Important lessons shared by the Panel of Experts at the NSS CEO Workshop, Sept 28, 2011.

Many CEOs are so busy right now working in the business, that they lose sight of the longer term goals. Our panel of experts proposes ways to take a longer view and maximize the impact value drivers can have in achieving success.

The uncertain economy demands disruptive innovation, yet that implies risk that is harder to achieve. Agility is more important than ever. The 6 Value Drivers below show you how to incorporate hidden values into your strategy and how to achieve value short-term and for the future health of your company.

Carol Kunik, Vistage | Value Driver 1:

Culture and Communications are often overlooked and viewed as a soft skill.  In your work with CEOs, where do you see the pitfalls and breakdowns in communications of the mission, goals and objectives and why is it so important?

The CEO/leader is the creator of the culture. He creates dedication to a “noble cause” by winning the team’s commitment to the cause, communicating that “we are in this together” and developing a compelling saga in language that inspires passion for strategic results. This becomes the Mission of the company. High passion companies out maneuver the demoralized competition. The leader also stands for what is not tolerated on his/her watch in terms of ethics, relationships and work.

In the book “Better Under Pressure” by Justin Menkens the research indicates that great leaders strive relentlessly to maximize their own potential – as well as stoke people’s innate thirst for their own triumphs. He says they all exhibit three essential attributes (that are rare, but can be learned) realistic optimism, subservience to purpose and finding order in chaos. It is up to us to create the environment we want to work in.

Steve Wishner added that leaders must have ‘town meetings’ and execute against goals.  Everybody needs to focus on mission and goals.

We spent some time going around the room to share our Mission Statements and how to think about crafting one:

• What drives you?
• How are you uniquely successful?
• Why does it matter?
• Re-communicate to highlight mission and goals

Dan Adams, NENS | Value Driver 2:

Technology is ubiquitous these days yet widely under leveraged.   What are some of the key aspects to consider ensuring our investments in technology will create value for our businesses?

Technology is a value driver if it is truly understood.  Most companies are winging it when it comes to a solid IT strategy.  There are two key areas we see companies lose control, efficiency and money.  The first is creating a real IT strategy and the second to understand the resources required for efficient technology usage.

IT strategy needs to include your business objective and goals, an accountability chart, a budget including human capital, timeline, operational support, cultural integration and metrics to measure outcomes.   This plan is a map to follow, to hold IT accountable for the targets you desire to hit.

Different skill sets are required to accomplish the tasks all businesses have.  Think of it as a transmission on a car.  You have different gears to enable different driving requirements.  In IT there are 5 basic levels which are help desk, network administration, specialized engineering, operational practices, and CIO skills.

Technology is a value driver if it is truly understood.  Most companies are winging it when it comes to a solid IT strategy.  You want to have a clear strategy and also a multiple gear box which refers more to the different levels of IT expertise you want to consider and don’t forget the roadmap.

Ron Adams, Capstone Partners | Value Driver 3:

A strong Brand with product and services visibility is an important value driver for a business.  How can a business enhance their valuation through brand recognition?

Brand recognition is an important value driver. Make your brand visible, recognizable and tie it to your mission statement. Brand awareness is a key intangible that is reflected in your workforce, customer relationship and distribution of products.

How does one quantify a brand, a CEO asked?  You can analyze the average lifetime of a customer, customer retention from the history of your client list. You then want to figure out what it costs to acquire one client.  Looking at loyalties of other brands will give you ideas, based on your sales, 3-4%should be spent on branding.

If you find your brand diminishing, identify the problem, develop an action plan and ask yourself if you are still accountable for your value you bring to your customers.

Beth Arnold, Foley Hoag | Value Driver 4:

Intellectual property in form of patents and trademarks are essential in managing competitive risk. How should a business look at its IP Portfolio today and have you seen companies benefit from repurposing IP?

Companies should do all that they can to strengthen the value of their IP- always.  Patenting, in particular, can be very expensive.  So you have to ask, do you really need a patent?  Patents are critical for technologies that require long and costly development and/or that require regulatory approval.  Example include drugs, medical devices and medical diagnostics.  Patents may not be important for technologies that will continue to be improved and can be maintained as a trade secret- software, for example.

If you are planning to obtain financing from an angel or VC investors, it is important to understand what they think of patenting for your particular product/technology.

In the current economy, it has become increasingly important to be strategic about patenting in order to minimize costs.   You may apply for patents in fewer countries, you may avail yourselves of international and regional filing systems.  You may file provisional patent applications.  However, it is critically important to spend the time and money upfront to fully develop the invention, make sure it is adequately described in the patent application and that the  broadest claims available are supported and pursued.

Trademarks, names of your product, logos, tag lines, slogans are important intellectual property.  Trademarks may be federally registered and it is not as complex to do that as it is to get a patent.  Also state law provides certain trademark protections based solely on use.

As for repurposing IP, that is a tricky thing, since a patent is only as important as what it is protecting.  For telecommunications and other technologies, what a patent actually covers may not always be clear.  This is why some companies with money buy up all relevant patents.  If someone sues them for patent infringement they hopefully have at least one patent that they can assert back.

Ben Weller, Next Stage Solutions | Value Driver 5:

We know that processes and methodologies are important to bring efficiencies and higher productivity for the business. How much impact do such value drivers have in a business and can you give us an example?

An often overlooked value driver is the process flow analysis.  Find your bottlenecks or silos and figure out how to resolve them. Make people in your firm accountable for what they do. The value creation comes from the top down by setting business cultures where all employees are encouraged to problem solve at the grassroots level. Allowing everyone to contribute will enhance your bottom line.

Rolling Forecasts is another tool that helps businesses stay agile and forward looking at the same time.  When a business develops a budget, typically once a year, there is a tendency to work towards that budget, a static document at best. This process is not innovation enhancing, whereas with a Rolling Forecast, the CEO   each quarter looks one quarter back and two ahead and makes changes and adjustments accordingly.

If for some reason projected quotas are not met, the rolling forecast model forces you to identify the reasons and either fix the problems or recalculate the projections.  We love this model because it helps businesses stay nimble and encourages them to embrace ongoing changes in the business.

Steve Wishner, Corporate Advisor and Managing Director, Exigent, LLC | Value Driver 6:

Focusing on the right value drivers can prove critical in an environment such as this. Steve, could you address some of the value drivers that you believe are most important for CEO’s to focus on in this economy?

In a slow recovery it is especially important to maintain positive cash flow? How do you accomplish this? Firstly, size the business to realistic revenue expectations.  If revenue is declining and you generate revenue below the capacity of the workforce you have hired, looking at layoffs may be inevitable.  Think hard, act decisively, do it ONCE and get it over with quickly. Importantly, communicate right away with the survivors and assure them  that the trauma is over and that they are the critical workforce  that the Company will now be depending on as it moves forward.

Another aspect of keeping cash flow positive is to understand and analyze your variable and fixed costs. Move as many costs as possible from fixed to variable. Evaluate what is your core competency and outsource most non-competencies.

What does your web presence look like?  Can you use it better and provide services online?

What does your collection rate look like and can you discuss with your customers how to  speed up payments?  How about on the accounts payable side?  Be careful, but have a conversation with your vendors as well.  Vendors and suppliers do understand the current economic situation and you can get almost always some better terms with the proper dialogue.

Analyze your inventory and make sure what you have is not obsolete and overstated in your books. Can you eliminate or lower inventory levels on lower turning sku’s?

Lastly, increase customer service, give your customers extra attention and demonstrate how you can be of increased value to them in multiple ways.

The session ended with additional Q&A from the enthusiastic CEOs in the room and hand outs appropriate to the topic.

Please join us for our next CEO Workshop, Thursday, Nov 17 at the Foley Hoag Emerging Enterprise Center on the topic of “How to Gain Access to Capital Markets“.

On May 11, 2011, NSS held a CEO Workshop concerning Budgeting and Forecasting.  The group discussed the different measurement criteria, value drivers and how to lead an ongoing budget process within your business. Flexible budgets, annual budgets and rolling forecasts were compared.  Here are two articles you may want to read that are relevant to this topic.

Contact Ben Weller, BD & CFO of NSS at weller@nextstagesolutions.com or call at 617-449-7728 ext. 710 for a consultation.

1. Let It Roll: Why more companies are abandoning budgets in favor of rolling forecasts by Russ Bangham of CFO Magazine, May 2011
2. Use a Rolling Forecast to Spot Trends by Harvard Business School Working Knowledge, March 13, 2006

Budgets and Forecasts represent two parts of a business management continuous improvement process. A successful enterprise must first have a clear understanding of its strategic plan. In fact Budgets and Forecasts are the financial GPS tools that carry strategy through to implementation.

How do you communicate and manage the goals for your team?

The workshop posed the following questions to our CEO participants;

• Do you see a budget as a Strategic or a Tactical tool?
• How can your budget reflect your strategy?
• Do you see your budget as more of a tactical tool, i.e. the performance yardstick for annual goals and compensation plans?
• Is the budget made up of strictly financial metrics?
• Where do you capture operational goals and performance measurement metrics?
• Is your budget implementation process a reflection of your company’s culture or is it a process within itself?
• Do you recognize your business and industry drivers within your budget?
• Does your budget have an expiration date, or do you keep it alive through continuous improvement forecasting?

Ben Weller, BD & CFO for Next Stage Solutions compiled the following check list as a hand out:

The measure of how you execute strategy is captured in the topic of Budget. But different areas of your business require different measurement criteria.

Budgets can refer to:

• Marketing Strategies
• Sales Plans
• Operational performance
• Human Resource development
• Capital Investment
• Financing Strategy
• Ownership Return

And can take on many measurement dimensions

• Fiscal
• Continuous Improvement goals
• Key Performance indicators
• Strategic Planning Milestones
• Benchmarked Metrics
• Customer Satisfaction

Budget Implementations can take on the personality of the organization

• Size of Company and distribution of authority
• Top Down versus bottom up management style
• Fiscal Micro management vs  Strategical Macro management
• Cash Flow is Primary Focus
• Performance vs External Expectations is a Priority

And all methods and uses need to focus on Business Drivers

• Variable Sales and Cost (Marginal Profitability)
• Fixed Costs
• Project Costs (New Product Introduction)
• Occupancy Costs
• Variable Energy Costs
• Headcount
• Average Selling Prices (Competitive Positioning)
• Efficiency (Labor and Machine Operations)
• Productivity

What Profiles of budget design fit with various industries

• Software
• Life Science
• Medical Device
• Manufacturing
• Food Production
• Professional Services

What are the various focuses of forecasting and where do they apply

• Traditional Rolling 12 Month forecast
• Sales Driven Top down vs trend based
• Cash Flow vs P&L
• Analysis vs Plan
• Current State vs Future State (This involves lean accounting and is a whole other topic)

If you are interested in this topic and would like to explore rolling forecasts further for your business, NSS provided a customized one-day workshop.

Contact Ben Weller, BD & CFO of NSS at weller@nextstagesolutions.com or call at 617-449-7728 ext. 710

NSS Workshop Series for CEOs and Business Owners

If you are a service provider receiving this, please share it with your clients, a value add for you, thank you.

GPS for Budgets & Forecasts: What are your Value Drivers?

Date: Wednesday, 11 May, 2011 | 7:30am – 9:30am

Place: Bridge Bank | 1050 Winter Street | Suite 1000 |

Waltham, MA | light breakfast

The measure of how you execute strategy is captured in the topic of Budget. But different areas of your business require different measurement criteria, all of which fall under the subject of Budget.  In this workshop we will discuss and answer questions around value drivers and how to communicate and manage your goals within your business. We will also talk about the importance of aligning strategy to Budget.

Mail in or bring your questions to this interactive discussion with our very own NSS team:

Moderator:

Rudi Scheiber-Kurtz, CEO, Next Stage Solutions, Inc (NSS)

Panelists:

John Connolly, CFO, NSS
Steve Dance, CFO, NSS
Laurie Taylor, Controller, NSS
Ben Weller, CFO, NSS

Host:

Dick Sweeney, Partner, Bridge Bank

Discussion Topics:

• How can your budget enable you to execute your strategy?
• How does your organizational culture drive the way you design a budget?
• What are your business drivers and what methods and uses should you focus on?
• How do you integrate functional planning into your budget implementation process?
• What are the metrics dimensions of a budget?
• What budget profiles fit your industry?
• How can forecasting be a reality measure on your business strategy?

Who should attend?

CEOs and presidents of companies with $3MM+/- of revenue who are considering next steps for their company.

If you do not match the above criteria, please forward this email to clients and colleagues who are. They will appreciate it. Thanks.

About the NSS CEO Workshops Series:

Next Stage Solutions, Inc (NSS) is a financial consulting firm providing CFO and Controller support to growing businesses on an interim or ongoing basis. Through its extensive network, NSS began offering the workshops in 2010 exclusively to CEOs and presidents of growing companies.  These workshops are interactive in nature and encourage company leaders to explore new ways of tackling the complexities a 21st century business, to learn from each other and gain new and more effective tools in leading their business to the next stage.

Register today at info@nextstagesolutions.com or 617-449-7728

By Lauriston Taylor, Controller Consultant, Next Stage Solutions, Inc. (NSS)

Summary:

The IRS has implemented two new tax breaks under the HIRE (Hiring Incentives to Restore Employment Act) program that will provide new incentives for employers to stimulate their staffing efforts.  Employers may qualify for the following two tax exemptions:

1. Payroll tax: 6.2 percent payroll exemption of social security tax on wages, effective dates are 2 February 2010 through 31 December 2010.
2. New Hire Retention credit: $1,000 per additional new worker that is retained for at least one year with no significant wage reductions during the later part of the year

Qualified Employees:

Those employees beginning employment after 3 February 2010 and before 1 January 2010 for a period of 60 days have been previously unemployed or worked 40 hours or less.  The following situations will qualify:

-  hiring a replacement for an existing position that has become vacant due to termination for cause or voluntary resignation

-  staffing of a new company and its initial staff

-  hiring for public colleges and universities

 

The staffing additions listed below will not qualify:

- State, local and federal positions

- House hold employers

- Independent contractors

- Employees who are related to the employer or who directly or indirectly own more than 50 percent of the business

 

The new hire should supply a signed Form W-11 and this should be kept on file for record keeping purposes.

Additional information:

For further details please refer to the IRS website

Form W-11 can be downloaded from this link

Join us for the Finance and Funding Options Panel

Date: Tuesday, September 21, 2010 | 7:30am – 9:30am

Place: WilmerHale Venture Group | 1100 Winter St

Bay Colony Corp Center | Center Entrance

4th Floor | Waltham, MA 02451

Exclusively for CEOs of revenue producing companies who are considering raising expansion capital. Come and meet the experts, learn what’s new and explore what type of financing or funding matches your needs. Lots of time for Q&A, so bring your questions.

Panelists:

Jane Braun, Silicon Valley Bank

Christopher Mirabile, Race Point Capital

Joan McArdle, Mass Capital Resource Company

Robin Lockwood, Flybridge Capital Partners

Moderator:

R. Lee Schindler, WilmerHale

Sponsored by Next Stage Solutions, Inc

Attendance is complimentary, but registration is required.  Call today 617-449-7728 or send an email info@nextstagesolutions.com. 

Steve Dance is part of the NSS team.  He brings over 30 years of high level financial expertise in Life Sciences and High Tech. Steve has raised over $500MM in capital.

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

That the CEO could always count on me to be calm and focused during a crisis.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

The sale of one of my previous employers to a major biotechnology company was a complex process, with many potential obstacles arising during the negotiation and due diligence process.  As CFO, I was part of the negotiation team and provided the bulk of the due diligence materials.  I was responsible for resolving the many issues that came up during the sale process.  I believe I was able to establish a strong level of trust with the acquirer’s team and we were able to reach agreement on all the issues, and the sale was successfully concluded.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was CFO for a biotech company in California that had 300 employees, over 200 of whom were located in Europe, principally in Lyon, France, following a recent acquisition.  Since I speak French, I was able to establish good relations with the finance group in France, and ultimately the rest of the management team.  I played a key role in ensuring that the needs of the European team were met and consequently was appointed President of European Operations in addition to my CFO duties.  The good relationships that I built with the European organization also enabled me to negotiate successfully with the French labor union to avoid a workers’ strike that would have halted manufacturing.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Wall Street Journal – still a great way even in this digital age to keep on top of what is happening in the business world.

Funniest Fact: Tell us something funny about you.

I was raised in Wimbledon, England and when I was a kid I used to go and watch the tennis at Wimbledon every year.  In those days the players used to walk through the crowds on their way to the courts.  One time I got too close to a player and he accidentally trod on my foot.  My foot was sore for days afterwards; the player won his match.

Laurie Taylor joined the NSS team recently.  He has over 20 years of experience and has worked with multiple start-up as Controller. We are delighted to have him on board.

Most Satisfying: In your CONTROLLER work you have done in the past, what is the most satisfying feedback you got from the CEO?

Nineteen out of twenty client companies have offered me a full time position during the engagement.

Most Inventive: Given that as CONTROLLER we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

I began a two person project to determine why a major bank’s ATM conversion had an out of balance total of $19M after the merger of the two banking systems.   The bank booked a 200k reserve to cover this reconciliation exposure.  I requested a Bank Tiger team to assist my current consulting team and at the end of the project we had completely reconciled the account and were only unable to account for $9k in bank funds.  We also discovered a major systems glitch that was the result of the systems merger and trained the banking staff to recognize the problem and how to correct the system if it occurred again.

Most Positive: CONTROLLER’s have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was assigned a project to take over for a Director of Finance at a specialized moving van company.  I first determined that there was a massive amount of misspending going on and no one was managing the AR accounts.  In 6 weeks we were able to make enough corrections that company was stable enough for sale to a much better funded and staffed regional carrier.  The sale of this business unit saved 250 staff member’s jobs as a result of the merger instead of a company closure due to prior management neglect.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Why of Work: How Great Leaders Build Abundant Organizations That Win by
David Ulrich and Wendy Ulrich

Funniest Fact: Tell us something funny about you.

I am crazy about WWII aircraft that have massively supercharged engines that “go fast, stay low, and turn left!” also known as the National Championship Air Races held each fall in Reno, NV.  The only rules are that these planes must have a prop and straight wings.

By Mark Ott, CFO Consultant, Next Stage Solutions, Inc. (NSS)

While the M&A market is fairly quiet as we enter the summer doldrums, it is a perfect time for owners and boards to think about what preparations can be made now in anticipation of selling a company when the market does open up.  Over the next several months, I will highlight some of the key financial issues that you should be thinking about and preparing for during this quiet period.

Are Your Historical Financials In Order?

In discussions with potential buyers, one potential red flag is a set of historical financials which doesn’t stand up to scrutiny.  You should have a complete set of financial statements (Income Statement, Balance Sheet, Cash Flow) for the previous three years (two minimum) which have either been reviewed by or, better yet, certified by outside auditors as well as unaudited interim financials for the current year.  If your accounting is currently on a cash basis, you should consider changing to an accrual basis (after consulting with your tax advisor) and it would be advisable to ensure that your accounting is in compliance with GAAP (Generally Accepted Accounting Principles).

Most companies have someone in house to do their bookkeeping but it is wise to have an independent company like Next Stage Solutions (NSS) come in and review the historical financials and get them in good shape.  NSS has strategic-thinking CFO’s who have experience in leading companies through the M&A process.  Their participation in this phase will actually pay for itself to some degree as it will reduce the cost of the review/audit by the outside audit firm and accelerate the process.  Furthermore, you cannot use the same firm to prepare the financials and then audit/review them.

One other good reason to have sound historical financials is that they will better enable you to Prepare a Credible Forecast which will be the subject of my next article.

Mark Ott joined Next Stage Solutions this Spring.  Read on to see what Mark has been up to – he has a great story to tell!

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

The most satisfying feedback I received is when the CEO told me that he knew he could spend a considerable amount of time out of the office (with customers, investors, board members, press, etc.) knowing that everything back at headquarters was being looked after with me looking after things.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

When we moved a company from California to Massachusetts, I had to build a complete infrastructure pretty much from the ground up.  This included the recruitment/interviewing and engagement/hiring of new corporate attorneys, external auditors, Accounting Manager, Office Manager, and Human Resources Manager as well as establishing new banking relationships and corporate insurance programs.  All of this had to be done in a matter of three months.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

When I was European Controller for a large networking company, I had eight country controllers reporting to me.  Some of the countries (like the UK and Germany) were larger contributors to the results of the overall operation than others (like Spain and Sweden).  In that environment the controllers for the larger countries tended to be more influential in group decisions and the controllers for the smaller countries would sit back and complain that their needs were always overlooked because of their size.  This ultimately led to a team that did not work very well together and this was reinforced by pre-existing cultural differences.  One of the things I did to turn this around was to solicit ideas from the controllers concerning topics to be covered in an upcoming quarterly staff meeting.  When the time for the meeting came, I appointed the controller who suggested the topic as the leader of the discussion leader and subsequent action items.  This forced the smaller countries to play a much more active role in the group in identifying their issues and forced the larger countries to sit up and listen and help find solutions as they were cast in more of a “follower” role.  Following this pattern in subsequent staff meeting resulted in a much more cohesive pan-European staff.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

“Leadership in the Era of Economic Uncertainty:  The New Rules for Getting the Right Things Done in Difficult Times” by Ram Charan, McGraw-Hill.

Funniest Fact: Tell us something funny about you.

My fraternity brothers used to call me “Howard”, which is my middle name.  They thought that it was an “amusing” middle name, so they thought they could get me going if they kept calling me by that name.  It worked for a while but the nickname stuck throughout college and they will even use it today in those rare occasions when we get together.

Stay tuned for our next team member’s story!

If so, don’t miss this complimentary workshop! Almost sold out with a few seats left, so call us today! “Hiring People Who Can Sell” For Company Presidents, CEOs and Senior Executives Tuesday, June 29, 2010 | 7:30am – 9:30am 220 Washington Street | One Newton Executive Park | Newton, MA Hosted by Companies have to rely on their sales teams more today than arguably any other time in history. If the sale does not get made-someone will not be placed and the job will not get done. Those that have failed have done so not because they did not make the commitment or invest in the training. They failed because they did not have the right people on board. No motivational speech is going to make people do what they don’t ultimately want to do. And for those that have tried to force it they will tell you that whatever small success they did have was short lived. The real key is hiring people who have the ability to close and deliver results. They know that if they don’t make the sale, another company will be happy to do so. They understand that selling is not pushing product or ideas but rather engaging folks in a meaningful dialogue while properly managing expectations. But how do you find these things out in an interview? How does someone  proof to have what it takes to be successful? This program is designed for Presidents, CEOs and Senior Executives and will not be as useful for non-managers or anyone else who cannot absolutely influence the hiring process. Consider The Following: Building a People Bank Key Questions to Ask What are The Top Two Indicators of Success in Sales Red Flags How People Confuse Enthusiasm with Sales Ability New Thinking on Assessments The Actual Interview Process The Importance of Sales Leadership Is it a Sales Culture or a Referral Culture (Big Difference) The Speaker: Jim Ayraud is CEO and Founder of Next Level, Inc.a successful sales management consulting firm located in Franklin, MA. Jim has more than two-decades of sales, sales management, brand marketing and sales training experience. He is a highly touted public speaker and is recognized in the Boston area as one of the top sales management consultants. Prior to founding Next Level, Jim spent his sales and marketing career with some of the best companies in America including Procter & Gamble and Kimberly-Clark Corporation. This high caliber experience provided Jim with the foundational selling and management skills that have become the backbone of this company today. During the past 14 years, Jim and his team have trained multiple companies in 60-plus industries. The variety of sales & sales management issues that Next Level has faced with its clients puts them in a special and unique category of being rel-world advisors. The Workshop is complimentary; RSVP email info@nextstagesolutions.com or call 617-449-7728. Limited attendance to keep it interactive.