Tag Archives: Revenue

How Do You Build in a Declining Market? Five Solutions

Situation: Revenue for a product and craft business has been slipping. At the same time, their competition has been disappearing. It is clear to the CEO that demand is and will continue to be present because of the market that the company serves. The question is how to maintain the profitability to survive long-term. How do you build in a declining market?

Advice from the CEOs:

  • The keys to recovery in a business like this will be in two areas: improving sales and increasing margins.
  • To increase sales the choices are more aggressive marketing and selling to existing customers or creating new markets like previous generations did when they started the business. Consider services that you could bundle with your products to augment the ways that customers use them. It will be the responsibility of your sales and marketing teams to demonstrate these product/service bundles to increase sales both to new and existing customers. This will help to solve the revenue slippage.
  • The other side is ongoing efforts to reduce cost which will, in turn, improve your margins. Costs can be reduced in creative ways that are not obvious. These include improvements in purchasing, reduction of waste, recycling of component materials, and inventory controls. It will be the responsibility of your production, purchasing and inventory management teams to develop these solutions. Assure that these teams are recognized and rewarded for their solutions.
  • Look at the segments of your product offering. Are they declining at the same rate or are there differences? This will help you to focus your efforts, as a company, to grow market share even if the overall market is declining.
  • Other suggestions for increasing sales:
    • Take advantage of the craft trends. Do this with NEW talent – not tired talent.
    • Consider partnerships and collaborations.
    • Set up contests and craft classes.
    • Look at how other industries promote to the craft industry and follow their lead.
    • Consider kitted craft products.

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How Do You Plan for Market Evolution? Three Suggestions

Situation: A tech company competes in a rapidly changing marketplace. The companies they serve constantly evolve their platforms. The company must respond rapidly to assure compatibility with both hardware and software innovations. Users adapt to new platforms at different rates, and the company must address their needs, as well. With so much time spent tending these diverse needs, how do they plan for market evolution?

Advice from the CEOs:

  • In the market you serve you must constantly reinvent yourselves as technology changes. Some platforms make changes on a 5-year cycle, while mobile platforms are currently on a 6-month cycle. This may force choices as to which platforms to serve. You also may want to focus on platforms where what you bring to the table is most useful.
  • You have made the strategic choice to tie the future of your company to a few large companies that dominate their markets. It is imperative that you cultivate close relationships with the technology as well as strategic leadership of those companies. This will give you more advanced insight into their plans, and they may even involve you in discussions about how the market evolves. If so, you will have positioned yourself for that evolution. These relationships may also become your exit strategy.
  • Businesses run on cash, or access to cash. As you cultivate relationships with your key customer companies, look for opportunities to invest in developing markets on a subscription basis which will provide ongoing annuity revenue. Figuring out how to leverage advertising or positioning options into your offering offers an additional revenue stream.

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How Do You Create Consistency in a Business? Six Suggestions

Situation: A CEO feels like he is on a roller coaster ride with unpredictable revenue and processes month to month. His ideal outcome will be to be able to go on vacation for 4-6 weeks, and have the business running better when he returns than when he left. Have you managed to achieve this? How do you create consistency in a business?

Advice from the CEOs:

  • Make your managers live up to their titles.
    • Insist that they go to each other to solve problems first, instead of always asking you.
    • When they ask a question, answer how to solve it – but don’t give them the solution.
    • Require them to present solutions rather than problems.
    • Be willing to spend money on their solutions.
  • Answer all questions with questions.
    • Ask them for their recommendation.
    • Keep asking until they come up with the answer.
  • You should not be doing jobs or tasks that are really your employees’ responsibilities.
  • When you start to delegate, it hurts for a while but it will work itself out.
  • What has been the impact on other companies when they’ve made these changes?
    • Businesses have become more diversified.
    • CEOs are focused strategically vs. tactically.
    • Businesses are more successful and profitable.
    • CEOs enjoy coming to work again.
  • How do you work with younger workers, millennials?
    • Allow flexibility – where appropriate – on hours and how they do their jobs.
    • Responsibility will vary by pay level – with the understanding that higher pay equals more responsibility and most likely longer hours.

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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 Build a Young Company? Four Perspectives

Situation: An early stage company is positioning itself for growth. The CEO believes that they need to adopt a new model to grow. She is focused on a new channel – an affiliate model using the web. How do you build a young company?

Advice from the CEOs:

  • Introducing a new product to a new market is very difficult, especially for an early stage business that is still establishing itself. Shifting from direct sales to ancillary services presents a new challenge and a new demographic. In addition, in your market there are low barriers to entry so it may be too early to diversify. You are more likely to be successful marketing to your core.
  • Evaluate and decide whether there is growth in your core business. If so, stick with your core plan. If not, then you either must change or decide that your core market is not what you thought it would be.
  • You offer a valuable, important service. The issue is branding and a clear vision of what you want to be. Start by identifying your revenue stream. Then assess ways that you can move from one-time sales to an annuity revenue stream without major adjustments to your model.
  • Is it feasible to build a revenue share model for ancillary services with your core business partners? Here are the steps:
    • Develop a model.
    • Talk to both your business partners and customers – test the concept. See how they respond.
    • There are two things to look for: does it turn out that that the model is easy to sell and implement, with little effort or distraction from our core business, or does it compliment your core business. If either or both is the case, you may want to pursue it.

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How Can You Monetize Marketing Alliances? Six Thoughts

Situation:  A company works primarily with early stage/rapidly growing companies. To extend their service offering, they have alliances with corporations which are interested in these companies as sources of innovation. The alliances have helped them to gain new customers, but the CEO is curious whether he can gain additional revenue from these alliances. How can you monetize marketing alliances?

Advice from the CEOs:

  • Match making is a valuable resource – regardless of where your company is located or the customers that you serve. Companies are less likely to pay for something that they perceive as having received free in the past, but are more than willing to pay for options that will enhance both their top and bottom lines.
  • Look at ways that you can make your services more valuable to your current corporate alliance partners. How can you help them make more revenue, or enhance their bottom lines through a win-win revenue-sharing relationship?
  • Become a match maker and get a fee. Offer your alliance partners opportunities that are more intimate than speed dating. Make sure that you are playing both a key introductory and ongoing role.
  • Use speed dating to match companies and funding sources. Invite investment bankers or private equity firms. Charge a 1-2% match fee if they do a deal.
  • Simplify your model. Who is your real audience – who is the constituency that you can best serve?
  • The most valuable deals and matches are those that offer ongoing revenue opportunities to your alliance partners. This is where you can offer them the most important value – a value for which they will pay.

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How Do You Recruit an Outside Director? Five Suggestions

Situation: A company’s current directors are all insiders. The CEO wants to bring in an outside director for greater perspective, someone who can help the company grow to the next level. What should they look for?  How do you recruit an outside director?

Advice from the CEOs:

  • Look for an individual at a company in a similar market segment that is the revenue size that you want to be and which is selling to the same customers that you do. You want their sales process to be similar in type and complexity of sale but non-competitive with your company.
    • This can be an inactive founder or past employee who has been in GM role with P&L responsibility.
  • Write a list of the needs that you want this person to fulfill. Use this to evaluate prospective candidates.
  • Is it OK to hire a stranger?
    • Before you speak with a candidate, research their background and reputation.
    • You want someone who can provide information and a perspective that you don’t have now. During the selection process you will get to know the person.
  • Consider a high level individual from a company that has been a top customer. This individual can help you understand how you are viewed in the market, and how you can enhance your positioning and competitiveness.
  • Have lunch with a local recruiter who regularly recruits directors for companies. Get their perspective on how to select an outside director and what to look for in a candidate.

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Where Should You Focus – Eyeballs or Dollars? Six Thoughts

Situation: A company sells personalized content as well as a tool kit. The long-term plan is to monetize storage of personalized content. When they speak to venture capitalists, the VCs advise them to focus on just building their user base and not to worry about revenue.  What would you do? Where should you focus – eyeballs or dollars?

Advice from the CEOs:

  • Take advice from venture capitalists with a grain of salt. Remember that their game is to fund companies that they like incrementally, taking a greater share of ownership of the company with each increment in funding. The more you lack revenue, the more you’re dependent upon them.
  • Gain traction by offering free content with up-sell opportunities for premium access.
  • The give-away strategy is a great model to build your initial user audience. Consider micropayment options for special features, content storage, and so forth.
  • Going slow and steady may not be the right model for this space. Company growth for a web-based platform is different from the typical bootstrap model.
  • It’s hard to get good advice for viral marketing opportunities from CEOs who have bootstrapped their companies. Look for other input. Seek the advice of CEOs who have been successful in the viral online marketing space and learn as much as you can about their business models.
  • Gaming is another opportunity – premium or virtual world sales.

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Where Should a Company Focus – People or Cash? Four Thoughts

Situation: A small company sells consumables as its primary source of revenue and profit, and produces equipment associated with these consumables. Their challenge is that designing and producing equipment is beyond their financial capacity. They have a small, loyal staff engaged in equipment production. This is a critical trade-off that must be resolved. Where should the company focus – people or cash?

Advice from the CEOs:

  • This product/profit combination is common. HP sells printers and ink, as well as other products, but ink cartridges have long been their primary source of corporate profit. The question is how to produce the associated equipment at the lowest cost?
  • Given the shortage of financial resources, why not asks a company with expertise in equipment to build the equipment on a contract basis?
    • Offer the outsource company the designs and expertise to support the project. That company may even hire your employees who have developed expertise in this area.
    • In return for providing design and guidance, ask the contract company for a percentage of the revenue or profit on equipment that they sell. This relieves you of the payroll and cash obligations for the equipment, and provides you with a modest income stream from equipment sales.
  • There is an obvious question of how the small company retains its intellectual property position. Is it possible to look at critical sub-assemblies and retain the expertise within the smaller company to complete and install some of these?
    • If so, this will boost annual revenue. The contract partner completes all but the most critical pieces, and the small company finishes the product with its technology.
  • The small company, through its sales and marketing efforts, should maintain control of leads and sales of both equipment and consumables.

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How Do You Maintain Company Culture as You Expand? Six Ideas

Situation: A company wants to open a satellite office in a lower cost geography where they can provide current services at a reduced cost to improve margins. In doing this, the company wants to maintain the same culture and controls on quality of work that they enjoy in their home office. They also need to accurately forecast revenue for the new office. How do you maintain company culture as you expand, and how would you forecast revenue for the new office?

Advice from the CEOs:

  • Maintaining company culture is tricky as a company expands geographically. Assign one of your current managers, someone who buys into the company culture, to head the new office. Also maintain the same hiring and personnel management policies that you have at the home office.
  • As the biggest concern is cost efficiency, make sure that the office manager has clear objectives to realize anticipated savings.
  • Look for an incubator that can handle all the peripheral office details so your staff can focus on their work instead of managing facilities.
  • When it comes to revenue forecasting:
    • Given the lower costs associated with the new geography, look for opportunities to trade margin for longer contract commitment windows to improve revenue forecasting.
    • Both margin and delivery can be lumpy when opening a new location. Obtain a credit line to help you smooth the rough spots in your revenue stream.
    • Investigate deferred revenue options to spread revenue risk – right of first refusal on next generation projects in exchange for a lower cost per project to the customer.

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