Tag Archives: Value

Do You Share Company Costs with Customers? Five Points

Situation: A B2B company has historically negotiated pricing with customers individually. While there are similarities between customers, each receives a product customized to their needs. The CEO is considering creating a “full disclosure” pricing model including their costs and seeks feedback from others. Do you share company costs with customers?

Advice from the CEOs:

  •  With only two exceptions, the CEOs did not agree with the concept of fully disclosing their cost structure to the customer.
    • The industry exceptions were public construction and government work. Some cities and the federal government require cost breakdowns and mark-ups by regulation.
  • The difficulty with the profit or license line, however it’s labeled, is that it becomes obvious that this is the company’s profit ‘nut.” This may be shared with a CEO that you respect; however, if the CEO shares this information with others in the organization your cost breakdown may become the basis for future line-by -line negotiations for cost reduction. Those with whom your company negotiates will be acting in their company’s interests, not yours.
  • The key is to optimizing pricing is to identify and sell a solution to the customer’s pain. If you do your homework well, and the customer is the right prospect, the price that you charge will pale in comparison to the costs that the customer seeks to avoid.
  • In your first negotiation, make sure that you have identified the customer’s pain and are presenting a value that addresses this pain. Only after you set expectations and have assured balance of effort do you go into more detail about your cost structure. Even here, only share detailed cost information if you deem this critical to the sale.
  • Look at it this way – price is not the key issue. The key issue is whether you can solve the customer’s problem and do so while providing an appropriate return on investment for the customer.

[like]

How Do You Fuel Early Stage Growth? Five Suggestions

Situation: An early stage company has assembled an impressive team and has a solid service offering. The immediate challenge is bringing in clients to fuel growth. The team has the capacity but needs some creative ideas on where they should focus their efforts. How do you fuel early stage growth?

Advice from the CEOs:

  • Fully utilize the team’s talents. Team members with established expertise can offer clinics featuring the company’s service offering at local colleges, business organizations and other venues to target audiences. Think about business organizations with members who would benefit from the company’s services. Also reach out to venture capitalists and the entrepreneurial market.
  • Develop a strong value proposition:
    • Go-to Organization
    • Eyeballs on the market
    • Links to highly qualified resources
    • Demonstrated expertise in your space
    • Claims tied to the top priorities of target clients
  • For start-up and entrepreneur client targets:
    • Offer a packaged set of services for a fixed fee. Be open to creative payment options to fit the financial needs of entrepreneurs.
    • Start developing a full suite of services. Start by assessing the need and developing a target list of early clients. VC portfolio companies can be a great target.
  • Build a good web-based communications interface for client use. Think of what is needed to create an attractive menu and let this drive service development.
  • Develop a separate brand for ancillary services that will complement the current offering, but which is outside of the current offering. Look at markets which would benefit from the service, including medical and nursing providers.

[like]

How Do You Rebuild a Company? Nine Strategies

Situation: A CEO is in the process of rebuilding the firm following a period of inactivity. Historically their marketing was word-of-mouth. How do you reestablishing a network which has been dormant for a period, find new clients and communicate an updated value proposition? How do you rebuild a company?

Advice from the CEOs:

  • Track down and visit old customers and contacts. Let them know that you are rebuilding the company and ask for their advice and help.
  • Use LinkedIn to find and reconnect with old contacts. Have breakfast or lunch with them, even those who are retired. Reestablish old connections and ask for an update on their companies and activities.
  • Focus on your knowledge base and the results that you’ve produced historically. There are more technology choices available now than there were in the past. Help old and prospective new clients to navigate the array of choices.
  • Development assessments to show your prospects where they are and where they need to focus their effort.
  • Many have built companies on their own – without professional assistance. The results often look good on the surface but lack a solid foundation. You have the perspective and expertise to bring it all together in a coherent and cohesive strategy.
  • Rejoin professional associations and networks that you may have dropped.
  • Go virtual – use virtual assistants to manage expenses while you rebuild.
  • Do webinars, and give talks on developing and executing a successful plan.
  • Create some pro-bono or low-cost programs for charities. Your target is the Board Members who may become future clients.

[like]

How Do You Optimize Your Business Model? Six Points

Situation:  A company is in the process of shifting their business model to better address customer needs. They have three different models under consideration. Management is split between these models, but must arrive at a consensus. How do you optimize your business model?

Advice from the CEOs:

  • Right now, you are considering three different potential models:
    • Tools – your old model
    • Data – produced by your old model
    • Service – your new model
    • These are different models with different prospects.
  • The money makers in marketing focus on data, not tools. Data is information, and this is what is valuable to clients. If you want to focus on the data component of your offering.
  • Currently, you are scraping data from social media and matching this to your client’s database on a real-time basis. There’s a model and value here because you are enhancing your client’s current database by making it more useful and actionable to them.
  • You have tools to enable and add value to existing client databases by allowing them to better segment their database. Again, there is value here.
  • Your core IP is the ability to correlate diverse data sources. Have you protected this IP? If not, this needs to be a top priority.
  • How much information that you scrape from social media sources can you share without violating privacy? This is something to think about because people are becoming increasingly sensitive about companies collecting their private information.

[like]

How Do You Structure an Earnout? Five Perspectives

Situation: A founding CEO is evaluating a purchase offer for his company. The buyer wants the CEO to retain some ownership interest to assure a smooth transition post sale, and ongoing assistance from the CEO so that the company continues to succeed post-sale. Should the CEO retain a minority share of the company? How do you structure an earn-out?

Advice from the CEOs:

  • The ideal option is full payment up-front. However, if the CEO is perceived by the buyer as critical to the company the buyer will want to have some assurance of continued services for some period.
  • An earn-out of fixed payments over time is acceptable provided that the language of the agreement is acceptable. However, performance-based earn-outs make no sense if the CEO no longer has control over the decisions that will impact performance. Don’t structure the payment as an earn-out, but as a retention bonus and assure that the terms are favorable.
  • Post-sale a minority share of your old company holds no value if you can’t monetize it. Holding a small share of a non-traded company has the same challenges.
    • It is all about liquidity.
    • If the other party offers this, ask what is the value is to you of the retained share.
  • Minimize the earn-out if one is demanded, but don’t count on it.
  • If there isn’t a strategic fit between the buyer and the company, the value of the company in a sale will be lower.

[like]

How Do You Survive a Maelström? Seven Strategies

Situation: Edgar Allen Poe’s “Surviving the Maelström,” is a tale is of three brothers whose fishing boat is caught in a monstrous whirlpool, and how the reaction of each brother determines his fate. Similarly, in times of uncertainty, our ability to react with either panic or a rational, reasoned response determines our fate. How do you survive a maelström?

Advice of the CEOs:

  • Based on Poe’s story, you need to replace fear with assurance, uncertainty with boldness, and doubt with conviction.
  • There are several potential financial bubbles forming including student loans and negative interest rate loans to sovereign governments. Both, in their own way, pose a threat to the international and domestic financial systems and could rapidly impact borrowing costs for companies. The solutions are to stay in ongoing contact with customers, and to stay light and flexible as companies so that you can adapt to market changes.
  • For Internet companies, the shift to Freemium offerings (a base product for free with pay as you go functional add-ons) makes it more difficult to design viable business models, and means new competition for established companies in low capital cost businesses. Again, a solution is to stay in ongoing contact with customers, constantly reinforcing your value proposition and the reality of switching costs.
  • Creative Destruction – particularly the emergence of new companies that threaten large customers and can change the value perception of suppliers’ core competencies. Solutions include ongoing communication with customers seeing what they see as “the next big thing,” focusing on continually improving our own core competencies, and possibly teaming with the more promising emerging companies.
  • The illusion that advertising will pay for everything – in reality, advertising dollars are a scarce resource like all other resources. Solutions include testing our own value-adds as an ongoing process, and creating fast-fail models to cost-effectively test our own promotions.
  • Definitions of value and productivity are no longer stable; all depends on the method of measurement. A solution is to remain aware of the innovator’s dilemma and to continually renew our value propositions.
  • A workforce in flux where young people don’t want to work for what they perceive as “old line” companies, as well as early-retiring baby boomers who may learn in 3-5 years that they can’t afford retirement. Solutions include focusing on employee engagement, building more flexible and “liberating” business models, and teaming younger with more experienced workers to cross-train each other.

[like]

How Do You Develop a Revenue Model? Six Recommendations

Situation:  A company has a crowd sourcing solution which is co-creational. You ask a question and get multiple answers. The company then uses technology to select the best answers. The challenge is developing a business model. What parameters are predictable and dependable? How do you develop a revenue model?

Advice from the CEOs:

  • Revenue is always, in the end, a matter of value received – both potential and actual.
  • High dollar per click comes from delivering better responses, particularly if you can demonstrate higher sales conversion rates.
  • High value responses are valuable. If you can deliver these consistently, consider charging a subscription instead of pay-per-click. Pay per click is fine for attracting first-time users, but move to subscription for ongoing access.
  • Limit your initial audience to crowd source participants who have knowledge and experience – like CXOs on LinkedIn. Create relevant communities.
  • In addition to best practice answers, provide an opportunity for participants to share failures – experiences from which they learned. Simply Hired created an early, and lasting audience by creating a companion site called Simply Fired when they started. Based on the responses to this site, they created a Top Five Reasons for getting fired, with inappropriate behavior and sexual harassment at the top. This exercise helped them to create a lasting presence.
  • Make your site clean and show clear steps to a revenue model for users. This will take time and you won’t see results immediately. Over time it will pay off for you.

[like]

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.

[like]

How Do You Work with a Resistant Employee? Five Points

Situation: A CEO feels overworked, fatigued and ready to retire! The core problem is a long-term employee who is constantly resisting the CEO’s the company’s strategic direction. How can the CEO alleviate this situation? How do you work with a resistant employee?

Advice from the CEOs:

  • If this individual is valuable, try to work with him first.
    • Can you give him a different focus – another role within the company for which his talents are suited and where he will make a significant contribution?
    • For a change like this to be effective it must be offered and accepted with the condition that this becomes his focus and not your strategic leadership of the company.
  • How is it best to have this conversation?
    • First, clearly state the direction of the company.
    • Then ask a question: What do you want to be doing for the next 5 years?
    • You may be surprised by the response to the question. It may lead you to a win-win solution; or it may become clear that this individual needs to be doing something else.
  • Conduct the discussion in two stages – but without a lot of time between these two discussions.
    • “You are valuable but things have to change. I prefer that you remain as part of the team, but on the strategic front you have a choice – are you on board or not?”
    • If after consideration the answer is that he is not on-board then you must let him go.
  • Don’t blindside this person. Think of a Resurrection versus a Come to Jesus Meeting.
  • If it turns out that you must get rid of this person you will wonder: why you didn’t do this 6 months ago.

[like]

How Do You Deal with Management Infighting? Five Points

Situation: A company has two key managers who battle constantly. Recently these battles have escalated. Both people are valuable, but this has become a significant distraction. What’s the best way to handle this situation? How do you deal with management infighting?

Advice from the CEOs:

  • Talk to the two people individually. Acknowledge company awareness of the situation and ask what’s going on.
    • Listen – make sure you understand what’s going on.
    • After you listen, coach. The message: I need you to step up. The company counts on you.
  • Both parties must feel empowered by the conversation.
    • Focus on behavior only, not the person.
    • Make sure that each feels validated but with clear direction to change behavior.
      • Acknowledge each individual’s value. Point out the problem, but make it clear that nobody is indispensable.
      • At the same time, be firm as to what is expected of individual behavior as well as individual performance. Set the expectation: either you act in a way which does not harm the company environment, or I will take your notice in 30 days.
      • If either individual can’t agree to this, then that individual is the problem.
    • Revert to guiding principles and values of the company. Raise the conversation to a higher level.
    • Establish what the individual wants from the company. Are their needs currently being met? What can be changed to better meet their needs?
    • An important end point of the conversation – because both are key players – is for each of them to value the other.
    • If, after providing time for the two to resolve their difference, they still can’t make peace with each other, you may have to make a hard decision.
  • Be careful – it may be necessary to take a different approach with each individual.
  • It may turn out that one individual is the instigator and the other is simply reacting to the first’s provocation. In this case, get a 3rd party to coach each of them.
  • Another company recently had this same problem.
    • The CEO sat each person down – talked about impact, big picture and what this does to their image in company.
    • This worked!

[like]