow needs. Their needs are mapped out for the next four years and they can fund current operations for a few months. However, their bank will not extend their credit line. How do you find the right funding source?

Advice from the CEOs:

  • Try another bank. Ask friends and contacts about their banks and see if they’ll refer the company to their bank.
  • Explore renegotiating the company’s lease to ease the cash flow needs.
  • Explore renegotiating payment terms with suppliers. See what can be worked out. The bottom line – if the company goes Chapter 7 or 11, they get nothing.
  • Consider going to a larger company and working out an arrangement.
    • Ask that they allow the partners to operate as an “independent” entity retaining their titles.
    • In exchange for funding the company’s cash needs, the larger company shares in the profits.
    • Seek a temporary arrangement to allow the company can get back on its feet financially.
    • Use the friends and reputation that the company has developed over the years. The company is a good outfit and respected. Others may help if asked.
  • A similar tactic is to approach a larger company to negotiate an arrangement that will allow the company to survive. Start with a business plan.
    • Highlight the company’s reputation and the quality of its products. Use references from highly satisfied customers.
    • Highlight the company’s key strength – developing the critical path and plan for a successful project.
    • The thrust of the presentation: the partner gets a quality team and shares in the profits from projects completed. The partner provides the cash to fund the projects. Compare the risk and return on these funds compared with other investment options available to highlight the value of the proposal.
  • Other CEOs shared similar situations that have worked for them.
    • The financial realities were kept secret from staff, customers, and competitors.
    • All unnecessary expenses were cut.
    • The focus was on making money today.
    • Supplier payments were delayed as necessary to manage cash flow.
    • The process was managed creatively, sometimes with the assistance of friends, and the companies were able to prevail.
  • There is no shame in facing and dealing with this problem. Determination will pay off.

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How Do You Shift Culture as the Company Grows? 12 Challenges & Countermeasures

Situation: A company has grown through its expertise consulting for other companies. For its next growth step the CEO and Board want to shift to a project basis. This entails several changes, from compensation to organization and focus. How do you shift culture as the company grows?

Advice from the CEOs:

  • Risks & Challenges
    • Biggest risk – dissatisfied employees who see less billable income per hour and may not see the “more hours” part of the picture.
    • The biggest personnel challenge will be those who have been with the company for many years, and who will see the most change – maybe not to their specific practices if they can bring in business, but on the project side.
    • Communication is a critical challenge, and also the best way to avoid landmines. Put a velvet glove on the presentation of the opportunity: “This is good news – we know that the low hanging fruit is now mostly gone, and that the remaining fruit is higher; to counter this we now have more options.” Carefully prepare communications to both management and consultant team members.
    • Another potential landmine – the impact on the company’s reputation if it blows up after a year. Set appropriate expectations – the company is introducing a new program rather than a wholesale rebranding.
  • Countermeasures to Mitigate the Risks
    • Maintain a structural option that preserves the old model for those who can bring in new projects and who prefer this model. For them, the new model is just an option that can help tide them over if there are gaps between the projects that they bring in.
    • Present the project option as new opportunity. Give more senior and experienced consultants priority in choosing whether to participate or not in new project work.
    • Plan and create the ability to assess the old consultancy model vs. the new project model. This will be especially important when individuals are spending part of their time in each area.
    • Create a set of metrics for each business – the consulting and project businesses – to measure whether they are on track. Identify and monitor the drivers for each business.
    • Keep the title Consultant on consultants’ business cards – Consultant, Sr. Consultant, etc. Allow them to continue to take pride in their role.
    • Move to the new model through a planned phase-in but retain the option to adjust the speed of transition between the old and new models. This will allow sensitivity to changes in the environment.
    • Don’t consider an immediate and complete rebranding – think in terms of introducing a new product under the company’s well-known brand. Plan a gradual transition of business to the new model. Introduce the new product as a new offering. As it picks up steam, gradually move brand identification and promise to the new model.
    • For the new project model, create incentives for project performance. Show team members that while the hourly rate may be less, if they perform as a team they will share the upside through project bonuses.

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How Do You Brand a New Product? Seven Suggestions

Situation: An information services company wants to launch a new product in an existing market. Their current brands are well-recognized with excellent reputations. Should they tie the brand to the company name or current products? How do you brand a new product?

Advice from the CEOs:

  • Brand specifically for each product or market – just as consumer product companies brand the same product with unique names for each consumer or commercial market.
  • A brand name is not the company’s identity – Apple as a company has created separate brand identities for computers, iTunes, iPods and serves multiple markets.
  • Attend conventions and survey the target market and current providers. Network to meet people and ask questions about what is important to them and to their buying process.
  • Think about the marketing funnel. The first element is awareness.
    • What are the company and its current brands now known for?
    • Build a brand with value that leverages the reputation and expertise currently valued by customers.
  • Define the current and planned market segments and tie branding to them.
    • Who are they?
    • How do they do it?
    • How will the new product fit?
    • Look at ROI for each market and create a strategy for the optimum combination of speed and profitability of market entry.
  • Tying meaning to a name can be a mistake. When one CEO named her company and service around a specific capacity, she limited the way that it was perceived. She is now considering a complete rebranding to open new markets.
  • Hire expert consultants with experience in developing brands. While this is an investment at the outset, these individuals are better, cheaper, and faster than doing this yourself.
    • Monitor the consultants to assure that they are spending the company’s resources wisely and addressing the company’s needs.
    • Hire someone with a network to gather the data necessary to support the branding exercise, a project manager. Use more expensive resources to plan and manage the exercise, and less expensive resources to gather the data.

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How Does a Professional Services Firm Get Known? Seven Ideas

Situation: A professional services firm has opened a new office in Silicon Valley. Their immediate priority is building clientele in their new market. They have an excellent reputation in their other markets, but are as yet unknown in in either Silicon Valley or Northern California. What can they do to create buzz and local awareness? How does a professional services firm get known?

Advice from the CEOs:

  • Hire a part time PR person who is familiar with the local community. For example, this may be an experienced Mommy Tracker – a woman who puts priority on being a mother, but who is also interested in working part-time with a flexible schedule. The role will be to schedule speaking engagements with local organizations, groups or companies.
  • Think about publishing a book, whether yourself or with a professional writer. Tweak it to include a section on start-ups and do a book speaking tour in Silicon Valley.
  • Consider sponsorship of prominent local organizations. In Silicon Valley this could include incubators or entrepreneur groups. These are companies who could benefit from professional services.
  • Offer seminars to target clients, or those that invest in target clients – for example venture capitalists or angel investment groups.
  • Write articles for Red Herring (redherring.com)
  • Get to know the WI Harper Group (wiharper.com) – connected with Walden International. This is a San Francisco venture capital group with limited partners from China, and with a focus on US/Asia technology transfer.
  • Highlight past success in helping clients to gain funding.
  • The suggestions outlined here can be applied to opening a new office in any new location.

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How Do You Optimize Quality Improvement? Six Suggestions

Situation: A company’s reputation is based on quality of work. The CEO notes that occasionally they have mishaps due to suboptimal documentation. They are considering a concerted quality effort.  Based on your experience, would you do this whether or not you were bound by ISO requirements? If so, would you hire an outside consultant to guide your efforts? How do you optimize quality improvement?

Advice from the CEOs:

  • Some companies have successfully used ISO to force documentation. ISO provides a structure to enforce keeping the company and employees diligent and honest.
  • Other companies have used standard operating procedures (SOPs) for field as well as internal functions to speed completion of documentation and accelerate invoicing. These companies may or may not have ISO requirements.
  • One company tried to go cheap – implementing process improvement without a qualified consultant. While the effort was eventually successful, it took way too much time and money. From this experience, they recommend hiring someone who is experienced and who already has a template to guide the process.
  • To test the experience of an outside consultant, start with a small project to get the company accustomed to the process and to evaluate the consultant’s efficacy.
  • If the choice is to work on this yourself with your employees, start by documenting what happens correctly. Once you have done this, work on improvements to address problem areas.
  • This is not a simple exercise – plan for it and use the right inside or outside person to guide the process.

 

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