29 Aug 2017
It’s a competitive bidding process and your company is up against four or five rivals – each of them pulling out all the stops to secure the contract.
It would be a tough contest at the best of times, but if your company is a start-up competing against better established businesses, then it might seem that the odds are stacked against you. You might have a great product, but if the other contenders are offering something equally good while also providing testimonials and well-documented track record of delivering similar projects on time and on budget, the buyer might just play safe. Arguably that’s particularly true when prospective customers are large organisations with highly-structured procurement processes. Often a start-up won’t tick all the preferred boxes.
But there is one potential advantage that a young company might bring to the table, namely, the presence of a CEO and/or founder at the pitch. “A phrase I heard in Silicon Valley was ‘CEO magic'”, says Oyvind Henriksen, co-founder and Chief Executive of UK app-commerce company Poq. “When a CEO is at the table he or she can make promises that in a way that someone else in company wouldn’t be able to do. It gives you an agility.”
Henriksen is recalling Poq’s first major customer win. Invited by House of Fraser to pitch for development work on an Android app, the company – a platform provider – was up against a number of digital agencies. Poq worked on the pitch for a summer and did all the homework necessary to address House of Fraser’s requirements, but Henriksen cites ‘CEO magic’ as one of the factors contributing to the successful pitch.
Up the ladder
But of course, as companies grow things change. Sales directors and account managers are appointed and the founder/CEO who once sat in every meeting delegates to others. Fast forward a few more years and the chances are there’s a different chief executive at the helm and most of the selling work is handled by the sales team. So is there still room for CEO magic?
The passion factor
Well perhaps. Tony Hughes is CEO of Huthwaite International, a training company that specialises in negotiation. As he he sees it, chief executives can carry something special along to the negotiating party. “What a CEO brings is passion and also a sense of trust. They don’t have to refer to anyone else to get a mandate on a decision,” he says.
Arguably, a CEO appointed to run a mature company might not have the same passion as a founder. Or to put it another way, the head of sales or an account manager might be equally as passionate as the CEO. But if passion isn’t a relevant factor, Shawn Thomson, CEO of Sandler Training says there are at least three circumstances when the presence of the man or woman at the top can be instrumental in clinching a deal.
When to get involved
“In the first scenario, the deal might involve the supply of products are solutions that are outside the seller’s normal range,” he says. “The CEO can say immediately whether something is doable ore not,” says Thomson.
Contacts are networking are also a factor. “The CEO might have personal relationships with someone in buying company,” says Thomson.
And then there is the question of industry knowledge. “There are times when a CEO will have a particular skillset or knowledge of an industry,” adds Thomson.
Simon Martin, CEO and founder of creative agencies group, Oliver, agrees that specialist knowledge can be an important factor in having a CEO involved. “Largely, I base it (my involvement) on whether I can deliver value in helping to tailor effective solutions for clients; this is based on the expertise I can offer – I know FMCG and financial services inside out, so I understand clients within this field”, he says.
But if there are advantages to have a CEO present at major meetings, there also potential pitfalls. As Tony Hughes warns, there is a danger that while the chief executive might secure a deal, the head of sales would have scored a better one. “Sales professionals go into a negotiation with the intention of getting as much as they can and giving away as little as possible. There is a risk that a CEO will prioritise the relationship and give too much away.”
There is a tricky balance to strike here. In some cases, giving away ‘too much’ might provide the foundation for a good long-term relationship and that’s something a chief executive may well be considering.
The importance of process
The other main negative, is that sales teams may feel undermined, if their CEO sits on too many meetings. Thomson says if a chief executive is to be involved, there should be a process and a strategy. “Part of that strategy is deciding who to use and at what time,” he says. In other words, it should be agreed in advance when the CEO is to be used.
Tony Hughes agrees. “The CEO should be a part of a team. Not someone who just walks in,” he says. This kind of teamwork reduces the risk of sales staff feeling undermined.
CEOs of large company’s are not free agents. They have boards, shareholders and regulators to answer to. Nevertheless, there are always times when a sprinkling of CEO magic doesn’t go amiss.