How to network like a ninja

Dave’s comment:  This week we welcome our perennial favorite contributor, Kim Shepherd, CEO of Decision Toolbox, to offer us her sage advice on a subject where she is expert.  Outgoing, full of creative ideas, and certainly the best person to teach us how, here is Kim on networking…

By Kim Shepherd 

Networking with others you want to meet is second nature to some, but it fills others with dread. For these people, a little structure can go a long way toward helping diminish the dread. After all, networking is much more than cocktail parties and trading business cards. Professionals who do it well can generate millions in revenue for their companies.

First, do your homework before attending an event. To find out who will be there, Google last year’s event to find pictures and articles. If it’s a fundraiser, the people who ninja-networkingwere there last year are likely to be there again this year. Charity events are also great because the organization’s board of directors will be well represented.

Now go to sites like LinkedIn and Facebook to find out more about the people you want to meet. What are their hobbies? Do they have children? Where did they go to college? As you commit the intel to memory, make sure you don’t mix things up. You probably don’t want to lead with, “How about those Trojans?” if the person is a Stanford grad.

[Email readers, continue here…]  Next, be fearless. If your first thought is “But I don’t know anyone,” stop and think: that’s not an excuse, it’s an opportunity. We’re afraid of what we don’t know, but the homework minimizes that fear. Once at the event, screw up your courage, walk right up to a prospect, and introduce yourself. Use your intel to warm up the conversation –– the ideal scenario is that you have something in common.

If you happen upon someone who wasn’t part of your homework, you have a fallback tactic: your smartphone. Get the person’s name, exchange pleasantries, and move on. You can circle back in a while. But before you do, check out that person online. You might be surprised –– maybe both of you have kids who play softball at the YMCA. Small world.

If you go with a colleague, you can tag team. True story, fake names: two executives, Jackie and Jeff, went to an event. Jackie wanted to connect with a particular entrepreneur, Carla, but couldn’t remember if she had met Carla before. Jeff definitely had NOT met her, so Jackie went to the restroom while Jeff introduced himself to Carla. After a few minutes Jeff rendezvoused with Jackie, gave her the 411, and Jackie was off to shake Carla’s hand.

Find the Octopus. There always are one or two people “holding court,” surrounded by eight people –– an octopus. When you connect with the octopus, you automatically connect with eight more people (at least). By the way, if for some reason it’s not appropriate to ask for a business card, be sure to record the person’s name, such as on your smartphone.

Follow up after the event. Congratulate yourself on overcoming those fears and making contacts, but you’re not done yet. The next day, enter those contacts in your CRM. Send them an invitation to connect on LinkedIn. Follow that with an InMail or email saying how nice it was to meet them.

So far we’ve been talking about people who are “newbies” to networking. However, if you’re already super–networker, you might consider taking it up a notch and becoming an über–networker. Put yourself out there as a subject matter expert and book some speaking engagements. The registration list for that engagement adds dozens to your network.

With a little planning, networking becomes easy. Keep at it, and in no time you’ll be networking like a ninja.

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Who cares about customer loyalty?

Repeat customers, raving fans, angry backlashers, commodity shoppers.  Oh boy, what a range of loyalty these represent.  And in your years, you may have experienced all of these.

Here’s another way to look at the ladder to an ideal customer loyalty relationship.  But customer-loyaltyfirst, let’s examine the three kinds of loyalty you don’t want to engender…

How about forced loyalty, if you happen to have a monopoly in your niche?  Customers hate this, especially when they have a complaint.  I am not suggesting that you create a competitor, only that if this is the case, you should find a way to exceed customer expectations greatly.  Often.

Loyalty by habit works, until it doesn’t.  Think of the supermarket you use regularly.  You know the layout well, are comfortable with the selection, and even recognize the checkers, sometimes by name.  That’s habit–shopping.  A competitor could find easy pickings here, with direct marketing to habit shoppers with coupons, special prices, and exciting promotions.  You don’t want your customers to buy strictly because you have become their “habit of comfort.”

[Email readers, continue here…]  Then, you can buy your customers, usually an expensive and very tenuous proposition.  Consider this attempt to be a bribe at best.   Your discount coupons, use of Groupon or other third party source, predatory pricing, or the high cost of ad word purchases is rarely sustainable.  Worse yet, customers attained through these sources are rarely loyal at all.

So how do we create real, emotional, easily measured loyalty?

We engage the customer at the time and place most appealing to that person. We under–promise and over–deliver – every time. We react positively to suggestions, reward their loyalty with recognition, and make this important cohort not just seem to be, but actually be the ideal example of our mission personified.

It takes work.

And the reward will surprise you.  Engaged customers spend more, generate higher margins, and become passionate influencers.  Free advertising. High margins.  What’s more to like?

Well, how about the satisfaction that – at least for some of our customers – we have achieved that lofty mission we set out to create way back when all this started.  And that has to be priceless.

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How to be a dictator enforcing sales offer deadlines

Everyone who manages a company or its sales force wants to write as many new deals as possible, and is usually warry about doing anything that might threaten the positive outcome of a pending sale.

So, it is common practice to leave an offer containing a discount open, following up

Deadline stamp

Deadlines are an important sales tool.

periodically to attempt to nudge a prospect into signing.  But without a firm, meaningful deadline, many of these bid-in-hand prospects will want to shop around, or delay a “yes” for budgetary reasons, or just ignore the offer for the short run.

If a potential customer’s cash is tight, or if the relationship between the customer and sales rep is not close enough to move the customer to at least respond, then an offer can sit for months or longer with no acceptance.

[Email readers, continue here…] There is a proven way to cause enough discomfort to move a potential customer to act, but is carries a degree of risk.  Place a firm deadline upon any discount, and make it clear that the date is real, after which the discount will no longer be available.  Do so within the offer document and with a personal comment with delivery of the offer.

And plan to enforce this deadline, even at the peril of losing the deal.  Creating a line in the sand and sticking to it will assure that your prospect takes the discount seriously.   If the deadline expires and the potential customer finally acts, expecting the discount, a significant degree of sales power returns to you.  From a simple, “Well, we’ll extend it for a week” to “Our board is firm, and the best I can do now is (something less.)”

The most powerful tool you have in a sales environment is a deadline.  If your prospect continually misses a deadline for no good reason, you have an earlier reason than usual to reduce the percentage of close to near zero in your sales prospect system, and that is a good move in making sales forecasts more realistic, if nothing else.

Yes, it takes a little extra gut to pull the plug on an offer or discount.  Ask yourself: “How many long-open offers are actually accepted?”  You’ll have you answer and a tool to enforce change.

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Rinse and repeat: revitalizing your business

Here’s a statement that you never thought would apply to your business planning.  Sometimes we get stuck in the muck with our marketing, product, management focus, and in keeping up with trends. It is natural for executives and entrepreneurs with lots on their plate and little extra time – to just keep up the same activities that have made the company a success.

But…

Isn’t this a good time to look again at these processes, refreshing those that work – and working on replacing or repairing those that don’t?  Keep on doing what works and grows rinse-repeatthe company (rinse and repeat) and actively work on the rest?

Customers feel better about a company always showing its innovation with new products and ideas to help increase customer revenues, decrease costs or better serve their customers.  Is it time to enhance, replace or invent toward achieving that set of goals?

[Email readers, continue here…] Employees love progress and excitement when involved in something refreshing and new.  Good ones tend to stay with the company longer. Everyone tends to give more effort when we refresh or revitalize.

The industry takes notice when you change up the same old marketing methods and message.  A company that uses the best and enhances or replaces the rest will be noticed and rewarded with increased revenues.

Rinse and repeat. What’s wrong with a thorough cleaning and then showing off a bit of innovation, even with older offerings?

Posted in Growth!, Surrounding yourself with talent | Leave a comment

After 20 years: Updating the Berkus Method of valuation

Well, it had to happen.  Originally created in the mid 1990’s to help with the imprecise problem of how to value early stage companies, especially those in technology, I developed what soon became known as “The Berkus Method” when published in the popular book, “Winning Angels” by Harvard’s Amis and Stevenson with my permission in 2001.  But a lot of time has passed since then.

There is a universal truth: fewer than one in a thousand start-ups meet or exceed their projected revenues in the periods planned.  So how do you use financial projections as valuation metrics when you know the odds of those being accurate predictors of the future are so very unreliable?

I thought then that the best way to value a start-up is to give value to those elements of progress by the entrepreneur or team that reduce risk of success.  It is the exact opposite of giving value to projected financial success, except for the hurdle which I use to filter out smaller opportunities.  I must believe that the candidate company, if successful, could achieve some level of gross revenue at the end of the fifth year in business.  Today, for me, that hurdle number is $20 million.

[Email readers, continue here…]  The Berkus Method assigns a number, a financial valuation, to each of four major elements of risk faced by all young companies – after crediting the entrepreneur some basic value for the quality and potential of the idea itself. Today, the method as explained, adds $500,000 in value for each of the following risk-reduction elements:

original_berkus_method

Note that these numbers are maximums that can be “earned” to form a valuation, allowing for a pre-revenue valuation of up to $2 million (or a post roll-out value of up to $2.5 million), but certainly also allowing the investor to put much lower values into each test, resulting in valuations well below that amount.

In 2005, Alan McCann created a graphic representation of the Method:

the_berkus_method

Note that Allan changed the title of the risks from technology-execution-market-production to investment-marketing-execution-development.  And he added the cohort responsible for each, a nice touch.  I should have done more about this subtle interpretation when first seeing this, and will attempt to make up for that now.

Because the Internet has such a long memory and documents from the distant past can be found with ease, a search the “The Berkus Method” today will yield any number of conflicting valuation criteria and element amounts culled from the many subsequent publications of the method over the ensuing years.

It has occurred to me lately that the original matrix is too restrictive, and should be a suggestion rather than a rigid form.  That is: a user of the Method should be able to list those risks that are most important to the target company and to the investor, and assign maximum values to each that are appropriate to the industry and to the times.

For example, $500,000 maximum value to each element yields either a maximum pre-money enterprise valuation of $$2 million or $2.5 million if all elements are “perfect” for a target in the eyes of the investor.  Yet, the current HALO Report from the Angel Capital Association containing average pre-money valuations for angel investors demonstrates that the US average, at least for the moment, is higher than this amount.  Valuations are higher in Silicon Valley, Silicon Beach, New York and the North Carolina corridor than in Oklahoma City, Kansas City or Miami.  The Method should allow for this.

The Method should be flexible enough for its users to negotiate or create a maximum valuation they are willing to accept in a perfect situation, and to assign risk elements that might be more important to them than those listed above.  For example, in Silicon Valley, a “big data” startup might competitively call for a $1.5 million maximum value per element, while the same startup in Nebraska might find $500,000 appropriate.  As for listed elements, a medical device startup might replace “marketing risk” with “FDA approvals risk.”

There is no question that start-up valuations must be kept at a low enough amount to allow for the extreme risk taken by the investor and to provide some opportunity for the investment to achieve a ten-times increase in value over its life.

Once a company is in revenues, the Method is no longer applicable, as most everyone will use actual revenues to project value over time.

The risk is that these options will make a very simple process two steps more complex, frustrating the original purpose of elegant simplicity. But hopefully, the relaxation of restrictions listed here will allow The Berkus Method to live into another generation, survive the effects of inflation, and address better the specific needs of niche market valuations.

Posted in Ignition! Starting up, Raising money | 4 Comments

How do you focus your team for action?

How do you get your team to focus and move forward effectively?  A fellow CEO recently told me of her method of assuring positive movement within her team.  She holds a weekly meeting of her direct reports, and asks them to find three important but actionable items for the group to work on if not complete during the following week.

She claims that, by reducing the number of issues to three, her team is better able to startegy+4_smbfdevote mental and physical resources to a solution than if she allowed her meetings to address a laundry list of issues faced by each of its members.

There is a theory about agile leadership that has been advanced by a number of business book authors, and this CEO’s method fits within that concept.  A group moves in a much more agile manner if it can be directed to focus all of its resources on just a few issues.

[Email readers, continue here…] She encourages her group to make fast, fact–based decisions on which alternatives to pursue, prioritizing their actions and those of their direct reports toward achievement of a goal or a solution quickly and efficiently.

We all can benefit from this lesson.  There are three kinds of agile focuses for such group meetings:

Market agility, in which potential opportunities are being created by changes in the market (such as cloud computing for technology companies);

Decision agility, where members generate creative alternatives to attack problems or opportunities quickly and innovatively; and

Execution agility, where members of the group inspire the organization to execute in a new direction and adjust course as events unfold.

The lesson is powerful but simple.  Keep your management meetings focused upon overcoming no more than three actionable problems or opportunities each week.  Delegate to empower those members to work in the most agile and effective manner.  Follow through with a check of progress to show support and interest.

Posted in Growth!, Surrounding yourself with talent | 2 Comments

It’s what you ask, not what you know.

A friend recently told me a story that had nothing to do with business, but unintentionally had a great lesson for all of us.  He had asked his arborist if he could move a mature tree from one part of his property to another – to make room for an addition to his home.  “Yes,” replied the professional.    “And how much would it cost?”  To which the arborist responded, “We’d charge $18,000 for that.”

Surprised by the high cost of simply moving a tree several hundred feet, the friend treeweighed cost against benefit, having a difficult time deciding whether to say ‘yes.’

As an afterthought, he asked, about how many years does this old tree have to live?  And the surprising answer from the arborist was “I’d say, about two to five years before it dies.”

That incidental afterthought of a question clarified the decision, and certainly saved money and later unhappiness.  And it points out to all of us that asking the right questions may be more important than having the right amount of knowledge.  Our friend could have been an architect attempting to protect the look of the homeowner’s property or view from a window.  He would have known the positive visual effect of relocating that tree would have created.   But he might never have known the consequence of that knowledge if never asking the critical question about the life of the tree.

Are we guilty of knowing so much but not asking the critical questions that might undermine our limited knowledge?  It is more than curiosity at work when solutions become much clearer when we have the skill and motivation to ask the right questions.

Posted in Finding your ideal niche | Leave a comment

Channel partners can be golden for growth

Dave’s note:  Here comes my favorite “tell-it-like-it-is” CEO, Kim Shepherd, with another of her pieces from her experience managing a completely virtual company with over one hundred employees located through the United States and beyond.  

By Kim Shepherd

In 2006, I gave a keynote speech at the Newspaper Association of America’s national conference in Chicago. During the speech, I spoke to a group of managers who have seen their revenues shrink by over fifty percent in recent years. I gave them a speed lesson on how the newspaper business can build a new river of cash through channel partnerships.

A Channel partner is a person or a company with a complementary service, who is knocking on the same doors as you, and who is connected. I don’t mean that they are on channel_partnersLinkedIn, attend networking groups, and talk a big game. I mean connected to the degree that when she tells a member of her network to jump, that member says “How high?” Rather than viewing him as a potential competitor, view him as a partner with direct influence over your prospect list.

Isn’t that someone you want on your team?

With a little bit of structure and ingenuity, you can supplement your sales efforts by leveraging channel partnerships. At our company, we have Channel partners who are previous clients, major corporations, and some of the most respected consultants in our space. Compensation doesn’t have to be complicated, either. Just take what you would normally spend on a sales lead, and give that to the Channel partner in the form of a revenue share.

[Email readers, continue here…] The most important rule is to feel good about any dollars that go to a Channel partner. I remember during one leadership meeting, our Operations Manager brought it to our attention that we were writing $80,000 in Channel partner checks that month and what were we going to do about that? My response was: FANTASTIC! Writing lots of Channel partner checks is the right kind of problem to have—it is not a fixed cost and it means business is coming in. Win–win.

The challenge for the person at the head of this initiative—which is currently my role—is that you have to accept that you will kiss a lot of toads before you meet a prince. Much like any sales organization, you are going to run into three types of people: hunters, gatherers, and vegans. You’re familiar with hunters and gatherers, but when meeting Channel partners, you’ll also run into people who really just want to go out to lunch and talk, go out to dinner and talk, meet for coffee and talk. They have the potential to waste big chunks of my time, so I classify them as “vegans” for being so low in calories. Good Channel partners are hunters with a “protein–rich” diet of connections.

Unfortunately, it is almost impossible to classify a Channel partner until you have some time invested, but I have never felt that any time spent with a potential Channel partner is wasted. Some Channel partners I had flagged as vegans after several lunches and no leads actually turned into “octopuses,” or a “hub” Channel partner who introduced me to eight other potential partners. I take a long–term view to the time I invest, and know that every now and then, I will meet an octopus in an unexpected place.

The final word on Channel partners is in keeping with my overarching message on glue. For a Channel partner to be a long–term asset to your company, wrap them up in your culture as much as possible. At our company, we give our Channel partners customized web portals where they can log on and instantly see their pipeline and upcoming payments. We also invite them to our All–Staff meetings for a dose of the Kool–Aid, as well as our annual holiday networking party for a bigger, more elaborate “thank you.”

Posted in General | 1 Comment

How to battle the dragon AND avoid the encounter.

Sometimes a competitor is just too entrenched, too strong, too well equipped to directly face in battle.  At least that is the conventional wisdom.  Yet, there are constant examples of new entrants into a niche that grow, prosper and sometimes even become dominant.

So when do we know which course to take?  Quietly abandon a niche?  Refuse to engage?  Or charge in full speed?

In one industry I know well, the dominant player with 22% market share was acquired by one of the largest companies in the technology world.  Everyone, including those connected with the newly acquired dominant player, wondered what changes would affect battle-the-dragontheir company and their personal lives and fortunes.  Well, even though that acquisition is still playing itself out on the field of battle, it appears quite clear that the new parent has directed its new subsidiary to abandon the lower end of the market and focus upon the larger sales, corporate customers, and major brands.

And if that new strategy is proved to be true, the five–hundred–pound gorilla in that niche just moved out of the way of many of its smaller competitors, leaving a market that will surely see a scramble of new competition in the near future.

[Email readers, continue here…]  What if you had abandoned that market, reallocated your resources, and focused instead upon other non–competitive geographical or industry segments?  There’s an example of avoiding the encounter and losing the lead position when an opportunity to compete surfaces unexpectedly.

But doesn’t it take seemingly unlimited resources to compete against the gorilla in a niche?  The answer is found in defining the niche itself.  Has your competitor left a geographical area virtually untouched?  Forgotten about selected vertical markets within the niche?  Been skewered for slow customer service?  Each of these discoveries would provide an opportunity to compete and perhaps win, defend and build from a distant base to fight the larger battle.

One more thing, absolutely common to technology companies:  generations of technology do not transition easily. Leading players in one generation often do not transition well into the next, as they carry the burden of a large existing user base with demands for support, feature–functionality and attention that drain the resources of even larger companies.  I’ve seen these waves of technology first hand in one niche, counting six such waves during the past 35 years, and watching new entrants arrive during each transition to attract customers with new products using new tools, sometimes to grow larger over time than the last generation’s dominant player.

So, how do we answer the question?  Battle or avoid?  We look for the under-served niches, avoid the direct encounter until dominating at least one of those niches, and use the profits and reputation from that small victory to take on ever–larger niches once dominated by the gorilla.  We’ll call that clever avoidance for the sake of a much fairer but later battle.

Posted in Growth!, Positioning | 1 Comment

What do you wish you’d known yesterday?

Wouldn’t it be great if there were no more digital or printed reports to tell us what happened in the past?  I know. We need financial data for comparison, and to a degree – for planning.  But we should be thinking of finding ways to make data available to us much earlier, when it is more meaningful and actionable.

Call it “pervasive access” or just–in–time reporting.  Or better yet, near real time looking-backinformation that we can use to make changes, decrease costs, or better manage assets like inventory or cash – or people.

If there were no reports, we would have to manage by exception, more by observation than by analysis.  Perhaps we’d use a real time dashboard, one in which all information is fed from direct input from processes in motion.

[Email readers, continue here…] See, the value of information does decrease over time – more than we recognize.  We fall into the habit of looking at weekly or monthly reporting, and react to trends by holding meetings, changing processes after the fact.

But what if you could develop changes in your business processes so that information, even big data, would be available and analyzed for exceptions almost instantly?  How much money, time and resources would we save?

So that should become a departmental or corporate goal for you.  Find places where reporting can be made by exception, not routine.  Call center getting behind?  Production slowed or stopped?  Sales slipping unexpectedly?  Why wait until the damage is done?

Find the areas where a real time exception reporting is possible and proactive.  Develop a system for early, even instant alerts when things get beyond comfort or safety.  And dump or consolidate the much later reports to save valuable time at period end.  Can you find at least one of these to implement today?

Posted in Growth! | 1 Comment