RSM415H1S A CEOs Toolkit

Helen Shen (1000544887)

January 31, 2016

Sofame Technologies Inc. Case

Summary

Founded in 1984 by mechanical engineers, recover waste heat from industrial gases
Abundant potential customers, savings and benefits easily calculated, many investors
New President, CEO John Gocek: Operations and Finance experience, face Sales issues

Customer: Building owners, institutions, industrial facilities, commercial establishments

Sales: 7 Sales Steps
1. Target
Industry: Energy efficient technologies, heat recovery systems
Demographic: Industrial customers (B2B) in North America using central heating systems
Size: Large industrial customers, conservatively at least $2 billion market
Capacity: starting at 1 MW (150 room hotel), lasting 30 years or more
Willingness to pay: $500,000 to $1.5 million CDN, many reluctant to pay (Challenge)
2. Contract/Promote
Territory manufacturers representatives (reps) at trade shows, presentations, stay informed
Local plant manager contacted, direct-to-owner and through reps, meet regularly (Challenge)
If expresses interest, proposal drafted up chain of command, but costly (Challenge)
Identify customer needs, develop technical solution
Sales cycle: 6-24+ months, too long (Challenge)
Reps sell variety of products: custom engineered Sofame sale requires twice the effort for potentially

three times earnings (Challenge)

3. Benefit/Present
Increase efficiency of boilers from 60-99%
Increase savings on utility bills given rising and volatile energy prices
Satisfy increased environmental awareness of stakeholders and regulations
4. Propose/Pilot: 3 most popular efficiency products
Percotherm heat-recovery condensing boiler
Percomax light-weight water heater
Hybrid Percotherm heater and recovery combo

5. Close: Pay only 10% upon installation of project, too low and already few closing deals (Challenge)
6. Deliver
Complex manufacturing starts as soon as order signed, manufacturing and shipping all customized to order
Dedication to engineering business deters from managing installation of projects, losing potential

revenue and scaring clients with having to manage their own in-house construction, although less risk of
delays and cost overruns borne by reps and contractors (Challenge)
7. Report/refer
Requires little maintenance, lasts very long; 24 years, over 300 projects with complete customer satisfaction
8.
9.

Finance

10.
11.

Aggressive booking and revenue targets for 2009-2013

In 2008, altered standard terms of payment, increasing request at time of order from 10% to 30%, also
requiring 20% upon approval of drawings, 40% before shipment, 10% after start-up of system
Sofame Finance created as independent project financing for clients

Operations

12.
13.

Sofame has more customizable and complex products, less well-known

Gocek did not know some indirect competitors could also achieve 99% heat recovery rate
Shortened manufacturing cycle from 12 weeks to 3 weeks with plant restructuring
2 fold increase in plant capacity (up to $24 million CDN in sales per year)
Developed experience to be more efficient and effective in installation, but not part of operations

Recommendations

Identify key CEO contacts directly to get top-level sponsorship to reduce proposal rejection
Follow up only on promising leads (80% of proposals not result in order, require fee for proposal/quote)
Creation of Sofame Finance, although last to get paid but increase close ratio with whole package
Process too customized, need some standards (Trade-off differentiation of complex, custom and expertise)
Need committed network of reps across all geographies: assign one product per rep, increase reps
As manufacturers, install too: installation cost part of standard quotation to increase revenues