Archive for the ‘Exits’ Category

CEO Profile: Mark Hoebich

Wednesday, December 14th, 2011

Mark-Hoebich-PhotoPart of the growth strategy for our client, Reed Elsevier, was to build a subscription data business to complement the ad revenues of their entertainment division, Variety. We also recommended that they explore acquisitions to accelerate that plan. Mark Hoebich, founder and CEO of TVtracker, had suggested a similar strategy years before, and effective July of this year it all came together. Below is an excerpt from an interview with Mark that we felt speaks to the challenges of bootstrapping a company to success.

Mark is the classic entrepreneur who knew “there has to be a better way.” While at Fox Television, his task was to constantly track all the new projects across the other broadcast and cable networks. So in 1999, Mark set out to build a B2B solution to track the activity and players for the entertainment industry, and then charge a subscription to the networks, studios, and industry firms who all need accurate and current information as to what is going on in this ever-changing industry. Within the first year he was able to pay back his investor (his father), and a year later turn profitable. To date, he has acquired over 250 of the leading entertainment brands and owns the leadership position.

Altus: How did you fund the company to get started?

Mark: I took out a $20k loan from my dad and paid it all back with 8.5% interest six months later. We got traction pretty early, but I kept things very lean and did not really take a salary. I ended up selling the company [the first time] to iFilm in 2000, which enabled me to draw a salary and expand the company. But in 2001 I decided I wanted to buy the company back. So again, I did not take a salary but tried to pass everything I could through the company. I remember my bookkeeper once said, “Mark, you are paying all your employees more than you are paying yourself.” But I knew that is what had to be done, and knew nobody is going to work for free besides me.

Altus: Why didn’t you take on additional investors?

Mark: When I took the company back, we felt like we had been a little bit burned. We had seen how disorganized so-called ‘larger operations’ can be, and in 2001 there was no investment dollars in the market. I always knew if I brought in investors I would have to give something up. I felt like we had the right people and the right model and should just do it! In hindsight, it was a great way to do it actually. It really forced us to be smart, think lean, be clever with marketing, sales, and product – and really became our culture, which also aligned with the culture of our customers.

Altus: What have been your most proud sales or revenue accomplishments?

Mark: It became interesting to me how you realize you are your own biggest obstacle in terms of sales. Because it’s your baby you want acceptance, and I would end up pricing the product to ensure a win rather than its true value. You end up believing your own value system. And in my case, within a niche and fixed market size of entertainment, there are only so many customers. So l later discovered I needed to raise my prices to achieve our full potential. I found that the most difficult part was walking into those sales calls convincing myself of a premium price. The thing that changed our business most significantly was when I decided to tell companies that we charge based on the size of their company. That model ended up being very successful to increasing our revenues and nobody would challenge me on it.

Altus: What was the biggest mistake you made within Sales and Marketing?

Mark: Oh my god, every mistake…every mistake. Most were spending too much on glossy materials and premium marketing campaigns that would yield zero sales. Our guerrilla tactics were always the big revenue and brand generators.

Altus: What key measures do you use to track sales effectiveness?

Mark: I measure my salespersons’ effectiveness based on the number of sales meetings they setup. I believe if you are presenting to enough companies, then the product will ultimately sell itself. The salesperson, no matter how good or bad they are, can never get in the way of the product. Just get in there!

Altus: How would you define greatness in someone from your sales team?

Mark: I always tell my team that you are entitled. It’s a little like the book The Inner Game of Tennis which is about knowing and believing you are entitled, an equal member in that relationship. In our case, when we reach out to someone, we believe we have something that will really help [our prospects] and when you believe that they are not going to hear fear in your voice, they are going to hear that ‘gentle calm.’ It is that confidence and non-arrogance that will make a salesperson successful.

Altus: What advice would you give to entrepreneurs or division heads leading a new venture?

Mark: My dad gave me some advice when I started TVtracker and said you are going to have 150 things to do every day and you are going to get addicted to Things To-Do lists, where you add and cross off tasks, but to always remember the number one thing on the list should always be Sales. Sell it. Get the money in.

The Right Hire for Early Stage Sales

Friday, July 10th, 2009

Sales is an odd function in early stage companies.  The traditional salesperson is tasked with presenting the company story in front of as many prospects as possible.  If those prospects are not responsive, move on to the next.  The best salespeople get fewer no’s and cycle faster.  In a start up, the situation is different and the role even more critical.  Generating revenue is still paramount and product pitching is the daily focus;  but now the cash from those sales becomes the immediate and essential life-blood of the company.   Beyond revenue, Sales often carries the additional responsibility of ensuring customer satisfaction, accumulating market feedback, acquiring competitive intelligence, defining product requirements, assessing vertical and channel strategies, and being a key influencer in the company’s morale and momentum.  However, many startup leaders still hire their initial sales team based on the traditional sales profile and the desired quota performance with little consideration for these elements.

Mark Leslie, founder of Veritas and currently professor at Stanford, calls the traditional class of salesman “coin-operated”, suggesting they are great at execution and tenaciously drive a consistent and proven process.  But in order to perform they require tools, infrastructure, and support that simply do not exist in a startup.  The result is missed forecasts and high turnover in the position.

One client with a SaaS offering approached Altus out of board pressure due to lower than expected sales.  What we found was two Quota Club Kings as regional reps; they were in the field and miles away from the product with limited support.  The repair was a few months of assessing the best sales process, identifying the target customer, and bringing in two inside reps matching a profile more consistent with a product manager–to listen, learn and share their experiences internally.  Now with a closer connection to the right customer, the closing ratio and sales cycle improved.

Another scenario we find in early stage sales is the under-hire, where precious cash has been allocated outside of sales and the plan is a junior rep / CEO tag team. This model creates the opposite challenge with relatively junior people trying to find, qualify, and manage prospects for the CEO to close.  Now you have a lack of experience, no process, no tools and often an incomplete product representing your company in the marketplace.  These recruits tend to thrash, driving more activity than results just to create an impression of productivity.   The result again is a weak qualified pipeline, missed targets, and often “bad revenue”—a customer willing to listen but who is ultimately not a good match to the product.  Now you have product development thrashing too.

We saw an example of this with an online offering looking for key partnerships and distribution.  Here the lower cost junior rep was able to build a large list of companies and activities that were not strategic or prioritized and the CEO was not able to support the volume while managing his other duties.  The repair was a senior part-time business development profile that could identify and close much bigger transactions with far bigger players.

Many leaders and boards believe ‘sales is sales’.  The perception is that a good sales person will always be good regardless of when or where you drop them.   While sometimes true, it is certainly not the case in the early stages of a company.  The profile of the best sales people for early stage is what we (and Leslie) refer to as Renaissance Salesperson.  The Renaissance rep is one who is more driven intellectually than financially.  He wants to learn and therefore asks questions and listens to what customers, and ideally markets, truly want and need. He evolves to what resonates with buyers and adapts quickly from one call to the next.  He likes to share his findings with the company and help to shape and evolve the product while it is still in its infancy. Most importantly, he is resourceful and can inform and persuade prospects with little infrastructure, support or materials.  He is challenged, intrigued, and motivated rather than frustrated and demanding more resources.

We recommend early stage companies begin their sales with this renaissance profile, and in small numbers, until a replicable model starts to take shape.  It is critical at this stage for the company to learn and adapt quickly and understand that results do not come quickly or easily with a sales group versed only in mature products and markets. This is the time to build the system that will henceforth guide the company’s sales (and perhaps marketing) strategy.

Once you can see the beginnings of a repeatable and scalable model you can now shape the sales organization into a high-yielding machine.  And just as sales people are not all created equal, neither is the makeup of a sales organizational model.   There are many different structures that can be implemented to maximize the cost, speed, and efficiency of sales, i.e.:
Inside / outside
Qualify / close
First sale / growth sale
Volume / relationship based
Direct/channel

Consequently these different models require different profiles of salespeople in order to be successful.  Failure to clearly understand and define the role will again translate into a bad hire, turnover, and loss of momentum and profits.

This recommendation is often hard for CEOs to accept because they need more revenue and rapid adoption and therefore bigger investments in sales. Most companies we begin working with tend to build to an immediate sales model based on their experience or council from established and successful companies in which they used to work and to which they aspire to return. However, just as a company evolves and matures its development cycle through prototypes, so too do sales strategies and tactics.

Although counterintuitive, the fastest path to the greatest revenue is to begin slowly with fewer salespeople until you feel a foundation capable of building on. They will burn far less money and create an environment where traditional sales will succeed.

Didn’t we learn anything from the childhood Tortoise and Hare story?

Altus clients prospering in the New Year

Thursday, January 8th, 2009

Now more than ever revenue traction is a life or death proposition for new businesses during the current economic climate. With our original Outsourced Business Development Practice we were able to help our clients succeed in the aftermath of the tech bust earlier this decade. Since launching our Sales Process Optimization Practice in the last couple of years, we’re thrilled to say we’re batting 1000 with guiding our clients to rapid revenue growth in over a dozen engagements. These successes have been directly or indirectly written about in several leading publications and blogs including iMediaConnection (the leading trade publication for the Interactive Marketing Industry), VC Journal, Newsosaur (high profile blog for the Internet news industry written by an investor/advisor and industry veteran), Private Equity Week, and NewsInnovation.com (site created by David Cohn and Jeff Jarvis, the leading pundit in New Media and author of the new book What Would Google Do?). [Please note that VC Journal and Private Equity Week is only available to subscribers and via reprints]

The great news is that all is not doom and gloom during a recession as Dave Chase wrote about for iMediaConnection – How brands thrived during the Great Depression. In fact, our clients are thriving. One even had a recent exit that builit on the strength Sales Process Optimization that created a world class telesales machine which was a core reason for the acquisition. The best thing about the successes highlighted below is that these companies can succeed without an exit as a result of the sales traction they have achieved. These companies represent a wide array of business from Internet media to a SaaS software solution to company providing energy savings solutions for building owners to a lead generation company for educational institutions. A common thread is that all have highly fragmented customer bases where traditional, expensive shoe-leather sales models don’t pencil out so we helped them implement a more successful model.

In the midst of the negativity in the press, it’s great to hear success stories. The following is a sampling across 4 companies:

  • In the Fall of 2006, this company had just surpassed 1,000,000 customer transactions per month that they get paid on. After restructuring their end-to-end sales process including lead generation through retention programs, two years later they were at 18,700,000 customer transactions per month. Since revenue correlated with those transactions, their revenue has increased 700% and they achieved their first profit after years of major losses (greater than $5MM per year).
  • We worked with this next company over a 6-month project that saw their revenue grow from $2MM to over $3MM per month and their sales cycle nearly cut in half from 45 days to 25 days.
  • We recently wrapped up a 4-month project that saw this company grow new customers per month from 10 to 25 while reducing their sales cycle from 4.5 months to 2 months. Last month, they achieved their single highest revenue day in their history as well as a record sales month.
  • The final company we’ll feature has a much longer sales cycle and complex sales process which we’ve helped them reduce from a 2 year sales cycle to 6 to 12 months. Over the course of the 8-month project, their sales pipeline grew from a $3MM pipeline to a higher quality, more qualified pipeline of $1722MM. Thus far, this has translated into their new installations per month growing four-fold.

We were able to guide these successes by applying a 13 phase process that takes the companies through a rigorous set of processes and workshops that elevate the company’s effectiveness. If you’d like an overview of the 13 phase process, click on any of the partners on our About Us page for our contact information.

13 Phase Sales Process Optimization overview

spo-13-phase-screen-capture

Successful exit built on the strength of Sales Process Optimization

Friday, September 26th, 2008

This week another Altus Alliance client had a successful exit that was reported on Forbes.com. The following is an excerpt from the beginning of the article.

Media Recovery, a leading Datacenter products and services company, has acquired ISSI Data (www.issidata.com), a privately held company headquartered in the Seattle, Wash., area. ISSI Data is a recognized national reseller and direct marketer of information security and storage infrastructure solutions.

The acquisition of ISSI Data will enable Media Recovery to harness the power of a strong inside sales operation and an expanded online catalog sales business.

From the time that Altus partner Bill Lawler joined the firm we saw the opportunity to build a practice we refer to as our Sales Process Optimization practice that has a major effect on Inside Sales operations. ISSI was one of the first clients where we saw the impact of optimizing the sales process from lead generation through acquisition, development and retention of clients’ sales organization. As the examples at the aforementioned link demonstrate, optimizing the sales process can have a dramatic effect on revenue and profitability. We are thrilled that ISSI has had a successful exit particularly in the midst of a tougher climate for exits.

ISSI was a great example of how Altus engages with a client to tap into the breadth of Altus’ expertise. Dave Jones was the original partner helping with business development. During that time, he brought in Dave Chase for a day to tap his knowledge around Internet marketing and lead generation and again when Chase helped on a 6-week Sales Learning Curve Assessment project. Later the baton was handed off to Bill Lawler to address the areas identified in the assessment which manifested itself as one of the first Sales Process Optimization projects.

Originally, we thought of the Sales Process Optimization practice as strictly a complement to our Sales Learning Curve and Outsourced Business Development practices that would apply later in a company’s lifecycle as was the case with ISSI. Instead, we have found that startups at a much earlier stage in their development are interested in ensuring their end to end sales process is optimized from day one. For example, NextNewsNet is a digital media startup in the local Internet media arena that is applying the Sales Process Optimization methodology as it prepares to make its first sales call. NextNewsNet’s team and advisors are some of the most seasoned and well known people in the Internet media business who know driving down the cost of customer acquisition is vital from Day One. It’s much cheaper to get it right from the early days than reengineering later.

10 Commandments of Venture M&A

Friday, August 31st, 2007

Bill Burnham has an excellent post on the Top Ten Commandments of Venture M&A. I’ve picked my top 5 below. Go to his post to read the details on these 5 and the rest of the “commandments”.

  1. Thou Shall Not Give a Strategic Investor a Right of First Refusal, Right of First Offer or a Protective Provision that Enables Them to Block a Sale.
  2. Thou Shall Write All Customer Contracts And Partnerships Such That They Can Be Transferred to An Acquirer And/Or That Such Contracts Can Be Terminated With Reasonable Notice.
  3. Thou Shall Not Enter A No-Shop Without Hammering Out All of the Key Terms and Conditions of a Sale First.
  4. Thou Shall Not Allow A Buyer to Interview Employees Until At Least An LOI is Signed.
  5. Thou Shall Discuss Exit Expectations With Management and Board Members Prior to Funding and At Least Twice a Year After That.

BigCo fishing expeditions

Saturday, March 31st, 2007

Since most exits are acquisitions, not IPOs, one has to seriously consider overtures from BigCos. That said, some companies use fishing expeditions to learn more about your business with no serious intention of ever making a legitimate offer. Ed Sim lays out a set of questions you should ask BigCo as well as ask yourself that is a useful list. Having been on the BigCo side of this equation, I can tell you that the fishing expedition often isn’t intentional. One set of people inside BigCo might be completely serious about their overtures but get blocked by some other person/team in BigCo. This is more likely to happen at BigCo if they don’t have a structured process for acquisitions. Thus, one additional question I’d ask BigCo is “how does BigCo’s acquisition process ensure that there is internal buy-in before getting into deep discussions with SmallCo?”

What’s a “reverse merger” or “backdoor IPO”?

Friday, March 30th, 2007

Those were questions I used to ask. Fred Wilson has a good explanation of not only what they are but the caveats associated with them.

Digital media client: Kontiki is acquired by Verisign

Friday, March 31st, 2006

VeriSign announced Monday that it plans to acquire Kontiki for $62 million, in a move to enter the broadband content services market.

Enterprise Software Client: CallVision acquired by VeriSign

Wednesday, January 11th, 2006
VeriSign, a provider of infrastructure services for the Internet and telecommunications, has signed an agreement to acquire CallVision, a provider of online analysis applications.

The transaction is valued at $30 million in acquired cash.

Vernon Irvin, executive vice president and general manager of VeriSign, said: “The acquisition of CallVision is a strategic investment that furthers our goal of providing intelligent infrastructure services that enable rich and seamless communications, commerce and content services for carriers, online portals, media companies and consumer brands worldwide.”

CallValue’s applications will be added to VeriSign Commerce Suite. The acquisition will enable VeriSign to provide converged ebill presentation, payment and customer self-care applications to mobile operators, Tier 1 carriers, broadband companies and consumer-brand MVNOs.

CallValue allows its clients to use its applications to transform billing data into sources of business intelligence.

“This is done by consolidating billing data from multiple systems, products, geographies, languages and currencies into a single electronic analysis and bill payment view and creating one view of multiple accounts.”

The transaction is expected to close in the first quarter of 2006.

Digital Media client: PhotoAccess acquired by Photoworks

Wednesday, April 21st, 2004

PhotoWorks Announces Agreement to Acquire PhotoAccess Technologies, Online Photography Technology Leader.