Tag Archives: Revenue

How Do You Balance Competitive and Collegial Behavior Within The Team? Three Points

Situation: A CEO has built a company which is very collegial. She is interested in adding an element of friendly competition within the company. Would it be destructive to add an aspect of competition to the mix? How do you balance competitive and collegial behavior within the team?

Advice from the CEOs:

  • This can be achieved by focusing on recognition, and encouraging recognition of each other among the team members.
  • One example is to have traveling trophies.
    • One trophy could be circulated on a periodic basis based on measurable criteria. Examples include new client acquisition, increases in revenue, or increases in savings by improving processes. There are many positive achievements that can be recognized.
    • A second trophy could be awarded for “assists”. Examples include one team member helping another to land new accounts, a team of employees developing a cost-saving improvement to process, and developing a new accounting technique that saves the company money.
    • A third trophy could be awarded to one team member for a job well done, and then awarded by that member to another member for another job well done, and so on.
  • To add to the collegiality, some of the trophies can be passed around spontaneously for on-the-spot recognition. Others can be awarded on a scheduled basis such as annual or quarterly employee or company meetings. Mix it up and be sure to make it fun!

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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 Negotiate the Purchase of a Franchise? Seven Points

Situation: An experienced CEO is considering the purchase of a franchise. What are the key points to consider in both evaluating the opportunity and in negotiating the purchase? What advice should be sought? How do you negotiate the purchase of a franchise?

Advice from the CEOs:

  • Most franchises have a set contract in use by all of their franchisees.
    • Ask for the names of existing franchisees and ask them what works or doesn’t work both about their contract and the services provided by the franchisor.
    • Ask the franchisor whether they will agree to a side letter to cover areas of importance outside of the franchise agreement.
  • What services and are offered by the franchisor as basic infrastructure and what are offered as a percent of sales or other fee arrangements?
  • Look closely at the frequency and amount of franchise fees. What fees are set or variable? What is non-negotiable?
  • Is there a need for a professional to represent you as the buyer?
  • Closely inspect the prospectus financials – franchisors in many states are required to provide these to prospective buyers. What is the initial investment? Are there monthly or periodic minimums to be paid by the franchisee? What are typical monthly operating costs.
    • Add to these your salary replacement costs – assuming that you will have to pay yourself something over the break-even period.
    • Calculate the monthly revenue needed to break even, and to pay off the initial investment.
  • Evaluate the competitive situation facing the product/services offered by the franchise. Network with others in the market to assess both the market potential and any barriers that that will be faced as the franchise is established.
  • What other questions should be asked?
    • Why is this business interesting?
    • What is your experience and what is the experience of the franchisor?
    • How well do you understand the market that the franchise will be serving?
    • What does the franchisor bring to the table that you cannot do yourself? What are the comparable costs?
    • What is the anticipated rate of return? How is it being calculated? Can this be verified with third parties?
    • What criteria are deal makers and which are deal breakers?

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How Do You Manage Seasonal Gaps in Project Flow? Five Options

Situation: A company experiences seasonal gaps in project flow. This makes it difficult to project both cash flow and staffing needs into the future. In addition, monthly cash flow tends to be uneven. What can they do to improve control of internal and external resources in this environment? How do you manage seasonal gaps in project flow?

Advice from the CEOs:

  • The company currently focuses 60% on consulting and 40% on internal projects, some of which produce future projects. Relative proportions shift over time, and projects can be cancelled.
  • Try to write the company’s contracts to push revenue to early stages of a project, so that there is more cash cushion to help ride out short cash periods.
  • Look for options to change the business model to increase financial flexibility.
    • If there are significant margin differentials between different types of projects this has overhead implications when resources are shifted.
    • Look for ways to allocate less expensive resources or virtual resources with a lower cost to lower margin projects. Look for opportunities to utilize remote resources if these resources cost less.
  • Adjust staff assignments to maximize payoff, as well as staff retention options. Look for project work opportunities.
  • Analyze and evaluate the ability to switch personnel between paying projects and internal development projects.

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What are the Basics of a One-Page Sales Plan? Four Points

Situation: A CEO wants a simple, one-page plan for her sales organization to help coordinate the company’s sales and marketing efforts. The objective is to boost revenue growth and market penetration with consistent sales messaging. What are the basics of a One-Page Sales Plan?

Advice from the CEOs:

  • The key elements of construction are: research, identification of revenue sources, and construction of a Road Map.
  • Three Examples of a One-Page Sales Plan are:
    • The Customer Survey-based Sales Plan – Ask the top 15 customers what the company’s current share of wallet (SOW) looks like and what they need to do to gain additional SOW. Use the responses to identify additional revenue sources and construct the Road Map.
    • The Service Extension Sales Plan – Construct a grid representing the company’s products and services currently offered to potential customers – particularly the company’s top customers. Create a separate grid showing services that the company does not currently offer and ask customers what the company needs to do to make those services appealing to them. Use the information gained to construct the Road Map.
    • The Current and Potential Revenue Sales Plan – Construct a grid representing the customers and markets currently served and by what product or service. Look at additional customer markets not currently served. Estimate the size, new business closure rates, and the total potential market opportunity. Use the information gained to construct the Road Map.
  • The advantages of a One-Page Sales plan include:
    • One page simplifies the process.
    • Summary of current and new targets.
    • Easy to track and measure.
    • Increases the chance of success.
    • Key people get on the same page.
    • Filters out undesirable customers.
    • A plan that can be completed and implemented quickly, cost effectively with a high ROI.
  • Additional Observations:
    • The company’s principal challenge is prioritizing business opportunities. Creating an “Ideal Customer Profile” helps to produce the desired result.
    • The company has limited resources to invest in new projects. Using an effective, low-cost tool helps to maximize the impact of investment.
    • The ideal customer profile will change over time based on the business environment and the company’s long term goals.

How Do You Guide a Company Through a Sale? Five Thoughts

Situation: A company was built on capital equipment complemented by annuity sales of supplies used by the equipment. The company is moving toward automation of technology and offshore production of OEM equipment. An OEM partner will take on the equipment side of the business and the company will focus on automated supply solutions with sales direct to the end customer. The OEM partner has approached the company with a purchase offer. How do you guide a company through a sale?

Advice from the CEOs:

  • It is important to determine the value proposition, both from the company’s standpoint and the standpoint of the OEM buyer. The company’s objective will be to optimize the intersection of these two views of the value proposition — to its benefit.
  • Look at current employees and the technology and determine what to do to preserve their positions and interests. This will become part of the negotiation, but it is essential to have a clear idea of how this meshes with the CEO’s personal priorities.
  • Look to outside experts for advice on exit and succession planning.
  • Determine the CEO’s vision and path of involvement up to the sale. This involvement is negotiable, but should remain consistent with the CEO’s vision during the negotiation.
  • What is the company’s patent position, and the value of the patents in terms of future revenue? IP produces a future revenue stream. Consider the valuation to be in the range of 4 years of IP value.

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How Do You Make Hard Decisions on Employees? Four Points

Situation:  A company needs to adjust expenses to control costs. It’s largest expense item is payroll. They are evaluating three options to adjust staff costs to anticipated revenue. Alternative A – Cut everyone back to part-time. Alternative B – Cut a few employees, but keep retained employees busy. Alternative C – A balanced approach between these alternatives. From others’ experience, which is best? How do you make hard decisions on employees?

Advice from the CEOs:

  • The unanimous response from the group – for employees, Alternative B is the most positive approach. Extended cutbacks in hours has been painful for all and led to grousing. Once staff were cut it helped retained employees to focus on their work.
  • When it comes to vendors, use Alternative A – don’t pay everything that you want to pay, but pay what can be paid consistently and predictably. It is critical as this is done to make sure that promises are kept.
  • When it has been necessary to make cuts – how has employee morale been maintained?
    • In the short term, those who remained have been happy to have a job. Longer term, companies have had to do more than this.
    • One option is to set quarterly revenue and expense targets. When gross or net margin targets have been exceeded, companies committed to share some of the excess with employees.
  • Before making any decisions, have a meeting with employees and openly ask them what they’d like to see that will help to build company culture and enthusiasm.

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How Do You Boost Intensity and Accountability? Five Solutions

Situation: A CEO is concerned about the intensity and accountability of her team. An employee stock ownership program is in place, and employees are rewarded with bonuses for meeting or exceeding objectives. HR reports that there is a lack of decision-making; employees just sit and talk instead of moving forward. How do you boost intensity and accountability?

Advice from the CEOs:

  • Does the current bonus structure include revenue growth? If revenue growth is not part of the incentive program, then this won’t be the focus.
  • What happens when the CEO is away?
    • Assure that the #2 who’s in charge has the same sense of urgency as the CEO and has the confidence to make decisions.
  • The company is at the point where it needs seasoned professionals to run key operations and functions.
    • Ideally this would be an internal promotion, but if there is no internal candidate look to hire from the outside. Hire two new managers – for different teams. Watch how they do with each of their teams to determine whether one can run the whole outfit.
    • This can ignite other employees – those who will catch on to what the new manager is doing and will now get the message.
  • Another CEO empowered people and explained how it worked.
    • They have had to swallow some poor decisions but have learned that they can’t come down on those who make mistakes – it discourages them from taking the risks needed to make decisions.
    • They’ve organized strategic teams to develop the empowerment program with minimal input from top staff. Teams are required have to report on their results 2x week – no exceptions.
    • The CEO hired two key hires who are hard hitting with deep resumes and experience – individuals who have shaken things up.
    • The new managers started in a sheltered situation where they could learn the organization and the people. This was done before they were put in their eventual positions.
  • What are the potential downsides to making this kind of change?:
    • Some sparks will fly.
    • Some will get upset.
    • Be patient with this process – let it happen.

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How Do You Develop an Employee to the Next Level? Four Points

Situation: A CEO has a key employee who wants a higher level of responsibility. Currently this employee is primarily focused on business development. He’s good at this but wants a higher level of experience. The CEO agrees. How do you develop an employee to the next level?

Advice from the CEOs:

  • If you ask this individual what needs to be done, what happens?
    • Revenue is number one. This is where he is focused, but he wants more than this from his role.
    • If this is also the CEO’s primary objective then the CEO needs to back off and direct him to split his time between closing high level opportunities and training his direct reports to be able to close lower-level opportunities on their own.
  • To the CEO – thinking about your own experience, how did you mature to a higher level when you had primary responsibility for business development?
    • Answer: I built and trained staff to do this and delegated these responsibilities to them.
    • Allow this individual and other key managers within the company to do the same thing, and coach them along the way.
    • Empower this individual to build his staff and enable them to take on more of the functions that he no longer wants to handle himself. Allow him to prioritize his time to focus on: hiring and training of his key staff and coaching and supervision as they grow into their new roles.
  • Consider this solution as a larger project manager role. Take a key product and empower this individual to design, build and manage the organization to deliver this product.
  • To frame this solution short-term, start with a 1-on-1. Ask about his vision – what he wants as his role and how he sees building this.
    • Follow by laying this out in terms of the company’s objectives – be specific as to what this looks like.
    • Look for a win / win reconciliation between the CEO’s and the employee’s visions that meet both of their objectives. Get on the same page with this individual, so that this fulfills both of your needs.

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How Do You Shift the Sales Mix? Five Suggestions

Situation: The CEO of a professional services company wants to shift the focus of the company from emphasis on service of existing customers to new customer development. Historically they have counted on repeat sales, but these have lagged. The CEO wants to develop new customers to build current and future revenue. This is a mentality shift. How do you shift the sales mix?

Advice from the CEOs:

  • The objective is to move the current customer to new customer mix from 80/20 toward 40/60.
    • As an example, the CEO has shifted her focus day to day management to long-term planning and strategy over the last two years.
    • Now it’s time to motivate others to make a similar shift in customer development.
  • Make the shift to sales – to rain-maker – a requirement for Partner Track. Let those who want to pursue Partner Track know that this is a key part of their qualification for Partner.
  • Make cash flow analysis an integral part of new project proposals and current project tracking. Have project managers devise their project analyses to show return but review these to assure that their analyses are accurate. Require them to sell their analyses to the Partners. This will help them to see the value of correctly bidding new projects up-front.
  • Ask them – what do you want to be doing in 10 years? How will you be contributing to the goals of the firm? What are you doing to get there? Communicate the critical metrics that will be evaluated: sales, new account development, profitable bids and project cost control. Focus cost control on keeping options presented under control and minimizing rework.
  • Reserve Partner Track for those who can produce both sales and effective delivery of services. In employee reviews make this distinction clear.

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