Stuck In Neutral V2 4-27-09

problems – markets - responsible

Are Your Revenues Stuck in Neutral? How to Get Out of the Flat Revenue Rut

DevelopmentCorporate

problems – markets - responsible

Are Your Revenues Stuck in Neutral? How to Get Out of the Flat Revenue Rut Does this chart look uncomfortably familiar?

Things You–Have Tried to Change the Trend . . problems markets - responsible √ Hired and Fired 3 VPs of Sales √ Invested $750,000 in a Website Redesign √ Conducted 293 Email Campaigns to 1,329,865 Prospects √ Spent $1.5 Million Re-Branding & Re-Positioning the Company √ Got Rid of Field Sales and Went Entirely to Tele-Sales √ Spent $825,000 to Get Into a Gartner Magic Quadrant √ Built ‘Son of Fusion’ and Wondered Why Nobody Upgraded √ Got Rid of Tele-Sales and Hired Elephant Killers Yourand Revenues Stuck in Neutral? √ Opened an Office inAre London Hong Kong √ Implemented SalesForce.com Get ofNobody the FlatCame Revenue √ Channel ProgramHow – Youto Built It .Out . . But . . . Rut Does chart look uncomfortably √ Hiredthis Social Media Wonk & Launched onfamiliar? Twitter, Facebook . . .

DevelopmentCorporate

The Results, Unfortunately Were All The Same

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible Pirates 1993-2008 Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

Won 67 68 67 67 72 75 72 62 69 78 69 79 73 58 53 75

Lost 95 94 95 95 89 87 89 100 93 83 93 83 89 86 61 87

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible

There are no magic bullets when it comes to reversing long term flat to declining revenue trends for tech companies. Companies get ‘stuck in neutral’ for a reason. Most of the time it’s a market problem versus a ‘people’ problem. Breaking out of the rut, however, takes courage and decisive action. The balance of this presentation presents an overview of three strategies your company could consider. There will be follow on presentations that explore each strategy in significant detail.

It’s for Some Significant Change After All These Years Your Team Forgotten How to Win? problems – Time markets -Has responsible

The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew

Technological change is like an axe in the hands of a pathological criminal.

Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible “Shift” Your Way Out of Neutral in 3 Steps

1st Gear

2nd Gear

3rd Gear

Optimize Existing Revenues

Buy a Revenue Wedge

Invest in Long Term Growth

After All These Years -Has Your Team Forgotten How to Win? problems – 1. markets responsible Optimize Existing Revenues • It’s never popular but it’s the easiest place to start. Optimization is a nice term for programs to maximize revenues out of existing customers • Some Classic Revenue Optimization Programs • Billing Audits – Are all of your customers setup for the correct billing plans? • Maintenance Price Increases – When was the last time you raised maintenance prices? • Price List Policy Enforcement – Do you sell add-on products? Do you require customers to keep maintenance on the base product to get maintenance on the add-on product? • Test/Disaster Recovery Licenses – Do you sell test/DR licenses • ‘Bottom Dweller’ Programs -- Convert low value month to month customers to prepaid annual subscriptions

Properly executed revenue optimization programs can generate 2% to 4% year over year increases in revenues

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible 2. Buy a Revenue Wedge • Lowest risk, highest probability strategy to grow revenues year-over-year is to acquire a small, but complementary business. • Target companies that are about 3% to 7% of your total revenues • Small companies limit risk to your overall business • Can typically be financed from cash reserves, untapped credit lines, and earn outs • An acquisition of this size will ensure that your firm can post some year-over-year growth • Key requirements • Target company’s customer base is a close match to your firm’s target market (High potential to cross sell your offerings to them) • Some opportunity for profit improvement through consolidation of overhead functions (HR, Accounting, I.T., etc.)

A ‘Wedge’ acquisition is not intended to solve revenue growth problems. It buys time and provides cash flow for your true revenue growth initiatives

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible 3. Invest in Growth • Using a portion of the profits generated from the incremental revenues from revenue optimization programs and a wedge acquisition to fund your company’s version of a Y-Combinator / SeedPhase / Startup Riot • Create a local/regional competition where entrepreneurs pitch product/service ideas to create products / services for your company’s existing / prospective customer base • Reach out to local entrepreneurs • Allow selected senior employees from your firm to participate • Focus on ‘capital-light’ solutions that leverage Web 2.0 technologies / principles • Pick 3 opportunities to ‘invest in’ • $50K to $75K initial funding • 3 months to get to public beta stage • Host the teams in your facilities to reduce costs

Companies get ‘Stuck in Neutral’ because traditional product management doesn’t generate break through ideas. A fundamentally new approach is needed

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible 3. Invest in Growth • Give the founders attractive compensation • 15% of total revenues • 15% of operating profit • Equity in your overall company if revenues >$5 million in 18 months • That’s a better deal than they would ever get from VCs who would cram down their ownership to <15% in three rounds of funding •Huge benefits for your company: • Great publicity and traction with analysts, press, investors, existing and prospective customers • Re-establish the entrepreneurial passion that built your company to begin with • Real chance to leverage modern Web 2.0 technologies in a capital-light manner to bring organic revenue growth back to your company

Companies get ‘Stuck in Neutral’ because traditional product management doesn’t generate break through ideas. A fundamentally new approach is needed

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible Cultural Resistance

When a company is ‘Stuck In Neutral’ it is difficult for everyone – employees, managers, executives, investors, and even customers. Everyone tries hard, but at the end of the day revenues, profits, and valuations are flat to declining. Change is hard. People perceive admitting that the company is ‘Stuck in Neutral’ is a threat to reputations and their continued employment. Politics versus entrepreneurial passions rules the day. If you want to get out of the rut you are in you will have to lead your team on a journey they probably do not want to take.

After All These Years -Has Your Team Forgotten How to Win? problems – markets responsible Break Some Glass . . .

If your firm is ‘Stuck In Neutral’ it’s been there for a while. While the business climate is simply horrible now, eventually it will turn and the economy will recover. When the recovery begins organizations will have funds to invest in solutions to improve their business. If you start executing the three strategies of Optimizing Revenues, Buying a Wedge, and Investing in Growth you can get out of neutral and be positioned to participate in the revitalized economy