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(Business
Audit, Strategic Planning,
Operations Improvement)
A small
receptionist service in
downtown Chicago was struggling
with low profits and dwindling
revenue.
We conducted
a business audit and identified
three critical areas which
needed improvement:
- Unbalanced
Revenue Portfolio -
Client had several
revenue streams, but
they were out of balance.
The largest revenue
stream (telephone answering
service) was barely
profitable and took
time away from much
more profitable services
such as transcription,
research, and editing.
- Debt -
Client had a large outstanding
debt at a high interest
rate. She was not making
enough money each month
to pay off any principal.
- Marketing -
Client obtained most
new customers from word
of mouth and Yellow Pages
advertising. Over the
past few years, word
of mouth seemed to stop
working, and the Yellow
Pages ads cost more than
they brought in.
We worked
with client to set specific
objectives in each of these
areas, and helped her implement
an action plan to improve
profitability. We helped
client develop a marketing
plan to acquire new customers
at a lower cost, and grow
the company at a rate she
was comfortable with. We
focused niche marketing
efforts on attorneys and
other selected groups of
customers with very demanding
needs, who are willing
to pay a premium price
for top quality work. We
also helped client restructure
her pricing so it was more
in line with what competitors
were charging (she had
not raised her prices in
years and was leaving money
on the table). Finally,
we worked out a debt repayment
plan, where client increased
her monthly payments to
quickly reduce outstanding
principal.
Results: Client
has sold the low-profitability
answering service, and
has gained new customers
that are more profitable
and have higher growth
potential. Gross margin
has improved significantly,
and she is using some of
her increased income to
pay down the debt.
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(Business
Audit, Strategic Planning)
A small
language translation service
in Atlanta was growing
and earning a modest profit,
but the owner was overwhelmed
by her workload and felt
that the company was not
realizing its full potential.
Based
on our intensive review
of operations, we made
several recommendations
for enhanced performance:
- Administrative
Support - C
lient was spending
almost 50% of her time
on administrative tasks.
By using an administrative
resource, she would
have more time and
energy to devote to
marketing and sales.
- Reduce
Reliance on Intermediaries -
Client was caught in
a pricing-squeeze.
The majority of her
customers were translation
agencies rather than
direct users of her
services, so by the
time she paid her employees
she was making almost
nothing.
- Expand
Scope of Service -
Client offered translation
services in several
languages, but she
lacked the capability
to offer translations
in the languages that
were in greatest demand
by large, corporate
customers.
We helped
client develop a job description,
qualifications and characteristics
to help her identify a
good administrative assistant.
We worked with her to develop
a growth plan whereby she
would gradually add (high
profit margin) direct customers,
seek relationships with
major corporations that
are willing to pay a premium
price for timely, quality
work, and reduce (low profit
margin) sub-contracting
work. We worked with client
to design a plan to broaden
her menu of services by
adding new (higher demand,
higher profit margin) languages,
and build a database of
qualified contractors to
provide these new services.
Results: Client
hired her (very competent)
sister to provide administrative
support in the short term,
and plans to hire a full-time
administrative assistant
within the next 12 months.
She has redirected her
marketing efforts toward
major corporate customers
and expects to have several
on board by early 2006.
She is adding new high-demand
languages to her service
menu at the rate of about
one per quarter.
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(Due
Diligence, Valuation)
A Lebanese
businessman asked us to
perform due diligence and
estimate the fair market
value of a Wireless Internet
Service Provider located
in the Midwestern United
States. Several other suitors
were also looking at the
company, and we had to
work quickly so that our
client could decide whether
or not this was a good
opportunity and, if so,
establish a fair selling
price.
We prepared
a list of more than 50
specific questions for
investigation that covered
all aspects of the acquisition
that would be relevant
to this decision, including
market opportunity, barriers
to entry, technology, sales
and marketing, operations
and processes, management
team, financial performance,
and subscriber base. Then,
we met with the management
team at their headquarters,
viewed their operations,
reviewed and interrogated
company financial and operating
documents, and posed our
questions.
Our meetings
and supplemental research
enabled us to complete
a first-pass assessment
of the opportunities, risks,
and market potential presented
by the acquisition opportunity
and deliver a complete
report to our client within
less than two weeks. Our
report included our recommendations,
supported by analysis of
financial documents, estimates
of valuation based on several
alternative measures of
value, a SWOT analysis
(of strengths, weaknesses,
opportunities, and threats),
and an assessment of risks.
We presented several growth
scenarios, ranging from
extremely conservative
to moderately optimistic,
and quantified the performance
of the company using a
discounted cash flow analysis.
Then we compared the company
with a basket of peer companies
based on price-to-revenue
multiples, price per subscriber,
and other measures. We
also presented the client
with a large binder of
current articles on the
market, competition, products
and services, licensing
and frequency issues, and
other areas of concern.
Result: Client
entered negotiations armed
with a thorough understanding
of the company's strengths,
weaknesses and potential
for growth, and an independent
assessment of the value
of the deal.
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(Business
Plan, Advisory Services)
An accomplished
musician, composer and
musicologist, engaged us
to help him develop his
California-based niche
Internet business focused
on classical music history,
performance, and instruction.
We worked
closely with client over
a period of several months,
analyzing the competition
and questioning the business
model. We came to the conclusion
that the original business
model would not work because
of complications in the
Intellectual Property laws,
so we settled on a simpler
proven model that was already
used by another firm in
a related industry. Once
the business model was
settled, we were able to
quickly develop the complete
business plan and pro-forma
financials. Since the business
was clearly going to need
significant capital to
start operations, we helped
client plan for multiple
financing rounds over the
first two years. We helped
client prepare an investor-ready
business plan document
and investor presentation
materials, so that he could
present his vision and
objectives in a compelling
way to prospective equity
partners.
Results: Client
has successfully raised
several hundred thousand
dollars in equity funding.
A prototype website has
gone live, and client is
developing a small but
growing customer base by
word-of-mouth referral,
supported by some "guerrilla
marketing". Once a critical
threshold of $500,000 in
financing is reached, we
will provide management
support as interim Chief
Operating Officer for the
second phase of growth.
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We
addressed two critical
challenges: (1) focusing
selling efforts on customers
with greatest potential
(rather than randomly "dialing
for dollars"); and (2)
reaching hard-to-identify
start-up enterprises
where outsourced fulfillment
could add the most value.
To meet these challenges:
- Our
investigation identified
the strongest growth
opportunities among emerging
Internet-driven industries
including vertical markets,
e-procurement sites,
and "brick and mortar" companies
building online channels.
- We
designed an online "one-minute
needs analysis" tool
to identify and reach
the best prospects in
these markets. As
a result, sales accelerated
with a steady stream
of pre-qualified leads
gained from website visits.
- We
helped build a new
referral network among
venture capitalists
that are stakeholders
in these young companies.
To gain credibility,
we helped produce an
informative seminar
for participating VC's.
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We designed
and built sales lead generation
programs that have become
the mainstay of business
development for this specialty
insurance broker. Initial
challenge was to contact
physicians, a notoriously
hard-to-reach audience,
to acquire new customers
for medical malpractice
insurance. We achieved
this objective through
direct marketing, collateral
materials and PR directed
to physicians, together
with affinity marketing
to reach medical staff
organizations and other "centers
of influence." These
programs have brought in
over 1,000 new physician
clients, and revenue from
premiums has tripled over
a seven-year period.
To
build on this success,
we drove the market launch
of a new product for
physicians: a compliance
program that protects
them from allegations
of Medicare fraud and
abuse. Product was introduced
through direct-response
advertising, seminars,
trade show exhibits and
video programs. This
launch created an opportunity
for further growth, strengthened
existing customer relationships,
and positioned client
against other brokers.
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Client
sought greater focus in
reaching its traditional
channel, and also wanted
to build new channels to
market.
- To
build the traditional
channel, we
worked with sales managers
and used a predictive
model to focus sales
efforts on the most
productive deal sources
and market segments.
To streamline deal
flow, we designed a
weekly pipeline report,
monthly sales activity
report, and quarterly
deal flow analysis,
and helped client use
this information to
identify and remove
bottlenecks at each
stage. These efforts
had a solid impact
on the bottom line.
The Division went from
showing a slight loss
to $15 million profit
in two years on double
the business volume.
The customer base grew
by 145%.
- To
create a profitable
new channel direct
to borrowers,
we designed and developed
a sales toolkit that
included success stories
from earlier deals,
sales letter and proposal
templates, staff biographies,
tombstone montages,
and special topic modules.
To communicate and
celebrate the program's
successes, we edited
and produced an employee
newsletter, and worked
with sales management
to facilitate national
sales meetings. Client
generated $1 million
incremental profits
in less than one year
from this new channel.
- To
retain customers and
stimulate referrals,
we recruited a cross-functional
team and facilitated
discussions to identify
ways to streamline
operations and enhance
customer satisfaction,
using process mapping
to document the flow
of activities leading
to new transactions
and delivery of customer
service.
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We
led a team of client staff
and outside resources to
research markets, channels,
and product lines across
seven business units. Through
these investigations, we
discovered four opportunities
to penetrate new channels
and markets by:
- enhancing
the company's capabilities
in the areas identified
as most important to
brokers,
- cross-selling
a broad mix of products
to existing policyholders
to gain greater share
of wallet,
- offering
alternative risk transfer
mechanisms as an alternative
to traditional insurance
coverage, and
- modifying
the incentive system
to reward profitability,
using customer ROI and “relationship
penetration” to
drive sales targets.
In pursuit of these opportunities,
we worked with business
unit leaders to create
marketing plans and helped
them translate the plans
into action. We worked
within the organization
to “test pilot” several
promising approaches to
market development. For
example, we ran a direct
marketing trial that achieved
a double-digit response
rate by using predictive
modeling, multiple waves
of direct mail, telephone
canvassing, and personal
sales presentations. As
a result of these efforts,
the business units achieved
32% revenue growth in two
years.
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