Feeds:
Posts
Comments

By Mark Juliano

One of the most important decisions for all startups is the composition of the Board of Directors, and the powers of those Board members — trust me, they have more power than you think!

Board Composition

The typical Board of Directors is comprised of individuals from four areas:

  • Founders and Company Executives (insiders)
  • Investors and Venture Capitalists
  • Trusted business associates
  • Industry professionals (consultants, customers, etc.)

Sometimes lawyers are also on Boards, but often they prefer to serve as corporate counsel to remain somewhat independent of the actual Board decision making. I agree with this assessment.

Boards are generally odd numbers, so that there are no voting ties — however, most Board level decisions are unanimous because, 1) startup companies strive to reach a consensus, and 2) it is considered “bad” to have dissenting opinions in small companies. Usually the company has 2-3 insiders (founder and executives) on the board, along with 1-2 outsiders. Board control is a VERY important issues — especially when outsiders outnumber insiders. When this happen — and TRUST me on this one — the outsiders, even if they don’t own a majority (>50%) of the stock, can overrule insiders, and even force the firing of a CEO, Vice President, etc. even if these individual own a significant percentage of the company.

What does a Board of Directors Do?

The company’s Board has a great deal of power, and the powers of the Board should be spelled out in the Shareholders Agreement and other corporate documents. The basic powers include ability to authorize and allocate stock, and stock options. This of course is critical for paying employees with stock options, raising capital (including venture capital), etc. They are naturally also involved in buying companies, and selling the company itself. The Board also authorizes annual and quarterly expenditures, especially any large or new expenses.

VETO Powers

While all of this seems “standard” the mistake companies also make is what I’ll refer to as “VETO POWERS“.  Even if the founders and employees own more than 50% of the company stock, the Board’s power can often “trump” those voting rights. Venture Capitalists are notorious for adding all sorts of clauses that both the Board, AND the Venture Capitalists must approve. No, the clauses don’t say Veto power, they simply say the Board (or Investors) must approve the following …

An example illustrates the potential problems associated with these Veto Powers. Let’s say a company wants to raise additional funds from a private or venture capital investor, and insiders own more than 50% of the stock. Let’s also assume the board is comprised of 3 outsiders and 2 insiders, and the Board has the WRITTEN ability to approve all new fund raising — and YES, I have been in this position as a CEO. Very quickly you, as the CEO, will find that the new investors, say venture capitalists, are negotiating with the OUTSIDERS, because they do have the power to Veto any deal.

These Veto powers can extend to major capital expenditures, sales of insiders’ stock, etc. etc. etc. I was in one situation where my company — MediaSite — licensed technology from Carnegie Mellon University. They had a Board seat (required to license their technology from the Tech Transfer Office), but only 10% equity in the company. Frankly, they were worthless Board members, and were ONLY concerned with how any business deal affected Carnegie Mellon. I actually told the CMU Board member that he had a “fiduciary responsibility” to act in the COMPANY’s best interest. He couldn’t have cared less.

So what happened … I found future investors negotiating with CMU, instead of the CEO and other board members knowing that the CMU Board had veto power. There was no way to get rid of the CMU Board member, and he created untold conflict on the Board — not to mention he has ZERO business experience … lesson learned…

Conclusions:

I have heard this absurd concept of a “balance” whereby Insiders own the majority of stock, and Outsiders have Board control — sorry Investors and Venture Capitalists (and those on Shark Tank :) This is totally Absurd!!! Investors should not give up Board control until they have no choice. These investors are wonderful in good times, and absolutely SHARKS in bad times. trust me…

DOs

  • DO keep more insiders than outsiders on the Board at all costs
  • DO add investors to the Board when required, and be sure they have solid industry, market, and company knowledge
  • DO find outsiders who you TRUST with your company
  • DO add outsiders to your Advisory Board, who are advisers, but don’t have the power to make

DON’Ts

  • DON’T put outsiders on your board who have little or no industry and market experience
  • DON’T give up Board control when you still have stock ownership control
  • DON’T put friends on your Board unless they have solid business experience, and you trust them
  • DON’T sign too many Veto powers — remember, they don’t say VETO on the investing document. They say, “the investors have to approve the following things:” and they all sound innocuous until …

By Mark Juliano

I’ve been working for and with startups for over 20 years, and it still amazes me that many people don’t understand how to get a job with a startup company. Below are some time tested methods that I’ve used to get jobs with startups, as well as those used by people I’ve hired.

Many Tech Startups are Run by Engineers (and other disciplines) — Who may not understand your area of expertise

As is often the case, high tech startups are often started by people with engineering backgrounds. While they instinctively know they need marketing and sales people, many of them don’t really understand what marketing and sales people really do. My advice — keep it simple, and be patient.

I recall when interviewing with FORE Systems (which had 4 founders — all PhD engineers) they asked me what would be considered to be “trivial” questions about marketing (I was interviewing for the Vice President of Marketing position). Questions included: 1) how do we get a good location in a trade show convention, 2) do we need to do advertising, 3) what is the minimum we can spend on marketing, 4) how do we get press coverage, and several others.

Instead of reaching a conclusion like — hey these guys don’t know anything about marketing — I answered each question, and wasn’t offended. In fact, I used the opportunity to educate them about marketing (and sales) as well as reiterate my expertise and experience.

Also — it is CRITICAL to demonstrate your technical expertise and knowledge, as techies will never feel comfortable with marketing and sales people who aren’t “one of them.”

DO SOMETHING for the Startup – BEFORE you get the job

This is by far the BEST single advice I can give anyone trying to get a job with a startup company. The reality is that virtually all experienced executives and managers can talk their way through an interview — making it hard to differentiate yourself. Using the FORE Systems example again (and I did this for at least 5 companies) – before my 2nd interview, I wrote a complete 20+ page Marketing Plan for the company. I addressed everything — the big picture things (strategy, planning, positioning, pricing). The small picture things — like exactly which trade shows, magazines, journals, etc. I’d target. Industry analysis and competition. And finally gave FORE a complete financial spreadsheet and budget for my department.

WOW!!! And YES every company was impressed, and I got the job. These plans probably took me about 20 hours to complete, and showed the company 1) how serious I was, 2) my expertise, 3) my knowledge of the company and industry, and 4) exactly what I could do FOR the company — not the other way around.

Some people ask me — but why would you tell the company what to do so they could hire someone else? NO silly — that’s the catch. I readily hand over this information and knowledge saying, “and yes, I’m the best person to execute this plan.

A similar example for Sales People would be — go ahead and call some of your Rolodex and give those interested contacts to the company. Again, they see you’re serious and willing to work hard to get the job, which of course translates to how you’ll work once you get the job.

You’re Both and Executive, your own Assistant, and your Staff

I can assure you that the biggest pet-peeve of Entrepreneurs is management and executive level people who immediately talk about 1) needing an assistant, 2) needing people to work for you, and 3) needing lots of resources. Please remember — STARTUPS DON’T HAVE MUCH MONEY!!! And entrepreneurs are scared to death of managers and executive who come from larger companies where they had huge budgets and staff. While these people talk a good game — they often can’t execute and do the SMALL things.

Basically, if you’re say the first Sales or Marketing person, you have to do your job, and everyone else’s job (since there are no other people :) Trust me, it will become obvious to any company when you are stretched too thin and need additional resources of cash and people. Very few entrepreneurs can truly do strategy, planning and implementation simultaneously — but that’s the job of an entrepreneur.

Final Thoughts — Some DOs and DON’Ts

  • DO remember it’s about he company, NOT you
  • DON’T talk about compensation until you’ve got the job. My answer to the compensation question is always the same — “I’ve never let compensation get in the way of working for a startup company”
  • DO let them ask questions first — but DON’T forget to ask questions
  • DO ask all executives some of the same questions — such as “what’s your strategy?” If you don’t get similar answers — beware
  • DO tailor your resume for each specific company, highlighting the relevant experience to that company. YES, it’s extra work — but not a big deal
  • DO update your social network pages and be sure they are consistent with your resume and each other

By Mark Juliano

Many companies form Advisory Boards as part of their overall corporate structure. Advisory boards are DIFFERENT from the Board of Directors, which have control and power in the form of voting, regular contact, full company financial disclosure and generally equity ownership. Advisory boards CAN be extremely effective for company executives if they communicate with them frequently, and respect and heed their advice.

An Advisory Board is generally made up of people who can offer unique advice on a number of areas of expertise for the company such as: marketing, sales, customers, legal, financial, etc. These are people who the founders and executives trust to give good, unbiased advice to the company. As such, they should be experienced members of the industry with significant experience in similar companies, products, industries and disciplines.

Personally, I have served on Advisory Boards to a half dozen companies over the years. My expertise is broad, having been a founder (or CEO/senior executive) of ten organizations, as well as taught entrepreneurship and business planning at the University level (both graduate and undergraduate).

Advisory Board Compensation

The basic rule of thumb is that Advisory Board members should be compensated in some way. These are generally very busy people, whose advice and counsel is sought by many companies and individuals, in addition to their regular vocations. While some advisers will give great advice and spend considerable time with company management — ask yourself which company you’d help if you were an adviser to 6 companies, and 2 were compensating you …

Generally minimal equity (1-3%) is fair (or possibly a small percent of revenues or profits), and/or a small amount of cash (less than $10,000 per year) plus reimbursement of any direct expenses. Remember that hiring a consultant can easily cost $100 – $500 per HOUR, and Advisory board members tend to always have the company’s best interests in mind — not that consultants don’t, but they are more arms-length advisers.

In some cases, Advisory Board members WON’T or CAN’T take compensation — such as if they are a customer, members of the government, etc. Separately — be VERY WARY of potential board members seeking a high level of compensation without any firm commitment of time.

What to Expect from Advisory Board Members

DO expect:

  • Regular consultation
  • Them to return your phone calls and emails promptly
  • Unbiased advice and help
  • Focus on their specific area of expertise
  • Contacts in the industry, customer base, etc. (i.e. their Rolodex)

DON’T expect:

  • Them to do your job for you or run your company
  • Them to come to regular meetings and travel extensively. In fact, most times advisory board members meet with company executives separately (or via telephone) versus the board of directors which tends to have a regular meeting schedule.
  • Them to be as involved as Board of Directors who generally have a large equity stake, voting rights and a vested interest in the success of the company.

What Makes a Great Advisory Board Member?

Any adviser or consultant should remember ONE most important thing — they are being asked for their ADVICE but NOT decision making. If any adviser (or consultant) finds themselves playing corporate politics, or trying to make decisions against the existing corporate executives — personally I believe these are NOT good advisers. Using the excuse, “well I’m only looking out for the company,” is often untrue — when they are actually trying to improperly assert themselves into the company decision-making structure.

Where to Find Advisory Board Members?

  • Experienced, semi-retired, and retired executives
  • University professors
  • Customer base (yes, they are interested and do have a vested interest in the company)
  • Legal community
  • Business associates (and friends who have business expertise)

CONCLUSION:

An Advisory Board can be an extremely valuable part of any company’s structure and decision making process. Members can, and should, have solid expertise and experience in the company’s industry and/or a specific business focus (such as sales, marketing, strategy, planning, finance, etc.). As with any advisers and board members, the CEO and senior executives must manage these people, and be sure to give them praise and appreciation. After all, Advisory Board members are people too and in particular are generally giving much more advice than the compensation they are receiving.

By Mark Juliano

This article addresses one of the fundamental choices for any company — Which sales channel should a company deploy?

The first, and most fundamental thing a company needs to decide is WHO their customers are. This may seem obvious, but it’s not as easy as it seems… When I was in the telecommunications industry, marketing high-end, high-priced telecomm equipment, it was indeed obvious — the IT (Information Technology) managers of Fortune 500 (and worldwide companies), governments, and university/research institutions. For these markets, a DIRECT sales force was most appropriate.

At the other end of the spectrum was when I was CEO and co-Founder of Vinomis Laboratories marketing medical (nutritional) supplement products. Our customers were consumers, so it wasn’t possible to use a direct sales force — though we did have to decide whether or not sell on the Internet or through drug and nutrition stores (i.e. GNC). Selling through stores meant we would have to give the stores a 40-60% discount off list price, and we would not be able to “touch” our customers directly. Of course, the stores would provide a large widespread distribution channel. Given our Resveratrol supplement was a new category, we chose NOT to sell through stores, and instead used our website, coupled with online advertising, social media, and some radio advertising.

Below are the DIFFERENCES among the primary sales distribution channels:

DIRECT Sales (meaning company sales representatives)

  • Cost — High due to hiring, salaries, benefits and travel expenses
  • Profits — High (company keeps all the profits)
  • Growth — Slow (it takes time to build a direct sales force)
  • Control — High (company has control of its sales people, messages, etc.)
  • Customer Contact — High (you see, talk to, meet with you customers)

IN-DIRECT Sales (meaning 3rd party sales reps, affiliates, etc.)

  • Cost — Medium (less than direct, but still require training and some expenses)
  • Profits — Medium (must pay reps some commissions, etc.)
  • Growth — Medium (easier to get larger number of reps via rep companies, and recruiting)
  • Control — Medium (yes, they sell your products, but may also sell others and don’t work for you)
  • Customer Contact — Low (reps have the customer direct contact)

One of the companies I consult with uses Affiliates to sell their clothing in women’s homes. These fashion shows and “parties” are similar in concept to Tupperware, Mary Kay, etc. type selling. The key here is to train these affiliates to properly represent the company, and in our case we send company representatives to the home shows.

INTERNET Website

  • Cost — Low (but higher than you think to build and maintain website)
  • Profits — High (company keeps all the profits)
  • Growth — Potentially HIGH — but requires a great deal of complementary advertising, social networking, etc.
  • Control — High (company controls products, website, prices, etc.)
  • Customer Contact — Low to Medium (you build the customer experience, but don’t directly “touch” your customers). Augmenting with customer service (meaning humans) can increase the contact

Contrary to popular belief, selling on the Internet is very difficult. Sure, it may be relatively simple to set up a website, use Amazon (and others) for e-commerce, buy online adds, etc. BUT however great your product or service, customers still need to FIND your website among the millions and millions of websites, online ads, and Internet information.

STORES

  • Cost — Low (though company may have to carry the inventory with some stores)
  • Profits — Low (stores get 30-60% discounts)
  • Growth — Potentially High (if you can sell through a large store chain)
  • Control — Low (very difficult to control what stores sell, how they train their people, etc.)
  • Customer Contact — Very Low (you rarely see or speak to your customers, though should have a customer service center)

MARKETING

No matter which sales channel the company chooses, you need complementary marketing. Sales is NOT marketing. And marketing is not sales. Marketing includes: customer research, advertising, public relations, trade shows and conferences, writing articles, website information, brochures and literature, etc. etc. etc.

By Mark Juliano

These days many new businesses turn to Social Media for their marketing versus traditional marketing communications vehicles (advertising, public relations – PR, trade shows, etc.) This post deals with the pros and cons of each, and how to specifically use Social Media to your company’s benefit.

Social Media Marketing

The MUST HAVEs — Website, Facebook page, Twitter and LinkedIn.

OVERALL — the most important part of using these Social Media websites it to: 1) post frequently, 2) link your sites to one another, 3) keep your information updated, and 4)

Most new businesses today have a Facebook page — we recommend TWO (2) different Facebook pages at a minimum. 1) your traditional Facebook page for your name, or in your company has multiple founders/executives, you should maintain a page for each person, and 2) a COMPANY Facebook page — for your commercial business.

All of these Facebook pages should link to one another, and post information that refers to each other’s Facebook page, and your own company’s WEBSITE, and specific pages on the website which related to your Facebook posts. A company Facebook page is unique on Facebook because it’s the page you post primarily company information, as well as information about your industry. Remember that your followers are not only interested in your company’s posts, but industry information — your goal in marketing is to build an online COMMUNITY.

I would also recommend using Facebook Ads to drive traffic to your company website, new products, etc. Facebook allows you to have limits on how much you spend on advertising — and it’s well worth it.

Twitter – is also a MUST HAVE — not to tell the world about what you are eating for lunch — but for the following reasons: 1) company announcements, 2) management additions, 3) new products, 4) to build a following on Twitter, etc. Remember you can install a Twitter and Facebook Page WIDGET on your website(s) so that your posts and tweets show up on your website, and customers/prospective customers can follow you on Twitter and Facebook. Widgets require a Facebook PAGE, which are generally for commercial uses.

LinkedIn – is also a MUST HAVE, for your executives and managers. Be sure your LinkedIn pages are up to date, and link back to your website. LinkedIn is a great recruiting tool, and potential partnership opportunity-builder.

REMEMBER — all of these LINKS help drive all of the Search Engine Optimization (Google, Yahoo, Bing, etc.).

Traditional Marketing —

Don’t forget this. While an online campaign, and social media campaign are wonderful, don’t forget about traditional marketing opportunities.

Almost every marketing consultant will tell you that Public Relations is the most effective marketing vehicle from a COST EFFECTIVENESS measure. There’s nothing like an article in local, state or national press — including online press. Yet, so few people know how to get press.

While I could, and have written and taught about Public Relations for decades — and could write a 20 page article on the topic — here are the basics:

1) Don’t just “pitch” to editors. READ their articles. COMMENT on their articles online. Get to KNOW the editors. Give them your customer contacts, etc.

2) Press Releases don’t get covered unless you already have a relationship with the press. And a press kit, while required, again doesn’t get press. It’s much better to draft a Press Release, and email parts of it to specific editors who are interested in the topic. CALL (using a Telephone) editors. Visit editors, take them to lunch, get to know them — it’s all about relationships.

3) Google Ads work, if you use low-cost keywords. So instead of using “peanut butter” for your Google ad, which will cost a fortune, use phrases like “non GMO peanut butter” or “home made peanut butter”. While these phrases get lower hits, they are much higher quality hits to your business.

Written by Mark Juliano (President & CEO of Renaissance Consulting)

Private labeling is a common strategy for many companies — defined as selling other vendors’ products under YOUR company’s brand name. The primary reason is to round out a company’s product line.

Examples:

At Network Equipment Technologies (NET), a manufacturer of telecommunications equipment, we sold Cables from other vendors. Cables were an add-on product that all of our customers needs. Yet, we had no desire to be in the low-tech cable business. We put our NET name on the cables and were able to command a 100% markup because they were a relatively low-price item, and customers knew the cables were certified compatible with our equipment. While at FORE Systems (based in Pittsburgh), we private labeled Video Products that our Internet networking customers wanted for video conferencing.

Currently, I work with ABC Fashions (name changed to protect the company), which sells women’s clothing to a select market of musical performance attire — such as black dresses for concerts, along with accessories. Naturally ABC does not make it’s clothing, but rather works with designers to select appropriate fashions, as well as request modifications to their existing clothing for the performance attire market. ABC uses small designers who don’t have a Brand Name yet, however, ABC is yet building its own brand name — that’s about to change.

ABC will be literally private labeling its clothing with the ABC Fashions name — and its customers now understand that ABC is a quality name in clothing. The company sells using a unique home-fashion-show model where women go to women’s homes to view models wearing their clothing. The company has found that its customer ALSO want to buy Casualwear, separate from its performance attire.

The issues for ABC — and any other company in this position — is that it could keep selling various designer’s clothing OR work with those designers to produce modified versions of their clothing (colors, sizes, and other modifications) under the ABC name — thereby not only promoting ABC’s brand name, but also discouraging its customers from finding the designer themselves and buying direct.

Other Examples

There are millions of similar examples of private labeling. All the major department stores do it. All the major pharmacy companies (i.e. Rite Aid, CVS, etc.) do it — yes, those “pharmacy label” product sitting right next to the major brand versions sold at less than the Name-Brands. But most of those pharmacies don’t actually make those products. Instead they buy them from a no-name quality manufacturer, who specializes in private labeling.

While at Vinomis, we sold Resveratrol (red wine grape) supplements and actually had them made for Vinomis at GNC. As the CEO, I wanted to use GNC because they had all the quality and manufacturing certifications. GNC benefited because they could use their excess manufacturing capabilities, and large quantity discounts to get Vinomis the best prices. And basically, GNC could formulate virtually any supplement in any form we desired (capsules, tablets, liquids, etc.).

Conclusion

Private labeling can and should be a core strategy for virtually any company wanting to expand their product line, and provide additional products for their customer base.

One of the hardest things for a President & CEO to do is properly allocate time. Goodness knows I’ve had these problems at all my startups (FORE Systems, Vinomis, Brava Fashions, Avidia Systems, MediaSite, Haley, etc. etc.). We all seem to spend TOO much time on small firefighting issues, and too little time on the truly important things like: SALES, Marketing, Products, Business Planning, Hiring key employees, Finances, and yes — CUSTOMERS!!!

So what’s a CEO to do?

Here are some suggestions that I’ve found helpful:

1. Keep a ToDo list and get that stuff done. Prioritize each ToDo (including voicemails, emails, etc.) on a 1-3 scale. Make sure all the 1’s are taken care of, do something on the 2’s. And ask yourself if the 3’s are really that important. And if you can assign any of this ToDo list to someone in your company, then do it.

2. Make another ToDo list of Big Picture things with headings like strategy, products, marketing, etc. These are generally very important for real change in an organization, but CEO’s never seem to get them done.

3. Be sure to do SOMETHING on the Big Picture list every day, and keep track. If you’re not making progress — you’re not making progress.

4. Shut your office door! And do the Big Picture things without interruption. Even put a Do Not Disturb sign on your door — for an hour. Really.

5. Have less long, worthless meetings. One company I know actually had their meetings with no chairs standing up, so they were shorter.

I know this all sounds kind of fuzzy, but the Big Picture stuff is truly the important things to change your organization.

Follow

Get every new post delivered to your Inbox.