Franchising/Licensing

Franchising or Licensing: This is basically defined as someone who wants to pay you to do things your way. Franchising is beneficial if your process can be replicated, your firm is profitable, your services are needed in a different location, you have (or could develop) a strong marketing program, detailed operating procedures and a strong training program.

As an Entrepreneur, Have You Lost Your Authentic Swing?

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Businessman ThinkingI love the 2000 movie The Legend of Bagger Vance.

Remember it? Directed by Robert Redford, the movie was based on Steven Pressfield’s 1995 book with the same name. The actors include luminaries Jack Lemmon, Will Smith, Charlize Theron and Matt Damon. This was Lemmon’s final movie which makes it even more important to many people.

In 1931 (during the depths of the Great Depression), the City of Savannah, GA sponsors an exhibition golf tournament with great golfers Bobby Jones, Walter Hagan and the town’s golf prodigy and hero, Rannulph Junuh.

As he caddies, wise Bagger Vance (played by Will Smith) provides sage advice to help Junuh recapture his “authentic swing.” They talked very little about the fairway, sand traps or greens. They talked about post-traumatic stress, the meaning of life, guilt, regret, a broken heart, giving up, accepting responsibility and hiding. You know…light conversation (lol).

As many golfers of today can tell you, finding one’s authentic swing in golf is not just a matter of repetition. Golf is a mental game as much as it is a physical one. When a golfer’s muscles are tight from being angry at work, his/her slice or hook returns on the golf course. When a golfer’s optimism or confidence is compromised, the short game on the green becomes another nightmare. An executive’s capacity to make great strategic decisions is another version of one’s authentic swing.

Presidents of privately held mid-sized companies often don’t have time to play golf or have another similar outlet that offers feedback on whether the president is still centered. It is impossible to maintain your authentic swing when you aren’t centered. Often the all-important feedback comes in the form of poor business results. The president’s loss of his/her authentic swing is taken out on the business.

Sometimes executives just keep showing up when he/she knows he/she is “just not right with the world”. Continuing to show up is important, but just going through the motions can solidify bad decisions (a hook or a slice). Finding what keeps you centered is worth the effort. An executive coach could be your Bagger Vance.

It Pays to Help Your Licensees Grow Their Businesses

Licensees Grow Their BusinessIn most licensee arrangements, companies pay for access to intellectual property. Plus, a percentage of licensee revenues is often paid to the corporation as client contracts are signed. Licensees are typically (but not always) assigned geographic territories, and long-time policies about territory infringement prevent conflicts.

Successful license-driven corporations don’t stop there.

Corporations that had accepted just about anyone in the early years become increasingly more selective about which companies will be added to their family of licensees as time goes by.

Policies about territorial infringement get established to ensure fairness, reduce confusion and prevent conflicts.

As independent businesses, licensees make their own decisions regarding how to operate their businesses (hiring, firing, compensation). Unlike franchisees, there is no corporate mandated business model. Licensees are not required to run their businesses using the corporation’s forms or budgets.

Recognizing the value of education, many successful corporations provide their licensees easy access to conferences, seminars, webinars, teleseminars and books. Just because a licensee owns a business doesn’t mean he/she can understand his/her own profit/loss statement, recruit and select the best job candidates, evaluate software, create a marketing plan, attract new customers or sell additional services to existing customers.

License-driven corporations may not have the responsibility and the legal risks associated with how their licensees run their businesses, but the successful ones have very effective marketing (especially a great online presence), keep investing in product development and provide business operation and sales training for their licensees.

Look at Growth Strategies Through a Stronger Lens

Signing Agreement_ING

During a breakout session on “Choosing Business Models” at the IMC GROW! Conference in Las Vegas, it became apparent that several attendees already utilize or are considering strategic alliances and/or licensing deals. I’m more of an optimist than a pessimist, but I did find myself calling up sad stories and providing warnings.

Licensing can be a wonderful idea for a service firm that has solid content. Other professionals who don’t have great content but love to speak, train, consult, or coach pay a reasonable fee for your permission to utilize your content. You can provide training and install some form of quality assurance program to protect the quality and your company’s reputation.

However, the problem is that most people who pay licensing fees to use someone else’s material are not business-minded or entrepreneurial. Before you know it, licensees are calling you to ask for referrals of clients or assistance with selling.

I like reviewing any licensing proposal through the lens of franchising. You may still choose to only license your content, but looking at geographic considerations, assigning a value to your marketing, reviewing the assumptions behind business management so everyone can make some money, thinking through legal protection for everyone involved, clarifying responsibilities, etc. can strengthen a licensing arrangement. I’ve seen people opt for franchising once they look through that stricter lens.

The same thing happens when a strategic alliance is being proposed. What would prevent the participants from fully committing to a more formal joint venture? Those issues are what destroy so many strategic alliances.

Various Roles for the CFO During Real Strategic Planning (Part Two)

Having helped over 800 clients do real strategic planning, I have had the privilege to work with lots of fabulous CFOs who are a competitive advantage for their companies.  These CFOs are open-minded, constructive, and instructive.   

Because strategic planning should be tailored for each unique company, the role of the CFO changes too.

It’s a joy to do strategic planning with companies that benefit from open minded CFOs. Instead of jumping to conclusions and shutting down discussion, effective CFOs help executives consider expanded options.  The CFO can also ask if they should consider approaches like acquisitions, private investors, an IPO, or franchising to lift off a stubborn plateau, compete more effectively, penetrate a new market, develop exciting products, or pick up speed.  Feasibility analysis and determining optimum pacing for those strategies comes soon enough.

Recently, we helped a client retain the services of an interim CFO. This client was experiencing several behavioral symptoms (blaming, silos, passive aggressive communication, and avoidance) that would sabotage successful implementation of any strategic plan. At the time, we were utilizing our Synthesis ™approach to strategic planning that features a teambuilding process running parallel to the strategic planning sessions. The Controller of this family owned business was an in law who contributed to the continuation of dysfunctional behavior.  They benefited from the Interim CFO’s objective questions, capacity to imagine success, and expansive thinking.  I wasn’t the only person who could envision growth and emphasize leveraging their strengths.

It’s not surprising that the majority of INC 500 companies have CFOs who are optimizers.  They think of ways to find more money, know how to squeeze cash flow, understand currency rates, and have established strong relationships with external resources.  I’ve noticed that the CEOs of highly successful midsized companies, who are guests on my syndicated weekly peer to peer talk show, frequently brag about their visionary CFOs. (Visit www.GrowthStrategistShow.com to access the archive of 300+ interviews.)

Recently, a client needed our Catalytic™ approach to strategic planning which includes a problem solving process that runs parallel to strategic planning.  They had tolerated the chronic recurring problem of generating inadequate gross profit from their primary service way too long.  The CFO played a key role in the success of both the problem solving and the strategic planning.  She dove in and captured the necessary data, provided reports to help the account managers and department head, and participated in executive level decision making.  Compiling financial data, creating reports, and participating in decisions are central to the CFO role, but you would be mistaken if you assume that all CFOs would have risen to the occasion as well as she did.

There has been great progress, but unfortunately…fabulous, optimizing, open minded CFOs are still not the norm. Too often, CFOs play the role of “naysayer” during strategic planning.  The Marketing VP starts to talk about new products or expanded markets and the CFO is the first person to say why the company shouldn’t even consider expansion.  The CIO shares the observation that the company will need to “go to the cloud” to serve clients better and/or reduce downtime and the wet blanket CFO asks about cost too soon.  The Sales VP shares information about how/why competitors are landing larger accounts and the grouchy CFO complains about the current high cost of account acquisition.  Or the negative CFO becomes condescending when the HR Director suggests that the company may need more career advancement opportunities or increase compensation formulas.  The lingering period of uncertainty that has followed the 2008 recession doesn’t help.

Usually such pessimism develops in CFOs when:

  • they are really Controllers and not trained to think strategically,
  • their informed advice is discounted too often,
  • they are overburdened with too much day to day accounting so their minds are preoccupied with details and reports, or
  • the CEO/CFO relationships push the CFOs into the negative role.

A company clearly increases its growth potential when the CFO addresses the causes of any negativity before the next round of real strategic planning should start.  Having a bright, open minded, optimizing, instructive, constructive CFO is a competitive advantage for any company.          

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.    

Don’t Get Pushed Around During Negotiations If You are Temporarily Short on Cash, Time or Energy

A friend of mine, Jane, owns a service firm that really takes care of its clients. She was starting to feel the strain of high labor-related costs and overdependence on a few key people, so she invested in “productizing.” You know what I mean. She protected her intellectual property (IP), turned their process into a system, and obtained outside assistance from a merchandising company to package it all. Maybe you can imagine how she felt. Jane had invested a great deal of time and money and was now feeling rather low on money, energy and time.

I found myself speaking up because it seemed like Jane was giving in to more and more demands from prospective licensees and strategic alliance partners.  We have noticed that the same thing often happens to owners of companies who are negotiating with their first franchisees or joint venture partners.

It pays to do a little research about the offers being made by comparable companies.  When you review materials distributed at franchise expo exhibits you quickly see the value assigned to IP, great product, systems, procedures, marketing, expertise, and reputation.  It is reasonable to expect licensees, strategic alliance and joint venture partners, or franchisees to be entrepreneurial enough to do their part and share the risk.

I couldn’t help but wonder if the people Jane’s been negotiating with are trying to take advantage of the fact that she wishes that she had more cash, time, and energy.  Folks who take advantage and would demand more and more and more during initial negotiations probably won’t be win/win partners later.

When Jane got a good night’s sleep and took another look at her value proposition, she moved beyond being embarrassed that she is temporarily low on cash, time, and energy.  A FAIR deal wouldn’t involve her putting up more money anyway!

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Would Licensing Cannibalize Your Sales?

If you have an established service firm, you undoubtedly realize that you need to invest time and money to create a system (maybe even proprietary software).  It’s part of the ongoing process to be less labor-intensive, become more efficient, reduce training costs, and improve quality and consistency.

Once you do that, inevitably, someone in your firm comes up with the bright idea that your company could have another revenue stream if you license the use of your proprietary software or system to smaller niche businesses. You can’t reach every customer out there and the licensees will pay you for the privilege of increasing visibility of your product/system/ software; which strengthens your positioning as an industry leader.  But you pause because the licensees could actually become direct competitors to you and cannibalize your results.

Some business owners freeze at this point and pull back from the licensing option.  It pays to not freeze. A sales executive and/or informed contract attorney can create territories and spell out the rules to maintain the WIN/WIN situation.

Plus, here’s something else to think about. Could the licensees later become candidates for acquisition when you are ready to expand geographically or accelerate growth? You would be familiar with one another.  Your licensees will have experience utilizing your system which would reduce post acquisition “learning curve” costs. Your firm could represent a marvelous exit strategy for hard working Baby Boomers who enjoyed being your licensees.

For more information about achieving synergies between licensing, acquisition, and strategic alliance strategies, go to www.GrowthStrategistShow.com to download my (date) interview with Robert Digby, CEO of PAY CHOICE.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, talk show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability™.   Ambler is wrapping up her 7th year hosting a weekly peer-to-peer-to-peer on line talk show at www.Business.VoiceAmerica.com and www.growthstrategistshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. Family owned businesses are being emphasized in 2011. Ambler is in the process of launching her 8th enterprise. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com .      

BEFORE You JUMP into a Joint Venture, a Strategic Alliance, a Franchise, Equity Deals, a Roll Up, an ESOP…

 

Recently, I’ve noticed more and more executives of midsized companies JUMPING into strategy implementation.

It’s too easy to fall in love with one strategy over another because you’ve heard a peer share a success story. “Hey, we could do a strategic alliance. George did it.”  Well written articles or webinars with great case studies can convert some people into raving fans of joint ventures or roll ups.  One of our clients became enamored with the idea of franchising his company after his wife was hired by a successful franchise.

The economy has created uncertainty.  Bright ambitious executives (perhaps you) feel like caged cats and are “itchy” for a change. It becomes very tempting to JUMP right into a strategy.  At least that way, something is happening, right?  Well, disruption might be happening that way, but your team will not understand the rationale behind the strategy you have jumped into. You lose credibility as a leader.  And successful implementation is risked. Some folks are JUMPING into strategies when they don’t know the differences between them, what each really involves, and the pros of cons of each. And then they are surprised when bankers are still reluctant to finance them.

Instead of jumping right into a strategy, this would be a great time to involve your executive team. Everyone could benefit from some concentrated learning.  Your controller could be asked to analyze the costs associated with strategies like franchising, roll ups, joint ventures, etc.  Your VP Business Development could be asked to analyze which approaches are being used in your industry and why.  Your General Manager of VP Operations could study pacing and look at what is involved with each strategy.  Everyone would be smarter and by the time you and your team select a growth strategy you will all have a much better sense of WHY it was selected.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called The Growth Strategist™. She has won over two dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across four recessions.  Her midsized B-to-B service, technology and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search, etc.) help midsized companies in Achieving Accelerated Growth With Sustained Profitability®. Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer online radio program Growth Strategist Radio Show, at www.GrowthStrategistRadioShow.com, that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy of the week. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Strategy: Prepare Your Business to Become a Franchise

Preparing a business to become a franchise is a wakeup call. You start looking at your business from the outside in rather than be so lost in the weeds from within.  Asking questions like “How much net profit would a prospective franchisee need to be interested in investing” helps you assess how much net profit YOU should expect anyway.  Thinking through your marketing program so it would be effective enough to attract high quality franchisees makes you hold your marketing campaigns more accountable. Revamping your training programs and procedure manuals so you are ready to exhibit at a franchise tradeshow leads to clarified roles, accountability, and improved results for your existing employees.  And knowing that franchisees would be emulating the behavior of your key employees cues you to address mediocre performance that you may have been tolerating for several years.

 

Over the past year or so, my growth strategy consulting firm has been working with an entrepreneur who has a great concept to update their company, leverage new technology, and provide a fabulous experience for customers.  To scale the business, they may end up with company owned locations (satellites), boutiques (twigs instead of branches), on line boutiques, or franchise owned locations. Just the possibility of franchising has helped them improve.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called The Growth Strategist™. She has won over two dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across four recessions.  Her midsized B-to-B service, technology and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search, etc.) help midsized companies in Achieving Accelerated Growth With Sustained Profitability®. Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer online radio program at www.business.voiceamerica.com or www.GrowthStrategistRadioShow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

It’s Time to Address Two Expensive Executive Behaviors

If you read my weekly blogs, you undoubtedly also know that I host a weekly on-line radio show called The Growth Strategist™. I’m in my seventh year hosting it and just LOVE hearing about what people have done to make growth strategies like acquisitions, franchising, market expansion, etc really work.  My guests are all Presidents/CEOs of midsized companies (typically $20 -200Mil/yr) so they are all bright and experienced. Most convey enthusiasm and are articulate.  We are coming up on our 300th show soon (YEAH!) plus I’ve provided strategic guidance to over 800 consulting clients over the years.  The point is…by now I can hear some distinctive patterns. Some of the patterns may not be surprising.  But in a way, if they are so predictable, wouldn’t you think that more executives would be addressing them by now?

For example: When I am rehearsing with the President/CEO of a family-owned business, I usually get candid responses to questions about target markets, primary customers, and key products.

Don’t get ahead of me here.  Of course, I can’t start with questions about succession, exit strategies, or executive compensation.  Heck…an executive doesn’t have to be running a family owned business to be reluctant to talk about all of that.

Take a step back from all of that. The answers from executives of family owned businesses seem strained when the topics of strategic alliances, joint ventures, or acquisitions come up. The implication is that internal relationship issues make negotiations with outside entities more difficult.  These days, that fact would certainly turn “family owned” into a handicap because customer expectations are going up and up.  The cost of trying to do everything yourself is becoming prohibitive.  Plus the world is getting smaller and smaller.  Today, a family must proactively address relationship issues that slow down strategic analysis or decision-making.  It sure comes across in media interviews. The radio guests who attract new business opportunities as a result of appearing on my show have conveyed openness, clarity of direction, a capacity to interact with a wide range of people, and an understanding of how deals are struck.

I’ve also noticed that most of the female executives avoid directly answering questions about strategy. I repeat, my guests are all Presidents/CEOs of midsized companies. These are accomplished executives!  I’ve been amazed how many times I have had to encourage (no, plead) with the female guests to share the logic behind major decisions like acquisitions, new products, or geographic expansion. Several have been reluctant to directly respond to the straight forward question about their gross revenue… even though the numbers are plastered all over press releases and resources on the Internet.  And when these reluctant female executives do share their gross revenue, they provide too much explanation. It sounds almost like an apology.  Some of them are running $Bil businesses!  Why on earth are they apologizing to anyone?

There are undoubtedly several understandable reasons for the reticence to just talk, but frankly, my experience as a talk show host has given me new insight about why so many corporations have been reluctant to appoint successful women business owners to their corporate boards. The major search firms who are looking for board members screen shows like mine. They must be concluding that the female guests CAN’T think strategically or CAN’T keep up with a high level discussion. That’s very sad.

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability.™ Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line radio program at www.Business.VoiceAmerica.com and www.growthstrategistradioshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. Family owned businesses will be emphasized in 2011. Ambler can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com

It Is Not a Good Sign If You Resist Even Considering Franchising

I fess up.  It took me a few years, but I finally noticed that the majority of business owners are scared of franchising.  That is an amazing fact when you consider the high success rate of franchises.

The reluctance could be entrepreneurs’ classic aversion to attorneys and accountants.  To turn your business into a franchise…yep…you’ll need the assistance of a CPA and a franchise attorney, but that is for your protection.  And even though their fees seem high at first, the amount of money that a good franchise attorney saves you in time, law suits, and mistakes turns their fee into a moot point.

The reluctance could be entrepreneurs’ classic aversion to committing to standard operating procedures (SOPs).  Yep…if you turn your business into a franchise, you’ll need clear procedures and a training program.  Even though most entrepreneurs don’t enjoy writing SOP manuals, fortunately there are great people available who would welcome the opportunity to have that job, especially during a slow economy. If your business is going to grow beyond an “incorporated career”, it will need talent within the operations area.

The reluctance could be entrepreneurs’ classic aversion to obtaining assistance in marketing. Yep…if you turn your business into a franchise, you’ll need insistent, consistent, persistent marketing.  But don’t we all need that if we want to grow our companies?

The reluctance could be entrepreneurs’ classic aversion to committing to the consistent generation of net profit. Yep…if you turn your business into a franchise, you’ll need to have a profitable business model.  Why else would someone want to follow you?

The reluctance could be entrepreneurs’ classic aversion to having people around them who may have more experience, may ask tough questions, want to hold the business accountable, have ideas and loyal customers, and deserve to be acknowledged (and not just the lead entrepreneur).  Yep…if you turn your business into a franchise, you’ll need to excel at attracting and retaining top talent, brag about them more than yourself, and be excited about growing people. But isn’t that what business growth always requires?

Franchising isn’t for everyone.  I get that.  But I can’t help but wonder if you wouldn’t even consider the option of franchising (or at least licensing), do you really want to grow your business?  Think about it.  With franchising, someone pays you to do things your way! What a concept!

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