Execution Tips That Might Help

The problem with recessions is that you don’t have time to be patient. But patience and belief in your execution is exactly what you need. I’ve listed some stuff below that does work and for many may act as a validation that you are doing the right things:

Business Models:
1. Revisit your cost breakdown between variable and fixed and drop that breakeven point as low as possible. I’ve created a helpful look-up table here that shows how far your sales can drop before you start losing money.
2. Look at all the delivery models for getting your product to market e.g. the academic publisher Springer announced that over the next few years greater than 50% of their book revenue will come from e-books. They see great growth from e-books because of the way scientific books are consumed.
3. Understand the stories that generate money. Summarize the data by product families, by region, by sales team. Seek deep granular reasons for sales traction and dig deep with existing customer relationships to understand failures.
4. Play with all possible cost scenarios to maximize the margins of best selling products.

Sales growth:
1. Go to the “coal face” and ask your sales team to sell to you in a role play. Do you hear compelling business results that will be achieved? Are they articulating the special ingredients that your company executes so well?
2. Examine the diagnostic questions your sales teams are weaving into their rich conversations. Do they sound insightful and focused on the improved performance of the prospect?
3. Does your sales commission reconcile with your business objectives? If it solely based on POs, given the difficulty of this market, you will build a demotivated sales force with nowhere to go. Consider an incentive to get the CEO appointments with the key influencers in the prospect company. In this market it’s imperative to spend face time with the correct people to clarify priorities. E.g. in a recent E&Y survey whilst large banks are executing swingeing cuts in IT and Supply Chain Management, they are investing heavily in Legal and Audit departments to control risk.
4. Ensure your sales teams have adjusted their “cookbooks” (metrics that lead to a salesman going to the bank!) to reflect the fiscally tight marketplace. Hint, it may take dramatically new and improved tactics.

Marketing:
1. Simplify your messaging to articulate instant gratification.
2. Master social media for your business.
3. Stop writing long winded parochial blogs > 600 words.
4. Write in plain English, describing the business results being achieved for clients today.
5. Measure everything and work closely with sales teams to maximize their opportunities.
6. Get on site to hear the vocabulary of your clients. Tailor everything you can to make the collateral feel personal to their issues.
Costs:
1. Link every single cost to sales and study the strength of the relationship. Eliminate or scale down all costs starting with those with little impact on short term (12 months) sales.
2. Revisit the mix of fixed and bonus elements of every employee’s package, starting with the CEO.
3. In a low sales growth environment, brutal decisions are needed on cost priorities. Be smart about achieving your goals by deploying free/low cost software. This is a time to substitute over priced, average suppliers with hungry, attentive, efficient service providers.

Call to action
Twice a week I reserve half a day to meet with owners for a free review to validate their tactics. July and August are booked.

VC Industry - lost the plot

So I'm looking at the latest VC investment numbers, 3 months to June 09 and I'm thinking the VC world has lost the plot!

Let me share with you some very simple numbers. My arms will not leave my body at anytime during this presentation.

2009 figures (3 months to June) show that on average $8.7m was invested in 309 companies. Let us assume that the VC on average held 60% of the equity. Let us assume they are aiming at 10 times their investment. That would mean that all 309 companies would have to sell out on average at a valuation of $145m or $45 Bn in total!

You see I think that logic is broken. There are so few companies that sell out for $145m, never mind 309 of them!

Now let us suppose instead of investing $8.7m on a huge bet we invested $500,000. To achieve the exact same return over 5 years the target company would have to exit at $8.3m. This seems so much more believable. I know so many great start up companies that would benefit from $500,000 and they would blow away an exit valuation of $8.7 million in 5 years time.

Just a thought.

Check out the web site in the link for more fun free stuff.

What I know about Management Dashboards

As we struggle to manage our businesses in these challenging times, I’m a little surprised there is not much air-time given to – what we should be measuring and how we should use it. So here are a few ideas - Things I know about Management Dashboards:

1. Monthly financial results need to be available by the 7^th working day after the month end. Any longer and your operations team are asleep and the information is becoming more useless by the second.
2. Every material metric should be accompanied by a “significance statement” explaining why you should be worried or happy. (even a few words helps)
3. All actual metrics should have comparables under budget, forecast and last year.
4. Financials of all business units should explain the story of what just happened using the great secret truth – there are only two reasons for every financial variance – volume and yield. E.g. you sold $2.4m more software (that would be nice) because – you sold 100 more units at $19k = $1.9m and you sold 500 units in total at $1k more each unit = $0.5m, making up the $2.4m. Important to know stuff like that.
5. Trends over time are much easier to see from graphs.
6. Graphs need to be clearly labeled and their meaning understood by a 7^th grader.
7. Written reports should be one/two pages long with relevant and interesting backups relegated to appendices.
8. 70% of businesses that go bust are forecasting profits for the three months post going bust.
9. Technology has leveled the playing field of knowledge – a great curious question can now be answered almost every time by the system or if you like – work out, what questions you need answers to, before revamping your metrics system.
10. Sales metrics need to be traced back to the behavior of a specific salesmen before accountability kicks in (and therefore action).
11. Salesmen behavior is influenced by reliable real time data, long before the failure to produce a PO is public knowledge.
12. Trailing 12 graphs are powerful visual tools that extract the distraction of seasonality.
13. There is only ever one Approved Annual Budget – subsequent changes are called Revised Forecasts otherwise you will be in a hell of a state!
14. A Budget is a spreadsheet interpretation of a set of material, comprehensive policy statements.
15. In almost all occasions if metrics look interesting their wrong.
16. All metrics covering all departments are connected – metrics don’t recognize silos, departments – they just keep coming at you from every direction.
17. A cash flow and a profit & loss are merely the difference between your two balance sheets produced at the beginning and end of a time period.
18. Perfectly accurate monthly financial statements 10 days late are useless.
19. What you measure relates directly to what you are - the business you are in. Parochial ratios that you need to measure, not relevant to 90% of other companies, are a good thing.
20. Walls are great places to show accurate sales data measured on a consistent basis and displayed in a recognizable format.
21. Measuring the reliability of forecasts improves the reliability of forecasts.
22. Stopping the facts getting in the way of a good story can prove fatal.
23. Understanding why we are successful is as important as why we fail.