7 Things You Didn’t Expect When Selling Your Software Company

Contribution by AceTech Ontario CEO Member Mark Miller of Volaris Group.

You have worked hard to grow and develop your software company. Perhaps your success has attracted some attention; or maybe you are feeling that it’s time to move on. One way or the other, selling is on your radar.

Of course, you’re ready for this next step.

But there are several things you probably didn’t expect – unforeseen factors that could affect you and the acquisition process.

1. Potential Buyers Generally do their Due Diligence

Initially, it felt like you were close to a deal. But the due diligence process is taking longer than anticipated.

Due diligence is more than just opening the company’s books – it’s about determining if your company is the right fit for the buyer. They will look at your operations, structure, and any legal considerations in addition to your financials.

Be prepared for a lengthy due diligence process.

People want certainty. It’s not uncommon for them to make a series of requests before feeling confident.

2. It Will Take a Lot of Hard Work – More Than You Expected

It has taken serious sacrifice –the building, planning, delivering results – to get to this point.

So now you can just sign the papers and relax, right? Not really. Selling the business involves hard work from both parties. Enter the process with this in mind and clear the decks for some serious work ahead.

Your emotional reaction may also come as a surprise. For so long you’ve thought about the end-game, you just assumed you would enjoy the process.

Go easy on yourself – it’s natural to have mixed emotions about giving up your work.

3. The Process Will Take Longer Than You Expect

The process usually begins with the initial discussions followed by the valuations, due diligence, further discussions, proposals, counter-proposals, financial review and payment schedules – all moving toward the final sale.

This process cannot be completed in a single phone call.

Be prepared to work through a lengthy process and continue delivering results along the way.

4. There Will be Fear in the Workplace

Don’t assume that just because you haven’t made a formal announcement, your employees don’t sense that something is happening. Employees can be highly skilled at detecting potential changes within their workplace.

Staff anxiety may hurt productivity or stir rumours that hurt your competitiveness. Always maintain a calming presence.

During this transition, your leadership is more important than ever.

5. You Can’t Take Your Eye Off the Ball

Your core business has been your key to growth, and continued performance has made people interested in your company.

Now that a sale is under discussion, that performance must continue.

A drop in performance could derail the entire process, so don’t get distracted by the negotiations.

6. Buyers Will Be Skeptical of Your Numbers

You have an idea of how your company should be valued, but your buyers may see things differently. That’s a natural part of business.

Don’t be discouraged by their skepticism. If your numbers are realistic and accurate, then the proper deal will present itself.

7. You May Have Seller’s Remorse

When the sale is done, you may feel a twinge of doubt. That’s normal.

It’s important to remember that the sale was your end-game all along.

When the opportunity presented, you were ready, and you made sure your company was properly valued.

It may be hard to give up control, but in time you will know that you did the right thing.

Your Turn

Are you preparing to sell your software company? Have you encountered challenges along the way that you didn’t anticipate? What lessons have you learned? Share your thoughts and questions in the comment section below, and don’t forget to share this post if you found it useful.

                                                                                                                                                                             

Mark Miller is the CEO of Volaris Group. He specializes in global vertical technology and has an interest in organic growth, talent management, sharing best practices, and building efficiency for the businesses he works with on a daily basis.

Volaris is a global company that has customers and staff all over the world providing mission critical software and hardware that helps run better businesses. To learn more about Volaris, visit our website at: http://www.volarisgroup.com/

Creating Communication Tools for Developers

Software_developers_working_computer_thumb800Bill Gates said that “[he will] choose a lazy person to do a hard job. Because a lazy person will find an easy way to do it”.  According to Larry Wall and several others, one of the greatest virtues of a developer is their inherent laziness. Since their early days, SoCast Digital has used this to their advantage.  Sanford Liu, Co-Founder, CTO & AceTech Ontario member, explains “I know it sounds terrible, but I think it’s a great way of thinking about it; programmers develop code so they can do less work in the future. One of my goals when I bring new developers onto the team is to make their work easier and less complicated”.

One of the benefits of being a technology company is that if there isn’t a workflow software out there that suits your needs, you can task your programmers with either developing one that does, or adding to an already existing software.  SoCast has taken that opportunity and combined it with internal in-person meetings between teams for seamless communication within the company.  “I think one of the things developers dislike doing the most is having to report on the projects they are working on,” explains Sanford, “as a result, we’ve built custom reports so that there’s transparency to the developers’ productivity and their work.  Only the executive managers can access these reports and they can do it without having to constantly ask developers to do this manually”.  This innovation has not only freed up some of their developers’ time, it has allowed them to scale without making it too cumbersome for their development team and their managers.  This way the company can see what projects are waiting to be worked on, what’s being fast-tracked, what’s completed, etc. for each team.

Without a similar software, many technology companies struggle with inter-team communications, and this is true for others outside the development team as well.  “You might be lucky and have someone who’s technically minded or has a strong technical background in your client services team or your sales team”, explains Sanford, “but even with someone who’s technically savvy, if they’re not a programmer, then they’re not going to understand a lot of the content that’s coming out of the development team and vice versa as well”.  Without communication between teams, developers will often guess at the feedback the company is receiving from clients.  These estimations often end up being the foundation for key enhancements to the company’s software. Customers will also ask client services what they are launching next, and they either make an assumption or are unable to answer the question altogether.  “By setting up some automated work flows and utilizing the suite of software we’ve now integrated, we’ve made it a lot easier for both teams to get what they want,” says Sanford.  The software also assists in making sure that projects A, B and C are completed by teams X and Y before they proceed to the next stage.  This ensures that the various teams are at the same stage of any given project.

However, Sanford reiterates that the software is not enough.  As noted earlier, the teams have regular meetings to discuss the workflow.  These touch point meetings between various teams are structured in such a way where everyone knows what they are supposed to bring to the meeting and what they are supposed to get out of it.  Sanford admits that they do receive occasional pushback regarding these meetings.  Salespeople could argue that they can better use this time towards closing deals or making calls, and developers could be spending this time coding instead of explaining the new plans to develop.  SoCast has ensured a way to address these concerns: “I think the key to making sure that everyone stays involved and stays engaged is making sure that everyone gets something out of the meeting”, explains Sanford, “So for instance on the sales side, this meeting should help our sales team sell; it should give them more things to discuss with clients and help their monthly commission quota.  Then it’s worthwhile for them to be a part of that meeting”.  In addition, developers can go into a meeting thinking that they have to complete tasks X, Y and Z, but upon hearing the feedback from clients, they only have to complete X and Z.

Sanford emphasizes how critical communication and communication structures are, and how many companies – technology especially – struggle to have it flow between teams.  Success in business is greatly impacted by the ways in which we communicate.

Why do we hate (our own) sales people?

Contribution Blog Post by Pete Smith, Managing Partner at the Meaford Group, Friend of AceTech and AceTech Roundtable Leader.

Last week, the Globe and Mail featured an article “Companies struggle with shortage of sales talent” which I believe was suppose to feature a new program at Wilfrid Laurier University. This new program has been created to teach sales training, something not traditionally taught by universities. Unfortunately, the article got derailed and took on a focus of the shortage of sales talent in Canada with Vidyard being displayed as the poster child for the problem. Given the nasty comments the article garnered, I suspect CEO Michael Litt probably wishes he had passed on giving that interview.

That said, the Globe article, along with a recent tweet by Shawna Calderwood of an article I wrote in 2011 entitled: Why do we hate (our own) sales people?, has prompted me to think it would be worth re-posting it today. So, from my 2011 archives, here it is:

Why do we hate (our own) sales people?

Have you ever noticed that in a company there often seems to be jealously, almost bordering on hatred, for the company’s own sales team? Ever noticed the derogatory jokes being told about the sales team; the stereotyping of them as not knowing their product; their lack of attention to detail;  their being motivated only by commissions, or their being shallow and self-centred? In the words of Rodney Dangerfield, they just “don’t get no respect”. Why does that happen, given that this team is the life blood of the company? If they don’t sell, the rest of the company doesn’t work.

There is a great article in the Economist “The Art of Selling” that states that, “Reports of the death of the salesman has been greatly exaggerated”. The article raises the question why isn’t there a Chief Sales Officer (CSO) in most companies, sitting at the executive table next to the CEO, COO, CFO, CMO, and even now the CPO (Chief People Officer). Instead this person is often disguised with titles like EVP of Global Operations, Chief Revenue Officer, Chief Customer Officer, etc. Is it that distasteful or politically incorrect to admit that a company has to sell its products to survive?

I currently am re-reading Lou Gerstner’s book “Who Says Elephants Can’t Dance” and was reminded that at IBM, their sales people were called Marketing Reps up until the 1990’s (I still have my business card from the 1980’s) . Think about the number of sales reps you encounter today whose job function is hidden behind the title Account Executive, Account Manager, or Client Manager. Think about the number of people whose business cards read Regional Sales Manager, Sales Director or even VP Sales, yet don’t have a sales staff working for them. All of these people are sales reps, yet all want to try and hide it from their customers because many seem to be embarrassed by their chosen profession.

What is the impact of this Corporate Inferiority Complex that we have cast on to our sales people?

One of the best sales reps that I have ever met was not confused or embarrassed by his job description. On more than one occasion, I heard him explain to a prospective customer that, “his job was to sell and their job was to buy” and if they weren’t interested or ready to buy, the implied message was “don’t waste my time”. This sounds harsh and plays into the stereotype of the dreaded salesperson but his message was that for interested customers, he would go to the moon and back to educate them, service them and get them value for their purchase; but if you were just tire-kicking or didn’t have the authority or influence to make the decision then he couldn’t afford to spend time with them. In sales jargon, this is called “qualifying the prospect”. Yet I have seen so many “Account Managers”, “Account Executives”, etc waste time doing things in the name of customer satisfaction for people who have no intention or ability to become a customer in the foreseeable future. Did their job title confuse them as to what their job really is?

A myth I see in a lot of companies is that the sales reps are overpaid, underworked and often only a bystander to the sale. They are the ones who take clients to lunch or dinner, often with a technical person dragged along to answer all the customer’s questions. They are the ones who attend the fancy conferences and schmooze with the customer’s executives. Meanwhile, the rest of the team write the proposals, answer all the technical questions, do the demonstrations, and design and deliver the conference room pilots, yet the sales rep gets paid the big commissions.

So what does a sales rep really do?

Well, it seems that they do a lot. Just ask one of those many sales support people  after they have decided to become a sales rep. They are the ones who were often making the derogatory jokes about how easy it is to be in sales, until they became the salesperson. My experience is that two out of three aren’t successful or if they are, they don’t like it and go back to their old job. All of them will tell you it is a harder job than they originally thought but they can’t really tell you why. They will talk about the pressure to perform, the black and white accountability for results, the intensity and the weight of carrying a team of support people on their back. They will talk about the lack of job description or job clarity. Anything the customer needs, whether reasonable or not, which is not part of someone else’s job description, falls to them to solve. They will talk about how hard the travel is, even though it seemed like a bonus when they weren’t doing it. Finally, they will talk about how hard it is to like some customers, even when they are totally unlikeable, because it is your job to like all customers so they will buy more from you.

So if you are a CEO of a startup and designing your organization, here are some suggestions on building your culture:

  • Make sales a proud profession in your culture because if you don’t sell, you are dead.
  • Don’t tolerate the derogatory jokes or snide remarks about your sales reps. Squash the people making them or better yet, make them a sales rep for a while.
  • Don’t confuse people with job titles. Sales people are hired to sell. Call them that. If a person is worried about having sales in their job title, then they probably do not have the right DNA.
  • Train them. There aren’t college or university courses on Sales as there are for Marketing, HR, Finance, Accounting or Engineering. You can’t hire a person with a Bachelor of Science in Sales so the onus is on you to equip them with the skills required – from making their first sales call to negotiating a complex sales contract.
  • Pay them a lot. If they get rich, so does your company. These are your top performers. Don’t begrudge them their BMW’s

Sales is the hardest part of a company. The reasons are subtle, especially for those not in the profession. As a CEO, don’t underestimate the challenges that managing this crucial component of your business will bring.

Why Your Company Needs a Customer Success Team

Picture1Believe it or not, the idea of customer success is not a new concept.  The work of Customer Success Managers (CSM) have been around for a long time, but it was never formally named. The concept has really come into fruition with the development of the SaaS model, however people are still struggling with the concept.  So we sat down with Jamie Cappelli, VP Client Success at 360insights to gain a better understanding.

Under the traditional sales model, customers pay a large License and Service fee upfront to own and implement software.  This model usually includes a Support and Maintenance contract for 3-4 years and unfortunately tends to promote a culture that typically only engages with customers when it comes time to discuss renewal.

Under a SaaS model, the customer rents the software paying less upfront, but has higher recurring payments.   With the cost of customer acquisition, a SaaS company will only break even after the first year of a customer contract and turn a profit in the second year. Since contracts with a SaaS company are typically year to year, or even month to month, customer retention is vital in order for the company to cover the cost of sale.  This is where the Customer Success team comes in.

“Customer Success is an attitude and the whole company needs to buy in”, says Jamie.  “In a SaaS environment, if you haven’t planned for a Customer Success program, I can guarantee that one will be imposed on you when customers start churning out.”

A Customer Success team is only one part of a value-focused company.  First, Product and R&D need to develop a solution that creates a value proposition for a customer.  Then Sales department exposes that value proposition to prospects and gets them to take that leap of faith.  Once the prospect becomes a customer, the Services department delivers the value as quickly as possible.  Customer Support assists when the value is interrupted.  The CSM is the value quarterback.  CSMs advocate and facilitate on behalf of the customer to maintain the value as well as look for opportunities to grow.  A CSM’s goal is to make sure that the solution is essential to a customer’s operations.

“Job 1 for a CSM – making sure that your customers stay customers”, says Jamie, “and customer retention is easy if the customer sees value for their money.  Making sure that customers see value is not something a CSM can do on their own.”  A solid Customer Success program has the whole company working together to deliver value, which ultimately results in trust – and trust will lead to new opportunities.

“A common mistake is to look past all of the essential elements of a Customer Success program and target the upsell/cross sell opportunities”, says Jamie.  “If your customer isn’t getting what they paid for, they likely won’t be a customer for long and are certainly not going to be buying more of what you have to offer. ”.

With an effective Customer Success program, the customer feels that they can trust your organization with their investment and that the investment will return a promised value.  As a result, a customer is much more willing to renew and invest in more products and services.  If a CSM is shoring up that trust, then a CSM inevitably becomes an Account Manager’s best friend as well as the best source for leads within existing accounts.

Jamie likes use Netflix as an example of a company that delivers seamless Customer Success.  When you sign up for Netflix, you see the value of your purchase straight away since you have immediate access to content.  While not every implementation can be that fast, it is the time-to-value that every Customer Success program should target.  As you continue to pay for your monthly subscription, your virtual “Customer Success Managers” get to know you better and what you value.  They start to tailor and suggest content to you – this increases use and adoption.  Initiatives like this will improve retention since the experience is personalized without the cost and headaches of being customized.

Another thing that Netflix does is watch their customers’ preferences and takes them into account when developing content, which is what you want to be doing from a product development perspective.  Similar to HBO, Netflix developed its own unique content to drive retention however, unlike HBO, it combined unique content with an understanding of customer usage patterns.  Netflix has capitalized on the phenomenon of binge watching. Netflix shows like House of Cards and Orange is the New Black release a whole season on one day, allowing their customers to watch as they please.

What is interesting about the Netflix model is that it demonstrates how Customer Success can become a corporate-wide initiative that results in a culture that is focused on customer-perceived-value.  Netflix has managed to deliver value and high retention rates without meeting with customers individually.  “If you are building your Customer Success program, you need to focus on one thing – value.  Customers should be able to easily quantify the ROI without a lot of mental gymnastics.  Everyone in your organization should be able to deliver the elevator pitch,” explains Jamie, “If you want to operate a healthy SaaS company, understanding the impediments to value velocity is paramount.  Time-to-value is a critical KPI.  If it takes a year before the customer can actually see the value of their investment, that’s not very SaaS-y.  If an upgrade or a new release is as painful as a new implementation, that’s not very SaaS-y.  Most organizations struggle with measuring time-to-value because they are not clear on the value proposition so they don’t when they are winning.”.

Challenges of Operating in Multiple Countries

Contribution by AceTech Ontario CEO Member Mark Miller of Volaris Group

AAEAAQAAAAAAAAfBAAAAJGQ3NDkxMzU1LTVlMDQtNDdhZi1hNmMzLTkxOTkxY2Q4ZmVmNAEither through acquisitions or expansions your company has gone global. You now have opportunities in additional markets, but also face a new set of challenges.

These challenges may be cultural challenges, such as adapting to a wide range of business environments, and operational challenges, such as setting up lines of communication which allow your company to function as a global company, rather than just a company that happens to have a lot of offices in different locations.

Some of the common challenges that companies face when establishing a global footing are as follows:

Human Resources and Talent Management

Companies need to focus on having the right people in the right place when executing a global strategy; as human capital is at the core of driving a successful global business. This requires providing ongoing coaching to your executives and leaders, so they can adapt to the different cultural environments, while working on their business management and leadership skills.

At Volaris, we recognize that cultivating the next generation of leaders is essential to continued growth and sustainability. Hence, we encourage our leaders to develop a long term perspective, and provide them with the autonomy to make decisions, in order to meet a clear set of goals and objectives in those global markets.

We also empower our leaders with the necessary tools to succeed in a global environment, through regular performance reviews, mentoring, and corporate summits. This helps keep our teams motivated, attracts better employees, engages our customers, and helps our leaders manage growth more effectively.

Catering to Different Markets

It is crucial to understand what works in your domestic market might not work in other countries around the globe. Thus, when expanding into a global market, your company needs to be conscious about the perceptions, needs, preferences, and other attributes that affect the decision making process of the customers in that market in order to customize your solutions.

The same concept applies to the products that you offer in those global markets. Some products might qualify as global products when they solve a common problem for all your international markets. However, forcing customers in a new market to adjust to all your domestic products might not be well received. Therefore, you need to conduct a thorough market analysis to deliver localized products and develop processes that satisfy your customer’s needs.

You also need to consider tailoring your marketing efforts to match the new market’s preferences. For example; adjusting your brand positioning, translating your marketing materials and corporate website, customizing your sales cycle, and evaluating your digital marketing and communications strategy.

Communication

Having your operations spread out across multiple countries and time zones can make it tricky to communicate. This also slows down the decision making process as there are only a few hours a day of common “awake” time.

At Volaris, we encourage our leaders to regularly use the company intranet site as a tool to collaborate with peers across multiple businesses, regions and countries electronically. Many of the academies we have put together in the past have proved to be an effective method to
share best practices, and allow our businesses to collaborate with each other while understanding each other’s goals.

We also host quarterly corporate summits with general managers and leaders from all over the globe, as we firmly believe that these summits play a crucial role in bringing people together; in order for them to learn, share, and grow.

Global companies must continually work on creating opportunities such as these, which encourage a face-to-face interaction between their teams, as this can definitely help boost team morale and increase collaboration.

Remember

Depending on which industry you are in, you will face additional challenges that could affect the way you run your business in those global markets. It’s always important to conduct a thorough research on your competition, legal regulations, and other factors relevant to your industry, prior to making the big move.

Acquisitions on the Brain?

Mergers-and-Acquisitions-Insurance-1011Often with acquisitions, some of the most important considerations happen before and after the deal.  To get an inside take from someone who has years of M&A experience, we sat down with Dennis Ensing, CEO of TransGaming and AceTech Ontario CEO member.  Dennis took us through some key aspects of an acquisition process that can either help or hinder the transaction.

Before Negotiation:

Everyone knows there’s two types of acquisitions, there’s the ones you seek, and there’s the opportunistic acquisitions that fall in a CEO’s lap. As great as the latter are, Dennis feels that as a CEO of a growing technology company, you should always be seeking out targets for acquisitions and have a process in place to do so.  With that being said, there’s some considerations to be made once one of those leads takes fruition.  To a large extent, the M&A process is not core to the business you are running, so they can often be a distraction.  So once you’ve got an acquisition on your plate, something else tends to fall off, “if you’ve got one eye on the business and one eye on an acquisition, then what about financing, what about planning for the exit, what about my family at home?”, says Dennis.  To make sure nothing falls through the cracks, many companies will hire an investment bank to be the front end of the transaction process.  For those who don’t, it’s critical to have someone by your side who’s running point on those areas that you know are going to suffer during the acquisition process (except probably for your family!).  “If I’m running the acquisition process and moving forward with a transaction, the core business better not suffer”, says Dennis, “and I need to know that I’ve got a right hand person who’s pushing that forward towards the objectives that we set and achieving the milestones that we need to so that my ‘distraction’ isn’t affecting them.”

Since an acquisition can take 4-6 or even 8 months before completion (after being identified), it is critical that before you start you have a process in place for what those next months are going to look like and who is accountable for what.  If not, it can take on a life of its own and can end up taking 9-12 months, or even 18.  During Dennis’ investment banking days, he became increasingly frustrated that there was no general overview in place of what the process looks like.  As such he created his own.

Click here for Dennis’ acquisition process & timeline.

After the Transaction:

Have you acquired a company? Congratulations! But there’s a couple things to remember once the deal is done, “If you don’t plan for integration before the closing, you can end up with a real mess”, says Dennis.  Acquisitions take a team, and that team can fluctuate through the process, but it’s important that you’re bringing your key business leaders in at the appropriate times so they can plan before closing and take ownership of the integration.  Part of the integration process includes culture.  After the dust settled with TransGaming’s 2012 acquisition of Oberon Media, they started to make integration related changes, and the top of that list was managing the cultural fit between the two businesses, “Culture trumps everything. People can sit there with the spreadsheet and say ‘oh, that’s what the integration will look like’”, explains Dennis, “but if you can’t marry the cultures, it’s never going to work”.

 

Not Another Millennial Article

Millenials

These days it seems that each week, there’s a new article on Millennials in the workplace and how their professional expectations are vastly different then the generations before them.  We sat down with Chris Wiegand, CEO of Jibestream and AceTech Ontario CEO member, to find out how he’s adapted to the newest generation in the workforce and how he’s made it work in Jibestream’s favour.

The first thing employers need to understand is that many Millennials are not motivated by compensation the same way their parents and grandparents were.  It is still a key consideration, however, there are other significant factors that come into play.  Chris notes that a Millennial’s desire to constantly learn, grow and be challenged is a much stronger factor, if not the most important, when considering a place of employment.  “We have to make sure we rotate people throughout the company so they don’t get bored”, says Chris, “we want them to feel like ‘yes I’m not just doing the same work over and over again, I’m learning, I’m part of R&D, next week I’m part of something else’. Although it’s not always or practical to rotate people in their roles but we are very conscious of keeping people engaged.”

Impraise Blog states “according to a study by Intelligence Group, 72 percent of millennials want to be their own bosses at work. If they do have a boss, 79 percent of them state that they want their bosses to serve as a coach or a mentor. The research explains that there is a need for a performance management system designed to guide employees into being more equipped experts in their line of business.” Chris has recognized this among his employees and has noticed that annual or even quarterly reviews are not sufficient anymore.  He has ensured that his employees are having weekly 1 on 1’s with their supervisors.  These meetings are not simply about what the employee’s current tasks are, but what’s working for them and what’s not working for them.  Chris has found that if they do not have the opportunity to do this, the frustrations they are having will fester and soon they will be looking at job boards.  These meetings are also key to ensuring that your employees are continuing to work towards their goals. “It’s important to make a clear growth trajectory for people, so that when you start someone off in a role, even on inside sales, that you have a clear path for them to be enterprise sales person, if that’s what they want to be”, explains Chris.

When it comes to employee retention, Chris says that “the more you teach, the more they get out of it and the longer they stay. Eventually they’ll leave on great terms and you’ll get the best out of that person for those X years”.  It’s also important to continually gauge the temperature of your employees, be open to changes and to try new things.  When Jibestream adopted Slack, Chris felt uneasy when he saw hundreds of giphys go across the app.  However, he’s realized that Millennials appear to be very strong at multi tasking and despite all the memes, his employees are hard working.

Chris has discovered that when recruiting Millennials, transparency and social accountability are paramount.  “I think things like Instagram and Facebook are good because they allow people to see your culture. They say a picture is work 1,000 words.  We share a lot of pictures and 80% of them are probably the office dogs”, laughs Chris, “but people can now start to fill in the blanks and understand the work environment and see themselves fitting in here – we try to make sure everything is consistent and representative of the workplace”.  In addition, you’ll notice on Jibestream’s job board, they are very honest about potential challenges a candidate may have in that position.  This results in interviewing candidates who can see themselves fitting into the environment and welcoming the challenges that they may face.

Chris feels that it’s important for his fellow CEOs to remember that Millennials do not make up 100% of the workforce.  “Don’t change everything you do to be universal for this group of people. The challenge is to make sure it’s still a dynamic management system”.  He feels it is important to not let the emergence of a new generation in the workforce change your whole company.

At the end of the day, Chris feels it ultimately comes down to emotional intelligence. “It’s about how you should be best addressing each different type of person in your group and then managing to that. Your managers are going to have to manage one person maybe slightly different than the other but still make it fair”.

 

So You’re Thinking of Going Public

public-to-private-company.pngIf you’re a CEO or a CFO, there’s a lot of differences in your day if you are running a public company versus a private company.  As most of the members at AceTech Ontario run private companies, there tends to be a lot of questions around what is involved in going public.  We decided to sit down with one of the few members of AceTech who are running a public company to find out what he has learned and what his advice is for fellow members.

Rob MacLean is CEO and co-founder of Points Loyalty and is a CEO member of AceTech Ontario.  His company did not exactly take the most typical path to becoming a public company due to circumstances and the hand they were dealt.  Points was incubated back around 2000 by a company called Exclamation Inc.  As such, they were a private company inside a public company.  Shortly after, as many people will remember the “bubble burst” and investments in private dotcom companies severely tightening up.  However, Points had gained substantial traction at this point so Rob and his co-founder, Christopher Barnard, combined Points with their parent company.  Thus they were now public and could more easily tap into that marketplace for capital, as well as utilize the funds that were remaining in the Public vehicle.

Other positives included an opportunity for transparency.  Points’ clients and partners are Fortune 1000 companies: big airline companies, hotels, etc.  Being a public company meant that Air Canada for example, could view their financial statements and know that they were a healthy company.  This gave them some inherent credibility, which was a great asset to them in the early days of business development.  Additionally, one of the ways they were able to attract talented employees early on was by being able to provide monetary value through liquid equity.  This is something that is very difficult to do for employees of a private company, and was particularly challenging for private  company’s post the  dotcom “bubble”.

Unfortunately, you can’t have positives without some negatives.  Rob discusses how, despite the fact that being public helped them recruit, the same positive was also a negative for them due to the size of the company.  “We’ve had periods over the years where we’ve grown the business 60% in one quarter in a year over year basis and the stock has gone down. You think ‘okay, that seems odd’”, explains Rob, “but  may have been more driven by a hedge fund closing shop , and so they have to sell their position and so you get into that classic supply and demand of stock”.  It can be very difficult on employees to see their stock move around as it does and have very little control over it.  Rob strongly believes that a company needs to get to a much larger, more stable stage before that volatility goes away.

Another big challenge Points faced was time and money.  “It really is quite a significant driver of work load from a CFO, CEO standpoint”, says Rob, “There’s certainly stages over the years I would have spent 40-60% of my time on public company type activity rather than in directly driving the business”.  Depending on the company, and its objectives, this isn’t necessarily time well spent for the CEO.  Rob would argue that they would have been better served if he was able to spend that time building the business instead.  There is no question that this takes away a signification amount of time from the CEO and Finance  roles within the company.  Additionally, it cost Points between one million and one and a half million dollars to operate as a Public Co.  Not every company can absorb this kind of cost, and the dollar amount has largely been the same regardless of the size of Points……meaning it was a significant burden in the early days when revenues and profits were smaller.

One point of concern Rob has for his fellow CEOs if they do decide to become a public company is focusing too much on the quarterly pressures.  There is a reputation that public companies are forced into quarter by quarter management style, and Rob admits that there’s some truth to that.  Since Points is considered, especially back in the early days, a very small public company, they made sure to still focus on the long term view of the business.  “It would be very easy to fall into the trap of not making the right business decisions because you were trying to meet a quarter,” says Rob, “I think generally speaking we’ve been able to avoid that, but there’s certainly a lot of pressure that people should watch out for. Having a strong , aligned Board, is critically important in avoiding the temptation of managing quarter to quarter.”

Another point for CEOs to pay attention to is the company’s growth trajectory.  Before going public, you want to make sure that your company’s growth is predictable as that is what the public market responds best to.  Rob explains that despite Points having continual growth every year, it was not a consistently increasing growth percentage which resulted in “chunky” (obviously a technical term) growth.  This made their trajectory difficult for the public market to understand. Analysts often seem to be more comfortable with a predictable 5%  trajectory  vs a growth profile that may be much higher , but less consistent.

There’s a belief that going public is the ultimate end game.  But all in all, if you are thinking about taking your company public, think about if it is the right time, and are you doing it for the right reasons.  “I think that there’s most certainly a place for being a public company, but you have to be very careful and very thoughtful regarding when is the right time” says Rob, “Access to capital is probably the most sustainable advantage in being public, but as with most good things, this benefit  comes with that are lots of challenges in terms of time, resources and cost.”

So at the end of the day, you have to ask yourself, are you going public for the right reasons?

 

An Inside Look into Private Equity Firms

capital_investment1Often in the AceTech Community, we hear CEOs discussing avenues for acquiring additional capital.  One of the common ways this is done is through Private Equity firms.  So, we thought we would get the inside scoop into a private equity firm and hear about their role from their perspective.

Yong Kwon, Partner at Novacap and AceTech Ontario sponsor, sat down with us to give us the inside track as to what they’re looking for and what advice they have for companies looking to acquire capital.

Before you even look at which private equity firm you want to partner with, unless you’re planning on outright selling your company, you need a detailed plan of what it is that you want to gain out of the partnership.  Knowing what direction you’re looking to take the company with this equity will help you better determine which firm is right for your company.  “Do existing shareholders want to take some cash off the table?  How much capital is needed to grow the business, either organically or through M&A?  How and in what time horizon are shareholders planning to exit?”  These are just a few of the important questions founders and management should consider, explains Yong.

It’s also important to know what you want the firm’s involvement to be, especially as not all firms take the same stance with regards to their participation.  Novacap, for instance, takes a very hands-on, operationally- focused role.  This is because they have partners who have formally been c-level executives and who don’t just have a financial background.  However, many other firms are not as hands on.

Of course, track record is also very important.  What is the PE firm’s history and reputation investing in your sector?  Yong suggests asking colleagues or industry peers about their experiences dealing with specific PE firms and the people within those firms.  Many will have impressive backgrounds and past results they can point to, but ultimately you will want to feel comfortable that the people who are partnering with.  How much attention will you get from your PE partner and how important is your success to their overall portfolio?

There’s a common misconception entrepreneurs have about private equity firms – that they’re all the same.  They are not. Partnering with a PE firm is a long-term commitment and finding the right fit is critical.  Taking the time to do your research into all the different options available will help you ensure you find the right partnership between your company and a private equity firm.

 

 

It’s About Time: Marketing for The Complex Sale

Contribution by Waylen Miki, Content Marketing Specialist at AceTech Ontario member company TripSpark Technologies

Despite what the play/film Glengarry Glen Ross may suggest, not all sales happen overnight. And the old adage of “Always Be Closing” falls on deaf ears when you’re dealing with a client who may not be able to buy from you many years down the road. In the transit software industry, one of the reasons for this stall in the sales cycle is due to long pauses between national funding events. This means our sales and marketing teams are forced to re-think their approach when it comes to lead nurturing and engaging with these unique clients.

But as luck would have it, the complex sale provides you with some valuable opportunities. When confronted with the longer sales cycle, you can use this time wisely. And since no sale exists within a bubble, your efforts can reach beyond the single sale and become the backbone of an entire inbound-style marketing strategy.

You Can Provide Value Before and Beyond the Sale

The key to the inbound method is to provide quality, useful and valuable information to your industry (read prospects). Your potential clients are searching for any information that can help them with their specific problems. And since you are also an expert in the industry, you can help them out. What are the trends in your industry that are of most concern to your prospects? Is there any leading research, papers, studies, that are being conducted that can help your prospects to better manage their business? Can your company be responsible for creating these studies? By keeping your eyes open to useful resources and distributing them to your potential clients, you become a central repository of knowledge.

How Transit Software Vendors Deal with Long Cycles

In the transit software industry, grants and funding sources play a major role in our sales relationship. We have found that it’s vital to help assist with budgeting in order to ensure that the acquisition price is within our prospects’ budget and purchase timeline. By working with clients through the RFP and RFI process, we are able to have more control over our sales plan and the methodology for ensuring that our products are the best fit at the best time. Our job is to help our potential clients as much as possible, making the purchasing process as painless as possible.

Do More With Your Content

Don’t simply assume your leads are the only ones in need of this material. Take advantage of your knowledge and create content for everyone in your industry. Write your own whitepapers, eBooks and blog posts and build your credibility as a thought leader. With regards to the complex sale, you are delivering value, long before a sales discussion. It is this growing relationship that will matter when the time comes. As well, after the sale is complete, you can continue to provide insight into your client’s operation. By working with clients, rather than simply selling them your product, you take on a dynamic role within the success of their operation.

Reveal Your Past and Current Success

Speaking of success. If you have reference sites that can validate and provide an honest and positive review of your product or company, share that with the world. If you have been nurturing your leads (now clients and advocates) over the past year, reveal the success that you and your partners have found, especially to your clients Remember that they are the hero of their story, not you. This point of view is incredibly valuable when new prospects begin to consider your company as a partner. We have found that video testimonials are very well received by both our clients as well as evidence by the traffic on our website. So we suggest taking advantage of video marketing. As well, be ready to provide client references as well as credible ROI analysis.

Beware Targeting a Single Employee

It can be an annoying thing to be in the middle of a year-long relationship with a potential client when suddenly your key contact up and quits from the company. Suddenly, all those lead nurturing emails and late night phone calls are rendered useless. This is why it’s important to nurture leads in more than one way. If your sale is going to be complex, then so should your approach. Rather than simply engaging one-on-one with a particular contact, there are ways to begin engaging with the company as a whole. Consider approaching others at your target company to work with you on a mutually beneficial project. This can be a co-created whitepaper that can provide value to the industry as a whole. Perhaps you have an idea for a webinar that can be enhanced by the experience and thought leadership of your target company’s leaders. This is a great opportunity to begin a creative and business relationship that does three important things:

  1. It establishes professional contact between you and your lead.
  2. It provides their company with a valuable piece of content, free of charge.
  3. It provides your company with deeper credibility with your own clients and all future prospects.

As transit software vendors, it is fairly simple to work within our industry to come up with quality content. Not every industry is as passionate about expressing the relationship between efficient transit service and the need for automated transit software.

Learn the Needs of Your Leads

We run into our prospective leads at tradeshows featuring transit software and hardware vendors. Maybe you’ll encounter your leads at symposiums, in online chat forums, social media outlets. Perhaps you’ll visit them in person at their site of business. In all these places, you have an opportunity to learn more about the needs of your leads. Rather than simply trying to force your logo, your brand and your product into their line of sight, consider asking them questions instead. Take the time to discover what pain points are the most relevant to their business. Uncover problems that they may be encountering for which you have a solution.

In the end, it’s not about selling, it’s about giving. So what do you have to offer? If you don’t know, find out. Along the way, you’ll find incredibly valuable insight that can be used for incredibly valuable marketing content. So by the time you think you’re at the “Always Be Closing” stage of the sales cycle, you will realize that you have already surpassed it.