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Managing through the downturn: TLH notes from the Nantucket conference

First panel:  Managing through the downturn

Aron Ain, CEO, Kronos
Jana Eggers, CEO, SpreadShirt (customized apparel), $10s m run rate, just raised growth capital (offers were shocking)
Christia Lampe-Onnerud, Boston-Power, advanced lap-top batteries, H-P is lead customer, growing fast
Chris Zannetos, CEO, Courion, Info SW co, security business, manage provisioning of systems for employees (eg, 800 new interns at a major hospital)

Courion went through very tough times when a major customer imploded in 2002 [sounds like it was CA].  Employees went into bunker mentality.  Key to show via bonuses and raises that there is a strong opportunity still for high performers.  Top 20% of co. going to president’s club:  “ruthlessly rewarding high performers”.

Kronos:  cut 10% of staff at start of year to anticipate 20% revenue cut and maintain profit.  

• No pay or hour cuts — keepers are paid what they are worth
• Over-communicate
• “Sizing company to what the market is allowing us to be”
• 10% cut from each group and each level, planned in Dec, announced in Jan
• Upped severance by 25% above norm
• “Hall monitors” met departees, helped them pack, and walked them out (kindly)
• Town hall meetings the next day
• Some people in the company had lost their edge and everyone knew it:  company perceived that the right people were leaving
  

SpreadShirt:

• chose to focus the business — exited bulk shirt printing business, cut entire team, even though profitable
• theme of the company is promoting self-esteem
  

Boston-Power

• young co:  4 years old
• some people can’t scale with the co, some can — moving ahead with the people who can be “bearers of the culture” and help us scale [growing fast, no need to cut for revenue reasons]
  

Courion:  saw slow down coming in late 07:  deals got smaller, customers buying a few modules versus suite

• shifted to customer lifetime value management
• new products and acquisitions to leverage relationships
• programs for deep engagement of customers have added a lot of value
• need to help customers figure out how they can scrape up $$ to buy from us — they conclude too easily “there is no money in the budget”
• board, esp financing investors, is more in the bunker than I am
  

Kronos:  

• “competitive attack plan” to drive revenue
• ROI focus with customers
• pursuing selected strategic opportunities: $10-$20m of additional investments in ‘09
• did an LBO in June 07:  easier to do the right thing as a private co.
  

SpreadShirt:

• still testing new marketing ideas, but with smaller $, maybe more frequent
  

Raising money:  very different from any past experience

• Janna:  Focus:  chose potential partners carefully, based on people who understood how we saw the opportunity, fewer pitches and more conversations
• Christina:  have raised money every year since 2006
  
  • had to learn to tell the story concisely
  • Granite for B, Oak for C, Investor AB for D
  • Used term sheet from A each time, closed deal in “2-3 weeks”
    

Key lessons:

• Kronos:  communicate even more, open honest dialogue outside and inside co, manage company monthly and weekly, not quarterly, while keeping an eye on where we want to be in 2-3 years
• Jana:  “hope is not a strategy” is our mantra, use experimentation to reduce risk, our brand promise is self-esteem, focus on the end customer (sell-through), help the immediate customer be successful
• Christina:  be data-driven, tenacious, and gracious
• Curion:  investors, don’t do unnatural acts.  Remember that you need the CEO to be emotionally committed.
  
  • Being cash flow positive gives you power
  • Remember that CEOs job is to be 2 steps ahead of everyone