Marketing with Impact: Four Goldmine Strategies

This is a Guest blog post by Deborah Fell, one of the top marketing experts I know.

Of all the ways to make money, panning for gold is probably among the most difficult. But what if I were to give you all the panning equipment and a map indicating exactly where the gilded stash is buried? A little easier now, right?

Today, I’m here to deliver the precious metals – a goldmine of marketing strategies that, if followed, may not result in gilded nuggets, but instead more customers, more revenue, and a golden future.

First, let’s recognize the obvious – your B2B customer is also looking to uncover some gold. But in their search for a product or service that’s going to fill a very specific need, they won’t be spending a lot of time on the phone or pounding the pavement.

According to a recent Forrester study, 92 percent of B2B buyers start with online research in the buying process and spend the largest single chunk of their time (27 percent according to a recent Gartner study) in this activity. As a result, these buyers are nearly 60 percent through their decision before they ever speak with a company’s sales representative. According to FocusVision, B2B buyers consume 13 pieces of content on average primarily from the vendor’s website, internet searches and social media. These buyers likely know as much or more about your company and the competition as you do!

The attached graphic illustrates just how circuitous the route is for today’s customer, from idea to purchase, and the paths they are likely to travel:

With virtually all buyers starting their research online, you would be wise to start there, too; however, how you start, and what you do, matters. Otherwise, those valuable buyer eyeballs will shift to another firm that is more adept at creating a connection.

At the outset, I promised you a goldmine – though your results may vary, here are four keys I’ve employed successfully with my B2B clients to help them define their online marketing strategies, and to make them count:

1. Discover your target customer and his/her buying process:

Have you spent time getting to know your customer segment – I mean, really understanding what makes them tick? What’s the core problem driving the search for solution, and how do they look for solutions and develop requirements? If your discovery only asks about their need for your product, that won’t work because the gold is much further below the surface. With a firm understanding of not only needs and challenges, but the related pain, fear and uncertainty, you can develop an effective strategic and targeted approach to support their research and buying process, and demonstrate that you are the one that “gets” them. Without this, marketing is a shot in the dark at best, and your message will be undifferentiated.

If you also have insight into your target customer’s buying process, broader context of their problem and depth of concern, you can create effective, relevant messaging in the right channels and move the needle in your direction.

Remember this parable: Homeowners are not searching for a hammer when they go to the hardware store — they are looking for something to help secure the nail that hangs the picture and takes the room from an uncomfortable place to a thing of beauty. If you’re selling hammers, it’s your job to understand the problem from the customer’s perspective, and then demonstrate to them throughout their buying journey that you have the superior solution to solve it. Same is true with B2B customers.

2. Create and execute a clear value proposition.

It’s tempting for people to overlook or overthink this step, thinking there’s no need to re-look or getting lost in the word-smithing. At this stage, we should be focusing on the essentials of the value proposition and putting it into words – answering these questions:

• What problems do you solve?
• Who do you solve them for?
• How do you uniquely solve them?
• What are the functional and emotional benefits?
• Why should prospects choose you over any other solution?

Easy, right? But knowing this, and articulating it, are two distinct tasks. Assuming you have the right offering at the right price and are accessible in the right channels, converting this value proposition into brand positioning and messaging will be key to differentiation in your market.

Every aspect of the business, including channel decisions (where to distribute/sell), product/service lines (what to sell) and pricing (what do distributors or consumers pay) are part of the equation. For example, where a company distributes says a lot about the brand. If you distribute in discount channels, you may get some traction fast to start up or to make up for a tough quarter; however, you will become the discount brand. So, communicating what kind of company you are on each of these dimensions is an essential ingredient.

Again, be thorough in your message development and thoughtful in how and where you place it. Often, marketing agencies or consultants will facilitate a workshop to conduct a word exercise and call it a value proposition. That’s not enough. Your value is what your customers perceive it to be, so think through your offering, and what messaging needs to be where.

“Your value is what your customers perceive it to be”

3. Create a go-to-market plan.

This is where you will create the roadmap to nurture the right type of customer for your revenue-sourcing aspirations. To do this right, and I will insist again, ad hoc marketing has simply got to go. Random tactics will not convey the right message. Messaging in the wrong channel will miss the mark. And the right channel with the wrong message means you are wasting time and money and demonstrating to prospects that you are not the right choice.

This is where digital will take an outsized role: It is critical to have not just an online presence, but an effective online presence. Check this out: As of 2020, there were 1.3 billion websites in the world (with 200 million active websites in the U.S. alone) and 6 billion indexed web pages. That’s information overload, and it comes when B2B buyers’ time is more scarce and more precious. Effective implementation will ensure you’re not wasting it.

“Information is a commodity; time is the scarcity”

4. Measure and track.

Opinion-based marketing results are out, and disciplined approaches to data and analysis are in. To that end, it’s critical to set specific goals and ROI targets. The days of asking your family and friends what they think of your website are long over! The best solution is to have insights based on real data, and goals that this data can support. Setting targets in this manner creates energy that will motivate the team to focus on accomplishments and success. Ideally, you and your team will have a daily sense of how marketing is tracking, and the insights needed to make timely adjustments to the plan. It’s important to stop what’s not working, keep doing what works or shows promise, and start new initiatives that will amplify the desired impact.

The good news is that this type of analysis need not be expensive. With a minimal investment, any company can measure and optimize its online results daily. Even if you outsource this to an agency, you still need to designate an internal resource to monitor, share, and understand the data. Marketing should report progress in your weekly or bi-weekly leadership team meetings, and the team should be collaborating with sales along the way. Showing a lot of leads but no progress in closing sales is not success. Marketing needs to stay close to the sales team (and vice versa) and elicit insight from them about the quality of leads and the state of the marketplace.

Clearly, there’s gold in “them there” hills. You just need to know your target customer segment and what moves them; how your product and service solves their pain better than anyone else; communicate this market superiority; and track and measure the results.

You have the plan and the map – go get the gold!

Or better yet, watch the webinar recording here: “THE Playbook for Explosive Growth: 4 Goldmine Strategies to Increase Marketing Leverage & Capitalize on Market Recovery”

Deborah Fell

Deborah Fell is Area Manager Partner & CMO for Chief Outsiders. She is an expert at helping mid-market to large enterprise companies identify and capitalize on marketing strategies to increase revenue and profitability. Chief Outsiders provides fractional CMOs without the expense of a full-time resource to CEOs who want to accelerate revenue and profits through improved marketing strategies, implementation and leverage.

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Before setting 2021 priorities, ask “What’s my ‘WHY’?”

This is a Guest blog post from Sales expert Chris Tully. Before setting 2021 priorities, ask “What’s my ‘WHY’?” Before you go all-in on finalizing the 2021 business plan, maybe it’s worth a review of what drove you to start your own company in the first place. Simon Sinek, author of Start with Why, believes that true success comes from a core belief that inspires others and infuses every achievement. When I’ve asked people “Why did you start your business?” over the years, I’ve heard as many unique answers as people I asked, many of which do relate to pursuing a passion or core belief. The Wright brothers did that. They believed that they could make a flying machine – and without financing, higher education, or even much help, they succeeded and changed the world.  In my experience, a business doesn’t have to have such a grandiose goal to succeed – and there are surely multiple definitions of success. So, what’s yours? Make sure you can articulate why you started, and what you are trying to accomplish – as specifically as possible. Take a little time to reflect Examining where you started and where you are now can shed some light on where to go next. Is the original reason for starting your business still what drives you every day? Is everyone who works with you on board with that? Do your colleagues share your values and core beliefs? Do they share your vision and mission or could conflicting priorities be draining some of your momentum? If your motivation has changed, has that motivation been carefully communicated and incorporated in how you run your business? Or is confusion over the goal causing some unexpected consequences? What did you originally hope to achieve? Are you still on track to achieve that? If not, why not? Getting back on track (or adjusting course) should be part of your business plan. Move forward with confidence Only when you can articulate the above concepts with clarity and certainty should you start working on your business plan for 2021. For the coming year you’ll need: SMART goals (for a quick primer on goal setting, check this out). The right people in the right seats on your bus – especially at the leadership level A repeatable sales process  that anyone with the right skills and motivation can follow Simple, easy to understand key performance indicators (KPIs) A CRM (Customer Relationship Management) system to monitor progress A reliable sales management process If any of these are missing, or if you are wondering how to make what’s in place more effective, perhaps we should talk. With everything 2020 has brought (wrought), now is a good time for introspection. If you begin with why you were inspired to start your business in the first place, then I believe you can work out the “what” and “how” steps for a successful 2021. Are you satisfied with your company’s sales effectiveness? If you feel like you need to do a better job attracting and winning the right prospective clients, give me a call.

Chris Tully is Founder of SALES GROWTH ADVISORS. He can be reached at (571) 329-4343 and ctully@salesxceleration.com“For more than 25 years, I’ve led sales organizations in public and private technology companies, with teams as large as 400 people, and significant revenue responsibility.I founded Sales Growth Advisors to help mid-market CEOs execute proven strategies to accelerate their top line revenue. I have a great appreciation for how hard it is to start and grow a business, and it is gratifying to me to do what I am ‘best at’ to help companies grow faster and more effectively.Let’s get acquainted. I am certain I can offer you an experienced perspective to help you with your growth strategy.”

How B2B Buyer Behavior Has Changed

• 

This is a Guest blog post by Chris Tully. Some great info and stats below regarding the changing nature of B2B purchasing. Thanks for reading and please subscribe!

How B2B Buyer Behavior Has Changed

I’ve always believed that at the heart of it, business buyers are just consumers with different priorities and a bigger checkbook.

Businesses now shop for suppliers like we shop as consumers: digitally. That behavior is increasingly the norm. These pandemic months of sheltering in place have only accelerated changes in B2B buyer behavior.

Comfort in socially-distanced shopping was already here way before the COVID-19 pandemic, leading to the demise of brick-and-mortar stores that didn’t keep up with the times (seller beware). Digital shopping:

• Transcends business-hours time barriers
• Allows for wide product search and research before point-of-purchase
• Provides instant give-and-take help chats, and
• Leads to instant purchase gratification.

What’s not to like?

Consumer digital shopping

Let’s take the auto industry example of consumer digital shopping outlined in a McKinsey report:

• Digital is the number one information and customer influencing channel. A huge 70% of vehicle buyers start their journey digitally.
• Digital has given rise to very well educated customers. They do their research online before they purchase.
• Digital car sales are a matter of fulfilling prerequisites and of creating a value proposition.

The transition to fully online sales is inevitable (see the www.carvana.com model for an example in action). Digital car buying is turning the existing dealer model upside down.

Business digital shopping

For business buyers, B2B buyer decision-making is largely driven by their learned consumer behavior. As recently as 10 years ago, says a Forrester study, “Vendors held the power of commerce by controlling information. But the business consumer, digitally savvy and self-directed, is now in control.”

• 92% of B2B purchases start with search.
• 68% of B2B buyers prefer to research online on their own, up from 53% in 2015.
• 60% of B2B buyers prefer not to interact with a sales rep as the primary source of information.
• 75% of B2B buyers use social networks to learn about different vendors.
• 62% of B2B buyers say they can now develop selection criteria or finalize a vendor list — based solely on digital content.

Now more than ever, business marketing and sales decision-making means figuring out how to attract and keep a buyer online. I’ve seen statistics that say nearly 40 percent of clients move on if your digital platform doesn’t perform well.

How you present your company digitally is hugely important: you can either represent your excellence or create a huge credibility sink.

Think of your website as your first sales call

• Your website needs to speak well for you in engagement, content, and performance.
• Your demand generation strategy needs to match up to buyers’ behavior – if 92% of B2B purchases start with search, then you need to control the message in search results.
• If your value proposition isn’t clear on your site, you will lose credibility. And since buyers don’t really want to speak to a sales rep, you could lose the buyer entirely.

Know how your prospects shop

Get the right answers to the questions below to precisely define your target client. Then apply them to your site. SEO should result in sustained lead flow.

• Where do they look for you?
• What are they looking for?
• What keywords drive the type of leads that you want?
• How do you show up on searches? Is your website optimized for SEO success?
• What are you telling buyers that is meaningful and relevant? Why do they care?
• What is your call to action?

Plan how to respond to a solid online lead

The more complex and expensive your offering, the sooner you will want a sales person involved in client interaction.

• Who responds first, an email bot or a real person?
• What’s the objective of the first interaction?
• Where does the first interaction take place (email, telephone, virtual meeting)?
• How are you going to monitor progress?

Recognize the buyer behavior evolution

Buyer behavior has been evolving for more than 25 years, since the first secure retail transaction over the Web in 1994. Both the Amazon.com online shopping site and eBay launched in 1995.

Most B2B decision makers have been virtual shoppers for quite some time.

A 2017 Frost & Sullivan study asserts that B2B online buying will continue to evolve to be more like B2C: “Customers expect things to be online and intuitive, desiring a self-service model with personalized and targeted B2B sales accessible from anywhere at any time.”

It’s probably time to recognize that your sales strategy has to match the way your B2B buyer wants to buy.

Chris Tully is Founder of SALES GROWTH ADVISORS. He can be reached at (571) 329-4343 and ctully@salesxceleration.com“For more than 25 years, I’ve led sales organizations in public and private technology companies, with teams as large as 400 people, and significant revenue responsibility.I founded Sales Growth Advisors to help mid-market CEOs execute proven strategies to accelerate their top line revenue. I have a great appreciation for how hard it is to start and grow a business, and it is gratifying to me to do what I am ‘best at’ to help companies grow faster and more effectively.Let’s get acquainted. I am certain I can offer you an experienced perspective to help you with your growth strategy.”

Brace for Economic and Tax Uncertainty After the Election

This is a Guest blog post from Pete Ryan, CPA and Michael Wetmore, CPA, founders of the accounting and consulting firm of Ryan & Wetmore.

Introduction

The next six months will bring a period of uncertainty. Businesses and individuals must plan to react to the many changes in stimulus plans, Covid-19 disruptions, tax laws, estate laws, and other laws and regulations based on election results. This article should not serve as legal advice – companies should plan to consult with attorneys, CPAs, investment advisors, insurance advisors, and others. Regardless of the election results, there will be big changes. Sources of systemic change include:

Comparing Tax Proposals: Income and Capital Gains

• Tax proposals are subject to change during the legislative process and may get watered down by the other party or moderate lawmakers.
• Changes in control of government could still bring big changes and tax increases, expert tax planning by tax advisors and CPAs will be essential.

Overview

• Some notes on the process of passing tax legislation:
  • There is precedent for retroactive tax proposals, so a tax bill passed in 2021 could be retroactive to the first day of the 2021 tax year.
  • Some of Biden’s tax proposals could be phased in over time rather than taking effect immediately.
  • Although it is common for Presidents to have tax proposals, all tax legislation must originate in the House, where Democrats are likely to keep their majority.
  • As changes make their way through congress, they are usually watered down somewhat – especially if control of government is divided.
  • If on party win a simple majority of both houses, they can avert a Senate filibuster by passing a tax bill in a process called budget reconciliation.
  • Many parts of the Tax Cuts and Jobs Act of 2017 (TCJA) are temporary and will expire in the next several years even without legislative action.
• Biden’s tax proposal includes corporate tax increases and income tax increases for people making over $400,000. Trump’s plan is mainly to expand/extend the TCJA tax cuts, though he has issued few details about second-term tax plans. Both candidates have committed to not raise middle class taxes.
  • Components of the Biden tax plan.
  • Components of the Trump tax plan.

Payroll Taxes

• Biden’s proposal imposes a 12.4% Social Security Payroll tax on wages above $400,000, creating a payroll tax “donut hole,” where income between $137,700 and $400,000 does not incur the payroll tax. This also affects self-employment taxes for individuals. (It’s not clear when or how this will be implemented.)
• Trump’s plan institutes a payroll tax holiday for the employee-side payroll tax deferral that is currently taking place.

Corporate Taxes

• Biden’s proposal increases the C-Corporation income tax rate from 21% to 28% (lower than the top rate of 35% in effect prior to the TCJA) and establishes a corporate minimum tax on book income.
• It also doubles the tax rate on GILTI and imposes it country-by-country.

Individual Income Taxes

• Biden’s plan would raise the top individual income tax rate from 37% to the pre-TCJA level of 39.6%.
• It would cap itemized deductions at 28% of value for those earning over $400,000, temporarily increase the Child Tax Credit to a maximum of $3,000 and the Child and Dependent Care Tax Credit to a maximum of $8,000 from $2,100. Biden’s plan includes other middle class tax relief.
• It would also bring back a first-time homebuyer tax credit of up to $15,000.
• Biden’s plan would reduce 199A 20% deductions over 400k.
• Trump’s plan would maintain and extend the tax cuts in the TCJA and possibly cut middle class income tax brackets.

Capital Gains

• Currently the top long-term capital gains bracket is taxed at 20%.
• Trump has proposed lowering the top rate to 15% or indexing it to inflation.
• He would also expand the TCJA “Opportunity Zones” program, which provides capital gains tax relief to encourage long-term investments in economically distressed areas.
• Biden has proposed taxing long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6% on income above $1 million and eliminating the “step-up in basis” for inherited assets.
• Many individuals and businesses will want to consider selling or donating appreciated assets (such as marketable securities) by December 31, 2020 or before new laws are enacted in 2021 – consult your advisors and CPAs.

Estate Planning

Estate Tax

• The TCJA extended the estate tax exclusion from about $5.5 million to $11.4 million, but this is set to expire in 2026.
• Biden has previously said he supports both lowering the exclusion to “historical norms” (which could mean the pre-TCJA level of $5.5 million) and returning estate taxes to “2009 levels” (which could mean a $3.5 million exclusion and an increase in the top rate to 45%).
• Biden also supports ending the “step-up in basis,” which allows estates to realize capital gains without incurring capital gains tax upon the death of their owners.
• Many individuals are rushing to their estate attorney before December to discuss making large gifts.

Grantor Retained Annuity Trusts (GRATs)

• A GRAT is an irrevocable trust that is set up for a period (a tax is paid upon establishing the trust). An annuity is paid from the trust every year, and when the trust expires, the beneficiary receives the assets tax-free.
• The TCJA increased the estate tax exemption to $11.4 million, but it would decrease if the provisions expire in 2026 or if it is repealed, making GRATs more attractive.
• Also, GRATs are most effective when interest rates are low – as they are right now.
• Neither candidate has proposed changes to GRATs, but the way they are treated for tax purposes could change in a new tax proposal.
  
  

Sales to Intentionally Defective Grantor Trusts (IDGTs)

• IDGTs are irrevocable trusts where trust income is treated as the grantor’s for income taxes, but the assets are not treated as the grantor’s for estate taxes.
• Just like with GRATs, the candidates have not talked about IDGTs specifically, but the way they are taxed could change in a new tax bill.

Accelerating or Deferring Income or Deductions

• Given the potential for big changes to the tax system, accelerating or deferring income or expenses into a certain tax year can have big advantages (though the effectiveness depends on projections of the future).
• These strategies are complex and depend on future conditions – talk to your advisors and CPAs about them.

Accelerating Income in 2020

• Accelerating income in 2020 has three main advantages: (1) The TCJA cut the top income tax rate; (2) losses due to the economic downturn may push taxpayers into lower brackets this year; (3) accelerating income increases a taxpayer’s AGI limitation for charitable contributions.
• If taxes are hiked in 2021, the changes could be retroactive to the first day of the 2021 tax year, so receiving income in 2020 could be preferable to 2021.
• Some income acceleration strategies include: Converting an IRA to a Roth IRA, electing out of installment sales, triggering an inclusion event for opportunity zone investments, harvesting capital gains, foregoing like-kind exchanges, exercising stock options, and declaring and paying C corporation dividends.

Accelerating Deductions in 2020 or Deferring Deductions in 2021

• Biden’s tax plan caps the tax benefit of itemized deductions to 28% of value for those earning over $400,000, potentially increasing the benefits of deduction acceleration.
• On the other hand, income and payroll tax hikes in 2021 could increase the benefits of deduction deferral to 2021 (since they would have a greater tax benefit in 2021).
• Most cash-basis businesses normally accelerate deductions at the end of year to reduce taxable income. In 2020, they may decide not to this.

The Wider Economy

• The state of the economy is evolving day-by-day and new stimulus is likely to be the top priority after the election. Be sure to monitor email updates from Ryan & Wetmore.

New Stimulus

• After briefly ending negotiations on new stimulus, the Trump administration proposed $1.8 trillion in stimulus, but the proposal was immediately rebuked by House leadership (as not enough) and Senate leadership (as too expensive).
• The Trump Administration also pushed for a bill repurposing $130 billion in unused funding from the Paycheck Protection Program for a second round of PPP, but House leadership rejected it.
• The House originally passed the $3 trillion HEROES Act (which was rejected by the Senate) and then passed a reduced $2.2 trillion HEROES Act.
• New stimulus after the election will be a top priority after the election no matter who wins. Make sure you get updates from your advisors.

Other New Bills

• No matter who wins, stimulus will probably be the top priority after the election.
• However, if Democrats do well, they will probably push for one or more other big initiatives (such as a big infrastructure package). Some of their priorities include:
  • Healthcare, green infrastructure/climate, police reform, immigration reform, and guns.
• Two top priorities are expanded on below:
  • Healthcare reform: The House has already passed a bill to expand Obamacare subsidies and lower drug prices. Joe Biden’s plan also includes creating a public option.
  • Green infrastructure: The House has already passed a $1.5 trillion green infrastructure plan (similar to Biden’s $2 trillion plan) that includes money for roads, bridges, transit options, housing broadband coverage while emphasizing reduced emissions and transitioning the electricity grid and generation to renewables.

Long-Term Interest Rates

• The Fed has cautioned that the pandemic will continue to weigh on growth, employment, and inflation in the near and medium terms.
• As a result, “dot plots” from the Fed Open Market Committee show that most members do not expect to raise interest rates above 0-0.25% before 2024.
  • Similarly, bond markets imply that traders do not expect the Fed to substantially hike rates until late 2023 or early 2024.
• In August, Fed Chair Jerome Powell said the fed will likely pursue an inflation target of “moderately above 2 percent for some time,” indicating plans for low rates.
• Low rates mean that it is potentially a great time to talk to advisors to consider refinancing existing loans.
  
  

Banks and Deferred Loans

• When states began locking down in March, banks rapidly implemented forbearance programs, allowing borrowers to defer loans and avoid default. Stimulus programs also allowed some people to keep making payments when they might otherwise default.
• In the third quarter, JPMorgan reduced reserves for loan losses, indicating that it expects fewer nonperforming loans, but it also noted a lot of uncertainty.
• There may be a real estate stimulus plan – all borrowers should monitor stimulus plans and review loans for refinancing opportunities, stimulus, and forbearance agreements.
• Businesses should be in regular communication with their bankers about extending lines of credit, terms, etc.

State and Local Taxes (SALT)

The SALT Deduction

• Prior to the TCJA, taxpayers could deduct all state/local property taxes and the greater of income or sales taxes from taxable income, but these deductions were capped at $10,000 annually by the TCJA.
• In late 2019, the House passed a bill to eliminate the SALT deductions cap except for taxpayers with AGI above $100 million (which then died in the Senate).
• The Biden campaign has confirmed that he supports repealing the $10,000 cap.
• Paying your fourth quarter 2020 state income tax estimates between January 1, 2021 and January 15, 2021 may be a prudent planning move for most taxpayers – talk to your advisors and CPAs.

Sales Tax

• Tax revenues of states and localities are projected to fall a lot in fiscal year 2021 and beyond while spending on public health will soar – and many states have requirements that they balance their budgets.
• This could lead to big revenue shortfalls and state and local tax hikes if the balanced budget provisions are not repealed and there is no federal government aid.
• Sales tax is set by states and localities so elections to national government do not have a direct effect on them.
• However, the original version of the HEROES Act passed by the House included over $1 trillion in state and local aid, which could reduce state budget shortfalls.

Health Insurance

• Employers expect about 4 to 5% benefit cost growth on average in 2021 compared to 2020, roughly in line with previous increases.
• People may use more medical services in 2021 because they put off routine care and elective procedures for much of 2020 due to the pandemic, and treating COVID cases carries large healthcare costs (especially given the potential for a case spike in the winter).
• Some likely trends in health insurance in 2021 include: Cost increases of around 4 to 5%, expanded options for virtual care, increased focus on mental health, more on-site clinics, greater access to “Centers of Excellence” (options that encourage employees to seek specialized care at hospitals known for high quality).
• Employers and employees should monitor the costs of health insurance, changes in plans, self-insured plans by employers’ costs, changes in taxability in benefits to employees and meet with advisors and CPAs to plan for them.

The State of the ACA

• On November 10 (a week after the election), the Supreme Court is scheduled to hear oral arguments for California v. Texas, a case that that could render some or most of the Affordable Care Act (ACA or Obamacare) unconstitutional.
• The ACA could be struck down wholly or partially, and a series of provisions could go down with it, including:
  • Protections for people with pre-existing conditions, individual healthcare subsidies, expanded Medicaid eligibility, coverage of people up to age 26 under their parents’ insurance, coverage of preventative care with no patient cost-sharing, and the tax increases that fund these provisions.

Planning for Increased Economic Activity

• Current pandemic conditions won’t last forever. Businesses should start preparing for the possibility of increased economic activity (possibly from a vaccine or treatment breakthrough).
• Over 200 vaccines are in early development. Over 40 are in human clinical trials. At least 10 have reached the final stage of testing (Phase 3) worldwide. At least one vaccine will probably prove effective.
• It will still take several months to distribute a vaccine widely to the public and significantly decrease risk of transmission.
• Federal and state governments have already started planning rapid vaccine distribution.
• Interest in rapid testing (where results are less accurate but can take as little as 15 min) is increasing. HHS has started sending rapid tests to states, and some states say they plan to use rapid tests at schools and nursing homes.
• Businesses should be prepared to accelerate activity based on testing and vaccine conditions – this may require additional working capital.

PPP Loan Forgiveness

• A PPP Loan recipient is eligible to have the entire amount of its loan forgiven if it was used for eligible payroll and nonpayroll costs, with at least 60% being used on payroll (subject to certain conditions).
• Forgiveness will be reduced if full-time headcount or salaries / wages declined during the loan period.
• Employers may be exempt from the penalty to loan forgiveness that is tied to pay, headcount, or hours reductions if they can show:
  • They restored pay and headcount to original levels.
  • They attempted to restore headcount / hours but were unable.
  • They were unable to operate at pre-pandemic levels due to COVID restrictions from HHS, CDC, or OSHA.
  • (This is not an exhaustive list.)
• Loan forgiveness applications may be submitted any time before the maturity date of the loan, but loan payments are deferred only until 10 months after the last day of the loan forgiveness covered period.
• The most important things for business owners and accountants to do now is to document everything to show compliance and use their best judgement. (Payroll reports and other records must corroborate loan / forgiveness application numbers.)
• Participants in other relief programs (especially healthcare firms and government contractors) should take special care as they usually are not able to “double-dip” and include expenses in multiple programs – consult advisors and CPAs for guidance.
• Talk to your advisors and CPAs about taxability of loan forgiveness in 2020 or 2021. A second round of PPP is possible – keep up with updates from Ryan and Wetmore. ersonal note: Ryan & Wetmore has been providing tax, accounting, financial analysis, due diligence and M&A services for our portfolio companies and investors since 1986. Great firm and I highly recommend!

Personal note: Ryan & Wetmore has been providing tax, accounting, financial analysis, due diligence and M&A services for our portfolio companies and investors since 1986. Great firm and I highly recommend!

Having CPAs and advisors you can trust is crucial heading into this historic period of uncertainty. Contact us here.

Value Proposition and Covid: Is Your Premise Still Valid?

This is a Guest blog post from Ines LeBow.

 

Five hundred and sixty (560). That is how many commercial Chapter 11 filings occurred in April 2020, a 26% increase from the same time the year prior.

That is 560 data points proving that creating a value proposition is not a one-time deal, unless you want to be left behind as the market shifts and your business changes to meet those new market needs. Just consider the year 2020 as a microcosm for these shifts. The economy, technology, consumers, and nearly every market in every industry have changed significantly in a few short weeks because of the Covid pandemic.

Some of the companies are large brick-and-mortar retailers like J. Crew, Neiman Marcus, and JCPenney. The market had been trending to online sales for quite some time, yet they got complacent and continued with their legacy brick-and-mortar retail strategy. Coronavirus simply accelerated the consumer transition to e-commerce apparel shopping, leaving these iconic stores behind.

Earlier this year…January to be exact…which feels like a different time and a bygone era, I wrote an article on the essentials of the value proposition to tell an epic fundraising story (“Is Your Fundraising Story Epic? Blueprint: How to Open Doors to Funding Starts with the Value Proposition”). The fundamentals to create or reshape the value proposition still apply. After all, your company culture, your product, and, most of all, your why constitute the raw material for the destiny of your company. But how many of the 560 companies who filed for Chapter 11 in April could have avoided bankruptcy proceedings if they revisited their value proposition and evaluated some of the following questions:

• What is your “why”?
• Why is it your “why”?
• Is there still a need for your product or service? What problem does it solve for customers?
• Is there a better way to deliver your product or service for today’s market?
• Is your product still unique?
• Do customers inherently understand what your product is and how it helps them?
• Does your value proposition compel your target audience practically AND emotionally?
• Can your product or service transcend a crisis?
• The numbers tell the story…have you paid attention to your bottom line?

To learn more on how to create a winning value proposition at any company stage or as part of an effective 1-page executive summary and pitch deck, contact me for a complimentary consultation by phone at 314-578-0958 or by email at ilebow@transformationsolutions.pro.

Ines LeBow is the CEO, Transformation Executive for ETS. She is a known catalyst for business operations, bringing 30+ years of hands-on experience. Ines has a long history of being recruited into senior executive roles to improve the execution of business operations and to drive revenue growth. You can see her LinkedIn Profile at www.linkedin.com/in/ineslebow, view the ETS website at www.transformationsolutions.pro, or email her directly at ilebow@transformationsolutions.pro.

 

 

 

Smart People Might Be Killing Your Strategy

This is a Guest blog post from Mark Haas, CEO of the Association for Enterprise Growth. He helps boards and executives create powerful strategies to help them make decisions with greater confidence, impact and pride.

 

Corporate restructuring, M&A, competitive intelligence, strategy, new product development, and process reengineering.   One thing required for success that they all share is the need for the best and brightest. The smartest person in the room. World class minds to solve world class problems. Top grads from the best schools.

I disagree. While intellect has its place in business, being smart is no replacement for creativity, agility, innovation or insight. Yes, sometimes these capabilities are rolled into one person, but rarely.  Several decades helping clients create strategy has led to some insight into where smart is a help and where it can be deadly.

You wouldn’t want only the “smartest” surgeons, engineers, artists or teachers wholly responsible for your welfare. You’d want the right team of individuals, each bringing appropriate skills for the task. Creativity is about being able to see alternatives. Agility requires anticipation. Innovation is more about flawless execution than the up-front ideas. Insight needs, well, a lot more than intellectual horsepower.

The Risks From Being Smart

Being smart has a huge downside for humans. It derives from how we were raised, trained, rewarded and placed in corporations. As children, most of us were rewarded for being on time, orderly and respectful of adult norms. In school, being smart was equated with getting the “right” answer, quickly. Most professions promote a body of knowledge that implies adherence to widely accepted professional standards. Our advancement in most business settings is a result of knowing the right people, performing well on tasks and knowing the rules of promotion. All this seems appropriate because it is so familiar.

In strategy formation, high intellect can be a hindrance; in a team of only “the smartest of the smart,” it can be a disaster. Especially in an increasingly VUCA world, there is no single answer and the first answer is often not the best answer. For the highly intelligent person, the learned (both personally and socially) rigidity and linearity of problem solving to reach an elegant, perfect solution gets in the way of seeing the possibilities of which powerful strategies are made.

Use Smart, But Leverage It

The solution is not to ban smart people from the strategy team. Rather, recognize that the skills you need for a powerful strategy team go far beyond intellect. A high-horsepower car engine is great in theory but is useless without fuel injectors, cooling system and brakes. Fill your team with staff (this also applies to external advisors) who can turn off their brains for a bit and participate more fully in the other essential parts of the strategy process.

 

Mark Haas is CEO of the Association for Enterprise Growth. He helps boards and executives create powerful strategies to help them make decisions with greater confidence, impact and pride. He works with companies and nonprofits to develop strategies, create and validate business models, and execute with discipline. Mark is also an international trainer, facilitator and speaker in ethics, strategy and performance management. He can be reached at  mhaas@enterprisegrowth.org and (301) 442-5889.

Is Your Company Ready to be Sold?

This is a Guest blog post by Steve Pimpo and Bill Rossello of Greenhouse Consulting.

Common challenges we see and how to overcome them

Most business owners will come to the point in their journey when they feel it’s time to sell the company. They have spent a lot of time successfully building and growing their business, but most times are unprepared for the scrutiny and questions that they will face when being evaluated by a prospective “buyer” and their advisors. Based on our own experience and input we solicited from investment bankers, only about 10% of companies with owners seeking to sell are actually ready.  Here are some of the reasons why:

Customer Diversity – A high percentage of company revenue comes from one client or contract. Unless a potential acquiring company is trying to “buy” into a market, buyers like to purchase companies that have a diverse client base or unique service or product offering.

Company Narrative – Some owners use the same sales pitch to pitch to prospective buyers as they do to customers. Communicating the value of a company to a potential buyer is different from selling services to a customer. You need to recognize what buyers want and articulate what is special about your company.

Financials – Sometimes there are accounting inaccuracies that can’t support “quality of earnings” or EBITDA adjustments. You need to ensure that financials are accurate and realistic and can stand up to the scrutiny of a potential buyer’s audit.

Quality of Contracts – Many prime government contracts are “set asides” or subcontracts and there is no clear path to transitioning them to a larger company. You should be prepared with a valid contract revenue waterfall, and a plan to transition set-aside contracts and relationships.

Management Commitment – Ownership hasn’t taken steps to ensure that the leadership and key players are “read in” and will remain with the company post-transaction. People are part of the “goodwill” and company “brand.” It is important to show buyers that there is a plan in place to retain these key employees through to the transaction and beyond.

New Business Pipeline – Buyers will hone right in on your pipeline looking for two things. Is the pipeline full of legitimate prospects and is your pipeline tracking system logical and consistent? If it does not consider reasonable estimates of gross and net revenue and probability of win, it’s not likely to pass a buyer’s sniff test. You need to be ready to justify the reasons you selected each big deal and why you think you have a good chance of winning.

Strategic Growth Plan – Many sellers lack the ability to articulate to potential buyers, a bona fide growth plan, one that paints a credible picture of where the company could go over the next 3-5 years with the power, resources and reach of a larger firm. You need to have that narrative ready to go when you put the company on the market.

Valuation Expectations – Often owners have an unrealistic expectation about the “multiple” of EBITDA or revenue a buyer will pay based on what their peers or friends have received in their transactions. Make sure you focus only on the value of your own business, what similar companies have sold for. Put yourself in the buyer’s shoes. Will they really pay for a tool that does not generate repeatable revenue? Or take a huge risk of paying a high multiple for a company with some of the issues raised herein? Talk to transaction experts and, if you’re willing to pay for it, get a formal valuation prior to putting your company on the market.

Your Near-term Future – Some owners just want to retire or quit the business after the transaction. If you’re the person who manages the company’s client relationships, or you’re the chief technologist, or if there is a major upcoming re-compete, the buyer is likely to want you to stick around for a while after the deal is inked. And there may be an “earn-out” provision that ties some portion of your proceeds to achieving certain objectives over that timeframe. Before you put the company on the market, be sure to consider how you would answer a buyer if they ask you stay on.

Due Diligence Preparation – There needs to be sufficient organization and appetite toward due diligence. The process is inevitably painful, invasive and underestimated. Approach this as a client engagement or actual project and assign one individual to own/manage responsiveness and production.

Without question, selling your company will be the most important professional decision you will ever make. If you address these issues prior to formally starting the process, you will get more attention from investment bankers, dramatically increase the probability of a successful transaction, and likely increase your proceeds too. Most investment bankers don’t have the time or resources to help you address most of the things we have identified. Even worse, they might see you as an unsophisticated seller and probably turn down your business. So, commit the time, effort and resources to prepare 12-24 months before you call the bankers.

Steve Pimpo and Bill Rossello are Principals and co-founders of Greenhouse Consulting, a Washington, DC based business that provides management consulting services to help companies grow or prepare to sell. They can be reached at spimpo@greenhousefirm.com and brossello@greenhousefirm.com, respectively.