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In his column, Mike talked about how important it is to have a vision that is clear to everyone in the company. It’s critical that your employees understand what is expected of them and how you want them to behave internally (with coworkers and management) and and externally (with your prospects, customers, and partners). At OpenView, we call those things “Values,” which go along with a company’s Mission and Vision (for more on that, click here).

Mike also wrote about one of his core strategies, which I happen to be a big fan of and have used successfully throughout my career. I referred to that strategy in a previous blog post, which I wrote after reading Mike’s thoughts on it. It was titled “UPOD: The Quickest Way to Boost Customer Satisfaction,” and you can read more about it here.

But the crux of Mike’s article (something that every founder and CEO who wants to be successful needs to understand and become comfortable with) was in the title: “Fire These Employees to Grow Your Business”

One of the things that I remind the CEOs of OpenView’s portfolio companies most often is that their people are the only strategic asset they have. When you employ the wrong ones, they can kill your company and your dreams. So, if you want to build a great company, then you should check out Mike’s article. The lesson he teaches is one that CEOs are never too old — or too young — to learn.

All the best!

G

Earlier today I stumbled upon the following pin from C.C. Chapman, founder of Digital Dads and co-author of Content Rules:

Image provided by: Pinterest

C.C. brings up an important point that is clearly often overlooked: NEVER blindly pitch your product or service without doing some critical research.  Or be aware that you will get blasted with an “Idiots Who Pitch Me” meme. Diana could have really simply prevented this from happening if she took literally 60 seconds to figure out who C.C. is (like the fact that he is not a new mom).

In order to stay in the clear, here are some key tips to follow when reaching out to the press or your key influencers:

• Connect on the main social channels like Twitter, LinkedIn, Facebook, and Google+ in order to gain some insight into the personality of your influencer.  Social media is a great channel for learning about the human.
• Subscribe to your target’s blog or RSS feeds so that you can easily stay up to date on what your influencer is thinking and writing about.
• Read their content.  Once you’re subscribed, there are no excuses.  Take at least 15-20 minutes a day to review your influencers’ blogs so that you can intelligently talk with them about their work.
• Stay away from canned emails when you begin your outreach.  No matter how much you try to personalize them, they will likely still come across as canned.  And you may make a mistake or forget to customize all of the necessary fields in the email.
• Always proofread before pressing send to ensure you are using the right name and there are no embarrassing misspellings or grammatical errors

If you need more tips on getting your influencers to tune in and pay attention to you, please read my blog featuring 22 tips on pitching from the receiving end – bloggers and reporters!

Sound off, have you ever received a phony pitch?  Or if you accidentally sent one, how were you able to recover?

The first order of business is of course to create the job description.  Discuss the role internally and with the key stakeholders.  The best person to create the job description is not necessarily Human Resources!  You’ll want to involve the direct manager of this person, who is generally also the hiring manager, and those who have held this role themselves.  Be sure to take the time to ask yourself and others: “Why are we making this hire?”

You’ll also want to understand the compensation range that aligns with your own organization.  It’s ideal to use external compensation analysis tools (we use Payscale at OpenView) to understand market rates, but it’s also important to conduct ongoing data points as you begin your search.  As you interview, what are you seeing in the marketplace?   What did candidates earn in previous positions?  You’ll want to get everyone on the same page.  Who will approve this offer?  Make sure that they are aware of this data and you get their approval for the range you hope to offer before you begin discussing it with potential hires.

Define your target list.  Who are your competitors?  What are the complimentary solutions?  If you are reaching a stage in the growth of your organization where you would like to reach new market segments, it could be an opportune time to begin hiring employees who have diverse backgrounds in the segments you are seeking to expand into. Of course, I’ve also written a blog in the past which argued that you shouldn’t necessarily focus on recruiting from your competitors.  So, you should also consider researching and recruiting from “like” industries.

You’ll need to consider your geographic constraints (or on an optimistic note, your opportunities!).  Are you able to relocate someone for this position?  If so, what type of package could you offer?  If relocation is not possible, consider the potential of having this person in a remote location.  At the expansion stage, you can’t afford to make the mistake of a wrong hire.  Weigh the pros and cons of hiring the best talent in a location outside of your company headquarters.

Finally, review your recruiting resources.  Where will you post this position?  Are there posting sites that are specific to your industry or the role?  For example, if you are looking for a software developer, you’ll want to look at Dice, StackOverflow, and User Groups.  Beyond the job posting, you’ll want to engage in an active search and headhunt candidates.  Will you use LinkedIn (most likely!)?  Who in your network may have some leads?  Review your target list once more and consider what resources will allow you to truly reach these candidates.

Of course, once you’re here, you’re ready to start searching and screening candidates.  Create a set list of interview questions, develop a scorecard, and determine your interview team.

Do you have a process in place within your own organization for setting a recruitment strategy?  What has been the greatest challenge to getting started?

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In Ben Horowitz’s influential article on Peacetime CEO/Wartime CEO, he quoted a very memorable line from Andy Grove, the legendary Intel CEO, who chastised a subordinate who came late for a meeting: “All I have in this world is time, and you are wasting my time.” Time is the CEO’s single most important and yet most easily wasted resource.

Indeed, even though the CEO is the head of the whole organization and is mostly free to delegate or re-allocate resources at will, he really has very little room to maneuver when the resource constraints, goals and myriad demands of the market are taken into account. This is even more prominent in a software technology company’s growth stage, the unique period when the company takes its proven product and economic model to scale. The operational challenges associated with the transformation can be overwhelming because they permeate all aspects of the organization: people and team development, corporate governance, financial management, continued product innovation and, most importantly, sales and marketing optimization.

The result is that the only resource that the CEO has full and almost complete control over is his/her own time. It is extremely precious, in part, because it is so scarce and is the least scalable of all resources. That’s true not only for the CEO, but for the whole organization and, by extension, its investors, customers, and partners.

The CEO’s limited time is absorbed by everything from:

• Internal meetings with other executives for product and market strategy planning
• Building and developing the management team
• Rallying the rank and file employees
• Quarterly meetings
• Meeting with customers and prospects
• Negotiating with partners
• Presenting the company’s vision in the markets
• Raising funds for growth and operations
• Exploring strategic with potential acquirers and acquisition targets

There is clearly not enough time in anyone’s world to make all of those things happen, yet we typically expect CEOs to lead and accomplish them all.

So, while it might sound preposterous, as an employee, a stakeholder, a customer or a partner you should be asking, “Mr. CEO, what are you doing with your time, our most precious resource?” That question is not meant to challenge the CEO nor be directive to what the CEO knows best about, but rather it is a rhetorical inquiry. It’s important for everyone to understand the CEO’s time and how it is spent, employing the same overall resource focus and optimization challenge that the organization needs to solve to grow and prosper.

There is no prescriptive model for how the CEO should maximize his or her time, because each company has a unique set of challenges and opportunities that calls for a unique combination of activities. Horowitz’s thoughts on Wartime vs. Peacetime CEO draws a good contrast for the CEO’s focus in the comfortable “peacetime” and the growing “wartime” periods.

A.G. Lafley’s classic article for the Harvard Business Review titled “What only the CEO can do?” highlights the activities that the enterprise CEO can ill afford to delegate or ignore, namely connecting the inside and the outside via the four key activities:

1. Defining the most important outside constituency
2. Deciding the business the organization is in
3. Balancing the present and the future
4. Shaping values and standards

What does of all this mean for an effective CEO’s day-to-day schedule? Are meetings with the team more important than meetings with prospective customers? And when should the CEO be inward looking, focused on developing the organization or its future products, as opposed to bringing the vision to the market?

A recent article on the Wall Street Journal titled “Where is the Boss? Trapped in meetings” cites the “Executive Time Use Project,” where professors at HBS and the London School of Economics studied the daily schedules of CEOs to a minute level of detail. The study found that most CEOs are spending one third of their time – about 18 hours per week – in meetings, while only spending about about six hours working alone. Much time is also spent traveling (no doubt to some of the meetings) and on telephone calls and conference calls (another form of meeting). It is not surprising that CEOs all recognize the mismatch and almost universally “pine for more solo time to think and strategize.” But they also find it difficult to break out of the typical mold and its expectations.

A related study of CEOs’ meetings found that external meetings are not correlated with better performance, while internal meetings are.The same article also quotes CEOs who appear to have more control of their time, noting that they either spend less time in meetings, a lot of time working alone, or delegate time in short, iterative “touchpoints” rather than formal meetings. The research insights and the anecdotal evidence points to the importance of time management for CEOs and hopefully provides some ideas for CEOs who want to strike a better time balance. Doing that would allow them to better steer and support the organization’s growth and success.

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I continue to be amazed by the number of entrepreneurs that can show a relative lack of sophistication or business acumen in a conversation until the topic of their business valuation comes up. Once it gets to that point, they can rattle off every Andreesen Horowitz deal and how “X” business was acquired at 10x revenue.

For whatever reason, the math always seems to magically work out to a pre-money valuation of around $100 million. Indeed, there are numerous expansion (and some early stage) software companies that have raised outside capital at $100mm+ valuations, but I thought it made sense to share my (and many investors) thought process on valuation.

First, it’s important to note that in most other areas of investing, businesses are valued off of some proxy for cash flow (EBITDA, EBIT, etc). I point this out because I think some people lose sense of the fact that valuing a business as a multiple of revenue is, to begin with, generous.

It should also be noted that valuation is more art than science, or perhaps a more appropriate statement is that valuing a business is art rooted in science. Very simply, I like to take an average of a basket of publicly traded company EV/Revenue multiples, then apply a 25-50% illiquid discount and start there. On top of this, I’ll look at the revenue components and value each of those individually to get a sum of the parts total valuation.

So, for example, if a SaaS business is doing $15mm in total revenues, but $10mm of that is recurring subscription revenue, $2.5mm is professional services, and $2.5mm is maintenance, I might say that recurring part of the revenue stream is valued at 3x revenue, the professional services component is valued at 1x revenue, and the maintenance component is valued at 1x revenue, yielding a total valuation of $35mm. On top of all that we may layer a further discount or premium based on perception of team, risk, market, etc.

The bottom line is that this is one iteration out of many for how a business can be valued and should help explain where a VC may start a valuation conversation for an expansion stage software company.