Posts Tagged ‘clients’

Alternate Sales Partnerships #3: The Sales Contract

by Tina Burke on October 1, 2010

Alternate Sales Channel contracts are relatively simple in concept, yet complex in execution and long term survivability.

Here’s why: Most companies already have a Direct sales team. People that they’ve hired, trained and provided benefits to and a salary. Those are hard costs that finance knows down to each sales person that they are paying a salary. Companies also know just how profitable each sales deal is, is not – or just how long it will take for a deal to become profitable. Finance takes into account:

  • Marketing – as in trade shows, lead generation or web marketing.
  • Training – any efforts like brown bags or flying people in for new hire orientations.
  • Equipment –  Laptops, Lunches, Cell Phones, CRM licensing, coffee.

The pieces are complex to produce a sale and market research has conservatively  pegged the cost to hire of a new sales person between $200,000 and $250,000. Will they be good and sell something?? Hit the quota that was designed to cover the costs of hiring them?

In addition, just about every department in a company has to provide something in order for that sales person to produce a sale. It gets expensive. We haven’t gone into soft costs of cultural fit. Will this person get along with the rest of the team, be good in front of clients, be dependable, professional and a good representative of the company?

Expensive. Risky. Yet traditional.

What to do? There’s got to be a better way.

You need to go out and find a professional sales team. A group of individuals who understand your product and service and who are already aligned with your client base or the client base that you’d like to have. Find a gun for hire to get the job done.

Cheap. Risky. Non-Traditional.

How to find the ever elusive effective, professional independent sales producing machine?

Let me assure you, they do exist. But it will require a different mindset from Executive leadership, finance and sales to have an effective relationship.

First you need to have a good product or service. Obvious, but true.  It’s going to have already been through testing and you’ll need to have some operational history under your belt. Then you’re going to need a good sales contract from finance.

Finance should be ecstatic to design one for an alternate sales channel team. Here’s why: An alternate channel sales team isn’t costing the company an upfront dime. Finance isn’t paying a per headcount salary before one sale is made. No laptops, no flying in for new hire training. (Most independent agencies will fly themselves in for training if your product or service is good enough, see operational history above.) Agencies have their own CRM software that they pay for to manage their business, their own cell phones and their own lead generation. They bring you clients and relationships that you are looking for without the hard and soft costs.

Second, you need to have a good sales contract for these organizations. Executive leadership needs to recognize that these are clients that you wouldn’t ordinarily have. The end clients are typically well qualified and already trust the sales agent. The sales cycle will be much quicker because the sales agent has already gone through the dating stage and they are making a heavy recommendation for your product or service. They are also going to be self motivated to know everything about your product or service.

Now the tricky part.

How do you pay an independent sales person to sell your product or service?

You can do that as a one – time payment that’s paid after the client has paid their first bill. Its generally understood that with one time payments, you own the client 100% going forward and that you have no more obligation to the sales agent after they’ve been paid. That can be a double edged sword when its time to renew your product or service and needs to be thought out with management.  The second alternative is to pay out a monthly residual payment. If you go this route, make sure that it’s a payment that you can maintain over the length of the contract. Its perfectly acceptable to ask the sales agents perform additional tasks in exchange for a higher commission percentage. For example, sell more deals, participate in renewals and upgrades. This way, you also incentivize  the agent to stay involved and support your client over a long horizon of time without the added cost of customer service. You also avoid the potential of that agent moving your client away to another service provider when the original term is up.

Be prepared to spice things up with your existing sales team. Adding an alternate channel sales team always causes sparks and creates competition. You can design a program that is inclusive or competitive. Inclusive would mean that if both your sales person and the agent were working on a client, then Finance would decide to pay each person. This is a little more work on Finance’s part because they have to factor in the cost of what they are paying their sales people into the deal. An Exclusive plan would essentially mean that whoever signs the deal makes the commission. As you can imagine, this requires a good rule book with a strong sheriff for the town.

Last, don’t play with people’s money.

That means a few things. Make sure that pricing for your product or service is level across all playing fields. Meaning, make sure that the direct team has the same pricing as the agent team. Hold steady. Give everyone the opportunity to make the sale.  If you do promotions, make sure that everyone has access to them to offer to prospective clients. This will make your entire sales channel strong and consistent.

On the back end, don’t ever change commission payments before the term of the contract has ended.  Pay people on time and consistently and make sure that if you hire a new head to take over your sales organization, that s/he takes care of all of the people who have done a  good job for you already.

“I need to get your thoughts on what I’m thinking of doing!”

It was my long time colleague Gary on the phone. We’d worked together at Qwest for four years in the shoot ’em out years of early 2000. Gary ran the sales and operations team that supported the direct sales teams for the Global Account organization for the West. We sold it… and he installed it.

“Sure, whats up?? “I’m thinking of taking a job as a Director of Sales over in the Agent channel.”

Now back in the day..announcing a career move like this would be like Sara Palin suddenly choosing to become a democrat.

“Um…”

“Before you think I’ve gone completely nuts, hear me out. I’ve been in this position for five years so far, done really well and don’t get me wrong, but I am so tired of babysitting entitled sales reps! I already have 3 kids under the age of 12 at home and these guys are so undisciplined about just the basics that its completely infuriating day in and day out. I’m over it – and I really like the company because we’ve got a great product. Slogging it out this way every day trying to get sales people to really work hard for the numbers truly sucks though.”

I started to laugh in commiseration … “Don’t laugh…can you tell me why you did it so long ago?

Well..the truth is that I had been sitting on General Manager calls every week for months listening to the sales numbers that were being posted .. and the alternate sales channel teams outsold the direct sales teams four to one, week in and week out. The CEO of the company loved it because the alternate sales channel was much more profitable – no base salaries to pay or headcount turnover.   My own direct sales organizations numbers were anemic and I could empathize with Gary’s frustration. Years ago, I had also grown weary of chasing my sales team with EKG paddles.

“Gary, I think it’s a smart move and I’ll tell you why…”

  1. Independent sales agents are highly motivated to make things happen because there’s no salary check auto-magically coming in the mailbox for them from corporate every two weeks. Agents have to own their own destiny without the safety net of a base salary.
  2. They have to hunt clients, treat their clients like they are family, absolutely find the best solution for them, sell it, install it and then take care of it long term by themselves.  That bakes in responsibility if that agent wants to survive long term. What I’ve found is that they are aggressive, they hunt for their own relationships and they are very entrepreneurial in actually helping their clients.
  3. They also take responsibility for producing their own results. Its refreshing…and quite a big behavior change. These guys truly own their own business and take a lot of pride in producing autonomy for themselves and a livelihood for their families. Its like walking out into the sunshine after you’ve been chained to a wall as far as I’m concerned. You’re also going to be the Director who brings in pure profit, and not a headcount and resource drain for the CEO.

More and more companies are moving in the direction of cultivating and growing an alternate sales channel. They get the benefit of a highly motivated sales team that they don’t have to pay a salary to and access to business that they would have been competing for…  Its good business for everyone and helps to keep the business climate healthy.

“Gary, I think it’s a great move and that you’ll truly enjoy it”.

How does it feel when you take the plunge and go out on your own? Is there a mix? One day it’s, “Thank God! I am on my own!” The next it is, “Oh God, no! I am on my own!” It can feel you’ve been set adrift having cut the mooring line to the familiar. Learning how to simultaneously capitalize on opportunities and deal with the existential angst in this entrepreneurial state is the fourth purpose of mythology, i.e., dealing with the psyche or one’s personal psychology. How the psyche develops is critical for making it through threshold experiences.

The psyche forms the foundation for building/discovering needed leadership tools mentioned previously in the first leadership blog, Navigating with an Executive Map and Compass. The path associated with this process is very much a quest. Friedrich Nietzsche expresses it well in Thus Spoke Zarathustra. Let’s see how it works in business.

The Camel, The Lion, and The Baby

When entering the business world one works like a camel dutifully and unquestioningly carrying a workload that gets bigger and bigger. It can lead to promotions. It gets puzzling though, since a limit will eventually be reached beyond which the camel will collapse. The first threshold is met. In order to progress change is required.

What was once exciting, providing a reason to get up in the morning, steadily becomes oppressive and the urge to cry “Enough!” starts forming. Crossing the threshold The Camel surprises others by transforming into The Lion. It attacks the giant beast “Thou Shalt,” which is covered in shiny scales each of which has a rule that must be followed if one is to stay in the current situation. The beast fights furiously since, after all, its rules have brought about the success experienced.

Once the beast is devoured another threshold is reached. The Lion is free, completely free. There is nothing left to fight, to stand against. The Lion stands alone. Movement forward means The Lion must change.

Another extraordinary and extremely demanding transformation must now take place in order to thrive and grow. The Lion transforms into The Baby. In mythology a baby signifies spontaneity, movement from within free of concern for consequence, free of rebelliousness. It is aware, bringing forward all experiences from the past. (See Buddhism or 2001: a Space Odyssey for more.)

Similar to The Baby Nietzsche writes about The Wheel. The Wheel is unique. It moves from within. It is neither pushed nor pulled. It seeks its own path without knowing where it will go. We know it in business as The Entrepreneur.

You’re So Lucky

How challenging and threatening can this be? This story may sound familiar. On one assignment there was a client employee who constantly complained about how lucky I was because of hourly rate, freedom to move from client to client, etc. This grew tiresome. When it started to interfere with my position on the project I said, “You are right. I’ll sit here while you tell your boss you quit. We can go have coffee and talk about how you can be completely on your own.” After that, he stayed with just doing his part of the project.

If you have indigestion from eating beasts or your wheel is beginning to wobble send me an e-mail at gwmonti@mac.com or visit www.ctrchg.com.

Ever have a resistant client? They want you to provide desired services but question and double-guess the recommendations and actions you make. Why would they behave that way? It has to do with the second function of myth, the Physical , also called the Cosmological. What it refers to is the beliefs (myths) one has as to how the world turns. In this case how the business world turns.

Cosmology, Clients, and Solar Eclipses

Having a cosmology is an important part of sense-making.  It provides a cause and effect framework for decisions. As long as it functions well there are eccentricities that will be accepted as “fact” when there really are just some coincidences in the system.

There’s a story about a cultural anthropologist who comes across a village right before a solar eclipse. The chief and village elders could not be distracted. They were preparing to save life itself. The anthropologist asked what was going on. The chief simply said, “Come and watch.”

As the moon began to creep in front of the sun the shaman began to direct the men of the village to beat the drums exactly as they had been taught – the way their fathers before them for many generations had done. As the eclipse progressed the drumming intensified and all the villagers were frozen in place wondering if the drumming would work this time. Eventually, the eclipse passed and the sun returned much to everyone’s relief.

The anthropologist felt it his duty to teach the villagers the rudiments of the Newtonian cosmology and explain how gravity worked along with drawing the orbits of the sun, the moon, and the earth. To his delight everyone listened intently and he left the village feeling proud.

He returned with the next eclipse and, much to his surprise, the drumming ritual was repeated. Exasperated he looked at the chief and said, “The theory I told you works!” The chief calmly looked at him and replied, “And if it doesn’t?”

Helping Clients Change

Bertrand Russell, the Nobel Prize winning 20th Century mathematician-philosopher, felt that cosmologies aren’t refuted they simply are abandoned. In other words, don’t argue with clients to put down their drums. Look for their hot buttons and pressure points. If there is enough pent up emotion over how their current methods aren’t working then they might consider the solution(s) you are offering. If not, then listen to their drumming and be patient.

I’ve learned it is important to let go of judging the client. Out at the edges everyone’s worldview starts to unravel. Maintaining a degree of humility is important in keeping a levelheaded approach.

If you need help in working through solar eclipses either in-house or with clients contact me at gwmonti@mac.com or visit www.ctrchg.com.

Business Valuation in divorce is different

by Steve Popell on April 15, 2010

In most business valuations, the standard is “fair market value.”  This method seeks to determine what a hypothetical “willing buyer” would pay a hypothetical “willing seller” in a hypothetical “free market” in which both buyer and seller are in possession of all material facts and neither is forced to make a deal.

In a divorce, however, the buyer and seller are known.  Typically, the manager-spouse “purchases” the community property interest of the non-manager-spouse through the process of community property division.  The standard of value in this case should be “investment value,” because it reflects what it is worth to the manager-spouse to own all of the community’s interest in the company, rather than just his or her community property half.

As with a fair market valuation, an investment value process analyzes a number of elements that are recognized by the appraisal community to be of particular relevance in valuing any privately held company.  Internal Revenue Ruling 59-60 lists the following:

  • Nature and history of the business
  • General economic outlook, and specific prospects for the industry
  • Net worth and financial condition
  • Earning capacity
  • Dividend paying capacity
  • Extent of goodwill, if any
  • Size of the block of stock being valued, especially if it represents a majority or minority interest
  • Whether the stock in question is voting or non-voting
  • Stock prices of comparable public companies, if any
  • Sale(s) of company stock at or near the valuation data
  • Limitations or restrictions on the stock, such as on transfer, dividends, etc.
  • Sale(s) of stock in comparable closely-held companies, if any (implied)

Of these, the two most important are earning capacity and financial condition.

When a company or individual acquires, or invests in, a business of any kind, the main reason is almost always the expectation of a return on that investment.  ROI comes from future earnings.  Sometimes, these earnings are presented as the bottom line on the Profit & Loss statement.  In other cases, the calculation may reflect cash flow.  But, the principle is identical.  Future operating performance determines the return on investment and, therefore, future earning capacity is a key factor in determining value.

Financial condition is also extremely important for a number of reasons.  {Note: a future post will discuss in detail practical financial analysis for a privately held company.}

  1. A strong balance sheet allows management to pursue opportunities for growth, either self-funded or with outside debt.
  2. Banks require the maintenance of specific financial numbers (such as Working Capital and Net Worth) and ratios (such as Current Ratio and Quick Ratio) to maintain an existing line of credit.  In today’s economy, most banks are far more rigid regarding these standards than they were previously.
  3. Regardless of the prospects for earnings growth, most companies experience occasional “bumps in the road” on the P&L.  A strong financial condition will allow the business to weather these times.  The company that has been paying last quarter’s Accounts Payable with the collection of next quarter’s Accounts Receivable has no margin for error.  The loss of a major customer or receivable can put such a company in serious financial jeopardy.

If the business being valued in a divorce is a sole practitioner professional firm, the Excess Earnings Method will often be the most appropriate.  Here, the difference between the practitioner’s earnings (salary + benefits + pre-tax profit) and “reasonable compensation” (what s/he could earn in the same position as a non-owner / non-partner employee of a comparable firm) is called “excess earnings.”  {See previous post on Reasonable Compensation.}

Excess Earnings times a multiple (reflecting the level of confidence that these excess earnings will continue in the future) equals “Goodwill”.  Goodwill plus Net Worth (minus a reasonable return on Net Worth) equals value in the Excess Earnings Method.

In most valuations, in or out of court, the expert will deliver an opinion on a specific value.  In the context of divorce, however, it is far preferable to provide an initial range of value for two important reasons:

  1. It is much easier for the spouses to agree on a range of value than on a specific dollar amount.  Once they have done that, settling on a final number becomes a much more manageable task.
  2. Often, the value of the business can be juxtaposed against, and negotiated against, spousal support.

For example, if the spouse to be supported is mid-30s with a high paying job, s/he may be keenly interested in a substantial buy-out that can be used as an investment or retirement vehicle.  Contrariwise, consider the individual in late 50s with little income history or prospects, who has been living a very comfortable lifestyle (probably supported by the business.)  This person may be far more concerned with maintaining that lifestyle (e.g. keeping the children in the same school district) and would be willing to give a little in the value of the business to achieve this objective.  A range of value assists the couple to carve out this kind of win-win.

Another important contribution that the valuation expert can make to this difficult and highly emotional process is to produce a preliminary report that is open to criticism.  If either spouse can make a persuasive case that the expert has erred in some aspect of the valuation process, and that revisiting the issue(s) could have a significant impact on the expert’s opinion, s/he should be quite open to doing that.  The only objective here is the welfare of the clients, and pride of authorship has no place.

In the final analysis, the expert’s role is to assist the divorcing couple to agree on a value for the business that they understand and believe is fair.  If the expert is able to accomplish this goal, s/he will have made an important contribution to the family and, most importantly, to any children in that family.


This article has been contributed by Steven D. Popell CMC (Certified Management Consultant.) Steve has been qualified as a business valuation expert since 1974, and has published extensively on this topic. CMC, a certification mark awarded by the Institute of Management Consultants USA, represents evidence of the highest standards of consulting and adherence to the ethical canons of the profession. Steve was a 2007 winner Collaborative Practice California Eureka Award for contributions to Collaborative Practice in this state and is a Senior Partner in Popell & Forney, with offices in Los Altos Hills and Pleasant Hill, California.

Before you fight them… Choose them wisely!

by Himanshu Jhamb on March 8, 2010

We’ve all heard this many times in our workplaces – “The customer is always right” and “All customers are equally important”. Well… I am going to challenge these in this post and will focus more on the latter one. This topic came up in one of my recent conversations with a publishing industry thought leader, Gordon Tibbitts, President, Atypon Systems where both of us were talking about the capacity of individuals and the choices we, as individuals, have to make in order to utilize our limited capacities effectively. At a point in the conversation Gordon said “You know what Himanshu, before you fight them… you have to choose your battles wisely”. One might ask how do you qualify what’s wise Vs. what’s not and the quick answer is – One that you think will produce the results you are after is the wise one to take.

Not all customers are made equal. Some customers are very rewarding, whereas some are pretty much a drain on your resources. For instance, I had a customer once who did not understand the value of Quality Assurance; as a result of that they did not have a clear QA management, a QA team or even any QA processes. The impact of that alone was that the project had many delays and not only impacted the customer in a negative way but even the vendors (us being one of them) felt the reverberations of the impact to a point where it affected (negatively) our bottom-line. If someone were to ask me about if the customer was a beneficial one for us as a vendor, the answer would, most unequivocally, be a resounding NO. These are the kind of customers that you don’t want!

Another very insightful point that Gordon made during our conversation was that it is a good thing not to ruffle any feathers if you see your competitor serving a high cost client. What made this insightful for me was the observation that Mr. competitor would face a lack of capacity if they are busy servicing high cost clients, and you don’t want to burn the midnight oil to get these clients from your competitors as this would almost be counter-intuitive to your productivity (and you’d be helping Mr. Competitor, too).

This also reminds me of a quote by Napolean Bonaparte:

“Never interrupt your enemy when he is making a mistake”

I’d like to acknowledge Mr. Tibbits for the pearls of wisdom he shared with me and I am more likely (than before) to think twice (or maybe even thrice) before I choose where I invest my resources… and I suggest you do, too!

The NEW World!

by Deepika Bajaj on October 13, 2009

Our world has been continually evolving. With the advent of globalization, technology and internet, we are now embarking on the phenomenal growth of the virtual worlds. So, what are Virtual Worlds? Virtual world is a real-time, multi-player 3D environments in which the user takes on a specific role, represented on screen by an avatar. Obvious example is SecondLife. People who live in virtual worlds can buy homes, go shopping and play games with friends – this is the social networking element of it. With the current economic recession, companies are finding it cost-effective to hold meetings, recruit candidates and do promotions in virtual worlds. Offline events require hotel, travel costs and lost time in productivity – so why not meet your potential clients, employees and colleagues virtually  – Afterall they exist both in the real and virtual world.

Here is a brief intro of a what is a virtual world?

Where is the MONEY??

Virtual worlds reshape the real-life Retail:
With the rise in Virtual world, many small businesses are using it to interact with their customers. Many businesses are marketing their products and services in virtual worlds – you can hold events, do strategic placements for audience development and building relationships with their customers:

Where is my LOVE?
Virtual worlds are all about experience and community.
Want a cool girlfriend? Who needs a real deal? She is exactly what you want and is gone when you log off.

Our world has expanded – it has multiple dimensions….ARE you present Virtually?


Branding – What’s your brand promise?

by Laura Lowell on October 2, 2009

brand promiseIn research conducted for my upcoming book ’42 Rules to build Your Brand and Your Business’ respondents clearly indicated that what affected their perception of a brand were visibility, authenticity and honesty of the brand.  Ok, great…what does this mean to someone trying to build a business and establish their brand? Or what does it mean to a company with an established brand trying to break into a new market with little brand recognition?  You may be surprised to hear me say (or type) that it means the same thing in both situations.

Ultimately, the key is to have a defined brand promise – what is it that your brand stands for?  Based on this you can then begin to prioritize your strategies and define your tactics accordingly.  I have seen, over and over again, where companies jump into the tactics with out understanding how they fit, or don’t fit, into the bigger picture.  For example, I once worked on a brand re-design project with a major high-tech computer manufacturer.  We had a well established brand and were trying to reposition it within the confines of the overall product portfolio.  Plus, we wanted to target a new demographic audience.  Off we went to the branding agency who created several different graphic treatments.  We reviewed them and made changes and came up with what we thought was a brilliant idea – very “off the wall”, especially for this company – but the new demographic “would be drawn to it” we explained to senior management who were having heart palpitations at the very thought of it.  Picture this…a gorilla sitting on top of a PC. Something was definitely “off”, and it turned out… it was us!

This project never saw the light of day…why?  We completely forgot the established brand promise we had been making, and continued to make, to the market.  This design had nothing to do with the real world – it was graphically outstanding and visually compelling, but who cares?  It didn’t relate at all to our brand promise.

So how do you start defining your brand promise? Here’s a list of questions to ask:

  • What does the company stands for? 
  • What is the single most important thing that the organization promises to deliver to its customers?
  • How do you want customers to feel about your organization after interacting with you?
  • What is it that the organization wants its brand to be known for?
  • What unique value to you deliver to customers?

Make sure you have agreement across the company – whether it is large or small.  People should be excited about this.  They should be able to rally around this promise and use it to make appropriate business decisions.  If not, then you still have some work to do.  But, I guarantee you, it’s well worth it.