Chuck Bidwell, Bidwell Management Resoures

02/15/2022

New Board Members Bring the Capital BUT “Opinions” Impact the Success of the Company:

New Board Members Bring the Capital BUT “Opinions” Impact the Success of the Company

Enterprise Value Accelerator
(Blending Marketing and Finance)
Story #6
(6-minute read)

Click to read the story:

Enterprise Value Accelerator (Blending Marketing and Finance) Story #6

11/11/2021

Enterprise Value Accelerator
(Blending Marketing and Finance)
(Story #5)
5-minute read (click the link below to read)

Enterprise Value Accelerator (Blending Marketing and Finance) (Story #5)

09/22/2021

COVID Creates Big Demand – Customers Buying for Their Homes

Employees Laid Off. Factory Shut Down – Will Orders Be Canceled?

Enterprise Value Accelerator

(Blending Marketing and Finance)

Story #2

(5-minute read)

Our factory is in a college town surrounded by Colorado ranch country. Employees drive pickups decorated with American flags and rifles in the rear window; others have Biden stickers on their bumpers. It is March 2020, orders for our existing product lines have stopped. Employees are laid off. With a huge advertising campaign, we introduce a new product we have working on for three years. The consumer research looks great and engineering is done. Its success will make or break the company.

I drive into the lot and park between Betty’s Volkswagen Microbus and Frank’s Ford F-150. Betty, our Customer Service Manager, sees my car and runs to the parking lot wearing a brightly colored “Biden” face mask and waving a fist full of papers. She jumps and skips all the way to my car yelling,

“25 NEW ORDERS THIS MORNING”!!



We run to her cluttered desk, and Betty shows me the details. COVID has moved families from gyms, swimming clubs, and sports centers to their homes. Everyone seems to be ordering our new product. The sales budget for the 31 days of March is 75 units. New orders for just the first weekend of March exceeded 100 units. The new product is a winner.

We have to ship quickly or the orders will be canceled and we will get a bad name in social media. Betty and I look across the factory floor, we have plenty of raw materials and parts, but only three of us at work. I can operate the fork lift, Betty can handle the shipping, and Frank, our Production Manager, can plan production scheduling.

The solution is in sight. We need to bring back 15 employees, make the product, and ship the product before orders are canceled.

“No problem!” I say to Betty and Frank, the three of us will get on the phone and invite all employees to a meeting on the factory front lawn tomorrow at 9 AM. Tell them we will have coffee and donuts. Oh yes, and have them wear face masks.

We start making calls and then the BIG PROBLEM–All 15 laid off employees basically say the same thing –

“NO! NO! NO! IT WILL KILL US. I CAN’T WORK WITH THEM.”

I did not see it coming. Employees I had known and worked with are scared, angry, confused, and unsure of how to proceed.



Pete said, “COVID-19 is a hoax but I am coming to work because I need the money. I will never wear a mask.”

Joan said, “I will wear double masks but you have to move my work station 10 feet from others.”

Susan said, “You cannot control those men. They will not socially distance. I am staying home with my kids.”

Ralph said, “The virus is only in China. I will not get sick. I will be there tomorrow and work my ass off. But no mask.”

And on and on. I see different pain points and problems. The conflict is real. I am facing new challenges I had never dealt with before, who had?

I get mad and jump to a solution. I draft a letter to all employees referencing the employee manual and the section on not reporting for work on time. The letter says all will report for work and those that do not will be terminated. I solve the problem, and I walk from my desk to get a cup of coffee.

I grab the coffee go back to my desk and look at the drafted letter again. The letter makes me sick. This is not me, and this will not work. Looking for ideas, I call my friend in Minnesota, the best operations person I know. Paul greets me, and we talk briefly about family and how Sarah and Priscilla are doing and then he takes a breath and asks me three questions:

How many of the 15 will read the letter and come back to work?

How many will stay once they work in your current environment?

How quickly can you replace and train the ones that leave?

Through Paul’s eyes, I see the company’s crisis. The problem is rooted in the pain of political talk, information sources, family stress, scientific understanding of the virus’s impact, and the hygiene protocol needed to address the virus.

Paul says, “forget your letter”. This is not a legal issue; do not use the rules in your employee manual. You must look at the deep emotional and need-based decisions of your employees.

Paul went on and said, “you know how you study the emotions of customers looking at new products; use the same approach.” Just like I work to understand a customer’s pain and needs and their buying decision process as I create a great product, I have to understand how to create a successful work environment for my employees.



Some by phone and some by Skype, with pen in hand and note pad on the desk, I call each employee using my “Listen First” process. And WOW, did I learn a lot. I now see a path to get the factory back into production.

Just as with new product focus group research, the phone calls share the new world of each employee’s feelings, needs, fears, and understanding of facts. The real and painful problems and conflicts of my employees reveal themselves.

I see they all want to work, not just for the income, but for their love of the company. There are strong political, religious, social, and knowledge differences. These will not change. Understanding that, the path is to create a working environment where all feel respected and safe.

I call Paul back. I wish I had more data, like I normally would get from a consumer research team, but time was short. Paul and I feel we can move forward as the process can be adjusted and refined.

I get all employees to agree to a first meeting. As I prepare to get the factory back to work, I know that uncertainty and change will be the new normal. The plan is to share our new direction with a few simple steps:

#1 A daily transparent open meeting. We learn and we adjust.

#2 Minimal hygiene rules. Enforced with only polite reminders.

#3 Most Important. Families first. Anxiety at home addressed quickly.

The direction is to focus on the essential work, not the differences. The key is the daily meeting encouraging a high level of adaptability and quick decision making, as the environment, internally and externally, changes rapidly.

By Thursday, all are at work. Tension and fear are on every face but they are back as a dedicated and questioning team. Masks and sterilizing lotion are everywhere and equipment and work stations are moved to create social distancing. With our daily meetings, we learn that all have reasons for their beliefs, but it is clear all are doing their best. The meetings continue to work well, letting fears, differences, and concerns flow freely. The discussion and sharing generates new ideas and adjustments are made daily.



The Summary –

COVID is a crisis for the employees, a new world of emotions and decisions, using the Employee Manual rules will not make you a Hero.

With a new product, you know the tools to get insights about emotions and behavior. Due to COVID, employees are in a world like a new product. Use the same approach to get employees’ insights. Become a HERO, increasing the Enterprise Value of your company.





Details: The phone and Zoom calls using “Listen First” data collection share the details of the employees needs and thoughts as well as the true pain points and needs. We work to have clear communication and do not assume all understand each other’s fears. Disagreement is OK and reasons for thoughts and action are shared. The goal of each daily group meeting is to focused on understanding and moving forward taking common action to adjust and make the factory work. The key is to create a minimal set of rules and to have the team of employees continue to discuss fears, concerns, and beliefs with the only goal of adapting so we can work together. The simple list of rules we used: 5-minute group meeting each day. Work stations are positioned 10 feet apart. Problems at home, you take care of family first. If not at your work station, you must wear a mask. If you test positive for COVID, must stay at home for 14 days – with pay. Rule enforcement done gently, only by the boss. It works great.

08/10/2021

VISA Chargebacks Breaks the Budget. Can You Solve the Problem Before the Board Meeting?

Enterprise Value Accelerator (Blending Marketing and Finance) Story #1

08/06/2021

The Founder’s Trap: Perfect Product and Huge Market Potential Destroyed by Owner’s Fear

(6-minute read)

It is late Friday afternoon after a long week. I get a call. The area code suggests “Phoenix”. Then the cell phone lights up with “TOM”, and I know it is action time. A hot investment deal must be on the table. I take the call. Tom quickly reports that, based on the known information, the company and its market are in perfect harmony, and it should be a “BIG WIN” for investors. But time is short as it always is, and the race is on to finish the project. What will we miss, and what mistakes will be made in the rush?

This is our 20th year; Tom is a brilliant lawyer who helps early growth companies find needed capital. He works with owners, the company’s board, and investors to create super enterprise value for the founders. He did it for me as the founder of a new company, which is now the largest in its niche in the world. We have been working on similar projects ever since and now a new one.

We are still in COVID protocol. The phone call turns into a ZOOM call where Tom shares the details. He needs an Interim CFO to:

Clean up the books. They must follow GAAP. The books are a problem today. Investor due diligence is next.
Work with the Founder and top management to create a detailed data-driven strategic plan that flows neatly into a business plan.
Assist with the capital raising by preparing the financial sections of the investor presentations and addressing detailed investor questions.
For me, the goal is to become a permanent part of the management team after we raise the capital for the launch. I report to the Board, but work primarily under Tom’s direction. Tom is Corporate Secretary and attends and records all meetings. The Founder controls all aspects of the company and as of today, his Amex Black Card is the only source of cash. With the constant use of his credit card, his fingers are in every pie. The company is out of cash relying on phone calls to the Founder to personally approve and fund even the tiniest expense. With this level of involvement, it begs the question, is the Founder’s involvement more than just wisely controlling cash? Whatever the answer to this question, the pressure is on Tom to raise the $5 million of convertible debt before the end of next month.

Tom and I focus on the precise financial and legal details of closing the convertible debt. We privately ask ourselves, “Are we too narrowly focused? Will we get blindsided?” With 20 years of working together, the emotional complications of a Founder should have been on our radar screen. In our race to the finish, what will we miss and what mistakes will we make?

Based on the known information, things look great. The product had been created, tested, and patented over the last 5 years. The large Indiana based pharmaceutical firm, Eli Lilly and Company, signed an agreement to purchase the product, once it had been thoroughly tested in their labs. This month, the company needs to be in full production and make 250 sample products to supply Eli Lilly.

The heart of my work, as Interim CFO, is the 5-year strategic plan, preceded by the accounting cleanup, and followed by communicating the plans to investors.

The big FedEx truck stops at my front door with a huge box of legal, financial, and accounting documents from Tom. The accounting cleanup starts with a review of each asset to establish its basis. Then, I interview all parties creating detailed files on all liabilities. It is quite common with early-stage companies to have agreements between owners, investors, partners, and vendors that are not fully reflected in the accounting records. It does not take me long to see the unknowns.

The problems jump out. The new CEO employment agreement, the Founder’s loan agreement, and the Board actions are out of sync. We must immediately link them together or the wheels will fall off before this company starts.

As the financials are cleaned up, the Founder and Board team work together to create an analytically based strategic plan. My detailed approach of converting the strategic ideas into a plan makes sense to all. In the end, consensus building creates the best plan and allows all management to talk to investors with the same voice.

The Board meeting is just a few days away. Tom works on sorting out the Board actions. The plans require a new CEO and $5 million of new investor capital.

My computer is printing all the documents, and I prepare big white overnight FedEx boxes with all the plans and drafted Board actions. As the FedEx driver picks up the boxes, I call each board member alerting them to the arrival time and emphasizing the importance of a decision at the Board meeting. I tell them specifically,

“No agreement at the Board meeting means no new investors”.

Sharing the information early gives each Board member a few days to review and ask questions before the Board meeting. In addition, Tom shares his 3 investors who have orally committed to investing the needed capital.

The company is highly in debt with no operating cash, but the investment bankers put the company’s value at a $15 million due to the patents. With the new investment of $5 million and the Ely Lilly contract, the plan shows an increase in an enterprise value to $200 million in 5 years. If the CEO is hired, the investor’s capital comes in, and the company goals are achieved, the Founder has a huge financial win.

The Board meeting starts at 1:00 pm on Tuesday. The agenda is: approval of the strategic plan, approval the $5 million of convertible debt terms, and the signing of the new CEO’s contract. All members had seen the details and the goal is to sign the investor letter of intent.

On Tuesday at 1:50 pm the deal explodes.

The pain buried in the unknowns of the Founder’s mind is out in front now. After months of work by Tom, Board members, investment bankers, and investors, the deal explodes. The Founder, who controls the company with 79% ownership, says clearly,

“I will not give up any equity!”

After the annihilation of the deal, it is important to ask the question:

“Are the Founder’s fears of loss of control and dilution rational or irrational?”

Today’s valuation of $15 million is based on having new investment and new management in order to fulfill the obligations of the Ely Lilly agreement. With the new management team and the new investors, the Founder’s ownership is reduced to 61%. He maintains the position of Chairman of the Board. In 5 years, his shares will be worth $122 million. Not seeing this future, his fears of loss of control overwhelm him, and he walks away.

Without the experienced management team, the investors have no interest. The future of the Founder’s invention, the contract with Eli Lilly, and the product’s role in the market place is left in a vacuum.

I call the fear of ownership dilution and loss of operational control: THE FOUNDER’S TRAP. The Founder has managed the company for 5 years but cannot see the company’s future without being in control and managing the details.

Because of THE FOUNDER’S TRAP, the crisis and the pain are permanent. When the Board meeting ends, there is no management, no investors, and the Board and the Corporate Secretary resign the next day.

Details: How to Avoid The Founder’s Trap:

By not “reading” the Founder’s emotions, and the Founder’s lack of commitment to the strategic direction requiring new management, many months of time is wasted by Tom, Board members, and potential investors. The questions remain:

How do we assess the Founder’s preparation to move forward?
How do we nurture and guide the process along a successful strategic path?
How do we prepare early to pull out, if the Founder’s commitment is in question?
As an investor, and as a professional working to develop a company, you must understand a Founder’s thinking and emotional commitment before you invest your time. In this case, because the company lacked the funds to proceed, there was only one true economic and business direction. It was so clear to us; we could not see or envision an alternative direction. We were blind-sided by our own narrowed vision.

Each situation is different. However, there are tools I have successfully used, early in relationships, to document realistic organizational and financial strategies. These are the sharing of ideas and getting agreements, hopefully in writing, regarding the strategic direction. It is important to never assume the Founder thinks like you do. With this early preparation, the professional and the investor can gain confidence in the future or, lacking comfort with the Founder’s comment, elect to walk away early.

07/27/2021

KEY PERFORMANCE MEASUREMENT AND REPORTING
Decisions Are at Every Level. Correct Data Leads to Greater Enterprise Value
(Detailed systems implemented at each company)

The enterprise value success of a company comes from operational decisions in every corner and at every desk and work station in your company. Infusing the vision of the company into the work of every employee is the cornerstone of success. The CMO’s job is not just to run the marketing department but to attune every employee to be a marketing decision maker. Similarly, the CFO must instill a financial focus based on meaningful reporting to every employee.

The determination of KPIs (key performance indicators) for every function and their timely reporting is the secret to success. This process is not easy and takes an analysis of the drivers of enterprise value and the measurement tools each function requires to successfully impact the company’s enterprise value.

Key Performance IndicatorKey Performance Measurement and ReportingDecisions Are at Every Level. Correct Data Leads to Greater Enterprise Value (Detailed systems implemented at each company)The enterprise value success of a company comes from operational decisions in every corner and at every desk an...

06/23/2021

Capital Raise Presentation — 28-Page Animated PowerPoint. Angel Investors Walk — No Questions. No Investments:

(7-minute read)

I arrive in Atlanta flying Southwest flight 2629 from Denver to meet my clients and watch their first presentation to a group of professional angel investors.With my Orvis overnight bag and a large black accountant’s case, I jump in a cab and race to listen to my clients’investor pitch. They asked me to come to the meeting so I could talk to potential investors about the details of the strategic plan and use of cash. They are, Peteran environmental scientist, and Philip, a computer expert. Peter and Philip are the founders of a British SaaS computer company coming to the USA once the capital is raised.

Click to read more here: https://chuckbidwell.com/capital-raise-presentation-28-page-animated-powerpoint/

02/24/2021

VISA Chargebacks Breaks the Budget. Story #1

Can You Solve the Problem Before the Board Meeting?


In the second year of our ecommerce start up, all was great. Looked like we would break the $1 million sales barrier and the year would be profitable. Every employee across the company was smiling.
Then the beautiful wall came tumbling down and all hell broke loose. A hidden demon emerged and soon a huge conflict between the VP of Sales and our Controller erupted. The demon would drive our start-up into a desperate dilemma not only for the month but for the year and beyond.
I was sitting at my desk when Sally, the customer service clerk who daily reconciles credit card cash, came to me in tears. “VISA hit us with 10 chargebacks last night, totaling $30,125. It will break our budget”
Comforting her, my mind went to the meetings next week with our bank and our Private Equity partner. All the positive messages we had sent about sales and profits would be thrown to the wind. Sally was crying, and my stomach was in a knot. The positive month was turning into a disaster. I went to the phone, called VISA and studied the detailed reports to understand what happened. Yes, 10 fraudulent purchases had been identified and reversed by VISA. With the chargeback, we lost the cash from the sale and the product was stolen.
Then Joe, our Controller, told me what to do – it is easy, he said. “You can report the loss; it is just a routine accounting transaction”.
“NO NO” I said. Not only will we lose money but it destroys our business model and it will have a long-term serious impact on our enterprise value. These fraudulent orders will kill us. Sales growth must continue and the chargebacks must be controlled. I must solve this so I can address the disastrous topic at the board meeting with our bank and Private Equity partner.
Sally was still crying when Joe, our Controller, said, we have to stop any and all of “those transactions” that might be fraudulent. Then Jen, VP of Sales, walked in and said If we cut off “those transitions” we will kill sales and never come close to our budget. She went on to say most of “those transactions” are gifts—at the heart of our holiday business. Now we have a conflict and a pain and a problem. How do we find the truth and get clarity and achieve action to move forward? How would you become a HERO, and Increase the Enterprise Value eroded by these continuous fraudulent actions?
You become the HERO by reaching beyond the tools of accounting and finance and focusing on the consumer behavior of the fraudulent buyers. The impactful step you can take is to use your consumer research team. Consumer researchers know customer behavior—they study both good stuff and bad stuff about customer behavior. I asked my Director of Customer Research to help and they went to work. They regularly work on products, packaging, advertising, pricing, and branding to positively impact sales growth. I figured you can use the same skills to understand and then avoid fraudulent behavior. This makes Joe, our Controller, happy and maintains good sales, making, Jen, the VP of Sales, happy.
The consumer research team analyzed over 250 transactions, both good and bad transactions, which appeared to have similar patterns and characteristics of the fraudulent transactions. They interviewed multiple customers, and they found behavior patterns. My goal was to move beyond the accounting rule, suggested by the Controller. His rule blocked all questionable transaction, thus totally avoiding any VISA chargebacks. My goal was to become the HERO controlling chargebacks, maintaining sales and increasing Enterprise Value.
The moral –
Booking the loss using accounting rules does not make you a HERO.
Uncovering the behavior causing the fraud losses makes you a HERO and increases Enterprise Value.

Details: The patterns and ultimately the procedures coming from the consumer research are different for each company. You should use consumer research tools to understand fraudulent patterns and set up customer service procedures to maximize sales and to minimize fraud chargebacks. You must do the hard work to find the patterns. Just like consumer research identifies purchase decision patterns, consumer research will identify fraudulent patterns leading to preventive procedures. For my company, the fraud always was associated with the delivery address being different from the billing address. Once the difference in mailing and billing address is identified, we used a series of emails and phone calls to validate a successful transaction before the product was shipped.