Client’s Challenging Situation:
Most businesses have tremendous potential, yet many are unable to make decisions and adjustments to transform that potential into business and prosperity growth. When not supported by enthusiastic employees and advisors, business leaders can struggle with the basics: employee morale/motivation, cash flow management, product problems, and service problems…the CEO’s list of issues is long.
Scope of the Problem:
A business friend was struggling to maintain and grow his business. The business had been operating for years, however, it had never experienced industry-average profitability. The business had a wide range of clients, from exceedingly small SMEs to major enterprise clients. My friend wanted help to raise the profitability and valuation of his business and be able to sell it. He wanted that to be a realistic option and he wanted it to happen quickly…in a year of possible.
We took time up front to:
- get to know the leaders of the company and the senior managers,
- understand the decision-making processes,
- understand the systems and the information they provided [to leaders, employees, 3rd parties],
- the breakdown of clients, client groups, and suppliers, and
- the full details of cash flow.
Very quickly, within 2 months, it became clear that one group of clients was consuming a great deal of company resources [especially manual labour] and receiving pricing that was barely ‘breakeven’. This was classic example of the 80/20 Rule in action. Our solution was to raise the prices for this group of customers by approximately 30%. While employees resisted the price increase due to concerns about losing customers, the customers did not object. We informed customers of the reasoning behind the price increase, and each customer was given the option to terminate their arrangement. Only 1% of the customers terminated their service.
The Value Delivered:
The price increase for one group of clients immediately increased the company’s monthly profit by 400%. This success initiated a shift in the mindset of employees from “Can’t Do” to “Can Do”.