The IMR Summit February 19, 2018 11:00 AM to 3:00 PM Fort Myers, Florida Discussion Leaders J. Michael Marks, Indian River Consulting Group Abe Walton PhD., Ivory Bridge Consulting Group
Attention Participants This deck contains materials that will take approximately 8 hours to properly cover and we only have three hours. Our intent is to tailor the material on the fly based on audience feedback. You get the entire deck for future reference.
For Your Convenience Download This Deck At www.isapartners.org/education 3 WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Agenda 4 Morning Session 11:00 to 12:30 You may think that you are • Crossing the chasm: birth to ownership exit just a really talented sales • Growth through adjacencies rep but your success is defined more by your • Workshop: Valuing the Ideal End Result business model than your talent Lunch 12:30 to 1:30 Afternoon Session 1:30 to 3:00 • Strategic alternatives & intentional growth • Process creation and achieving scale • Workshop: Prioritizing Value Propositions WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Peter Drucker 5 His writings contributed to the philosophical and practical foundations of the modern business corporation. He was also a leader in the development of management education, he invented the concept known as management by objectives and he has been described as "the founder of modern management" He passed away on November 11, 2005 I had the great fortune as having many classes and dinners with him at Claremont Graduate School and the book’s principles include: 1. Ensure your capacity for survival with enough strength to weather a blow 2. Ensure your ability to recognize needed change and adapt http://smile.amazon.com/Managing-Turbulent-Times-Peter-Drucker- ebook/dp/B000FC12QE/ref=sr_1_1?ie=UTF8&qid=1424706401&sr=8- quickly 1&keywords=managing+in+turbulent+times 3. Ensure the boldness necessary to exploit emerging opportunities WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Sustained Competitive Advantage 6 Resource-based competitive advantage Valuable • Rare • Inimitable • Non-Substitutable • Culture wins over process - Southwest Airlines • WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Idealized Final Result 7 How can you possibly know what you would do while under constraints, if you don’t know what you would do with out any constraints. Start with WHY? or How Might We? WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Getting Unstuck: Solving The Perfect Problem 8 The only problems you have left are the perfect ones. The imperfect ones, the ones with a clearly evident solution, well, if they were important, you've solved them already. It's the perfect problems that keep us stuck. Perfect because they have constraints, unbendable constraints, constraints that keep us trapped. There's no way to solve the perfect problem because every solution involves breaking an unbreakable constraint. http://sethgodin.typepa And there's your solution. d.com/seths_blog/2010 The way to solve the perfect problem is to make it imperfect. Don't just bend one /07/getting-unstuck- solving-the-perfect- of the constraints, eliminate it. proble.html If the only alternative is slow and painful failure, the way to get unstuck is to blow up a constraint, deal with the pain and then run forward. Fast. WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Problem Finding = Different Models of Thinking 9 WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Ideal Final Result - Exercise 10 WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Effective Rep Firms Keep Both Sides Honest Or At Least Equally Irritated Your Multi-Sided Value Proposition 11 Upstream- Principals Downstream- End Users & Distributors Rep firms are good at 2 out of these 3 activities, so be clear and choose A rep-discovered sales opportunity wisely based on the needs of your creates significant pull through principals revenue for a distributor 1. Getting products spec’ed with specifiers The balance of direct and distributor 2. Managing projects lines creates linkage with other 3. Managing flow business channel partners who bring Demand creation or making markets opportunities to the rep’s firm for distributors to serve The rep firm provides the technical Providing principals with competitive expertise so the distributor or end user insight and new market doesn’t need to invest in it opportunities WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Network Effects (Apple’s I-Tunes) 12 Every business model has two components, how to add value to a market and then how to extract value Most businesses started with a virtuous circle, but when it breaks they plateau • It spools up just like a turbocharger when it works • Sticky customers are both high margin and happy The key is knowing your tribe • Remember that your principals have high switching costs and just deny it WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Over 20 of the 21 Million US Firms Are Lifestyle Businesses Crossing the Chasm 13 Business models that don’t evolve will experience declining growth rates down to core economic levels, excluding share shift All of you started with a founder entrepreneur who was the lead sales manager, then you hired sales reps, and when absolutely necessary, finally hired some administrative support besides a spouse • To meet minimum W-2 or T-4 requirements you paid a high percentage of the factory paid commissions to attract reps in the beginning • As you develop network effects the rep share declines while their income rises Many firms get stuck here if you fail to change your comp plan as reps become over paid, complacent, and age out in annuity territories • You evolve into a thirds model (1/3 each to compensation, overhead, and partner profits) while W-2’s grow rapidly at or above market This is what funds the specialized marketing and operations functions that dramatically increasing sales rep productivity by typically 4 to 8 times Potential Action Step WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
Many firms simply ride it down harvesting what they can Today’s Core B2B Challenges 14 1. The accelerating trend away from relationship buying to advantaged players & rabbits 2. The internet buffet of choice and transparent race to the bottom 3. The erosion of selling service as a differentiator in the market 4. Increasing customer sophistication 5. Aging of old school sales reps and a limited pipeline of replacements 6. Markets are aligning by size where larges buy from larges The punch line is that the old model is not a best http://blogs.hbr.org/cs/2012/07/the_game_buyers_play_with_vend.html?utm_source=fe practice for the future. edburner&utm_medium=feed&utm_campaign=Feed%3A+harvardbusiness+%28HBR.o rg%29 WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
History Doesn’t Repeat Itself, But It Usually Rhymes Death of a Rep Firm 15 The most probable end to a rep firm is when the managing principal ages out and sells the business on a leveraged buyout to a younger firm member, who will default on part of the note, while feeling really bad for a host of market-based reasons • By definition, most are lifestyle entrepreneurial businesses as there is no shareholder value outside of the relationships with the firm’s senior sales executives There is nothing wrong with this as long as you don’t drink your own Kool-Aid • If you are old enough to ride it out then the best strategy is to put “lipstick on the pig” and ride it down taking out as much money as possible This is often a best practice and there is a freedom when giving up the illusion of building something that exists beyond you (Issue: getting others to invest) Some firms go on to create real shareholder value beyond the first founders when instead of waiting for a crisis, they start investing now (the afternoon session) WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
A Rep Firm Is Worth Four Times Adjusted EBITDA 16 EBITDA is Earnings Before Interest, Taxes, Depreciation, & Amortization (think free cash flow) The four multiple is the median value for small professional service firms and your EBITDA is calculated by: Ʃ N (Principal Revenue X Commission Rate) = Total Rep Firm Revenue less (Total Salary and Commission Compensation paid to owners*, sales reps, and support staff) less (Other operating expenses except interest and taxes) Equals the firm’s ~EBITDA This value times four is the typical price that a willing seller pays to a willing buyer • This almost always requires the senior executive to stick around for two years to transfer relationship equity with a sizable variable hold back based on transition success * Does not include profit withdrawals WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP
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