Author Archives: vlm

Issue: Who should the next hire be. The choices a Senior Level Technologist, a Marketing/Admin/Back Office Assistant, or a CFO/Controller/Bookkeeper.

Significance: The owners were bogged down with details. “Noisy” customers with adequate coverage would enable the owners to focus on sales and marketing efforts, assume additional project and account management, and CIO functions.

Background: Currently the company is a lean operation with just seven employees. The average revenue per employee is $243,000, above the industry average, yet the profitability is less than desired.

The owners have disparate roles. One co-owner performs the CFO role which is expensive based on salary and a distraction. He is 30% billable as a virtual CIO, Project Manager and AM. The other handles Operations including core networking, managing support groups, handling escalations, in addition to serving as a virtual CIO, PM and AM. Co-owners share purchasing, quoting, proposals, and order tracking.

Previous hires – One person in Administrative role was outstanding but other five were a disaster. They were not self starters and unable to provide the functions required. A Senior Level Technologist hire also went bad and cost the company $35,000 in compensation loss due to dishonesty. An Outsourced Controller/CFO was also a failure based on cost and lack of understanding the business.

Ultimately the co-owners have reverted to do it yourself mode to save costs.

Actions Taken: Mapped out the responsibilities and calculated the revenue and cash flow impact of increasing technical staff to service the work backlog.

A senior technical position could represent revenue but it is difficult projecting work more than 90 days out. A CFO would be an additional expense. An administrative person could enhance customer service and support marketing and sales.

Ideal Outcomes: An increase in customer satisfaction. More consistency regarding completion of internal processes. Better understanding of the company’s financial standing. Enhancing co-owners’ value and distancing them from the hands-on technology. Allowing co-owners more time to build the business, away from tasks that pull them away from it.

Roadblocks: Co-owners are reluctant to make an investment without additional revenue to support it. Constant pressure to increase profitability. Concerns about hiring now with the possibility of having to reduce staff later.

Desired Results:

A management plan is to hire allowing the owner to exit routine operations.

Recommendations:

Regarding the co-owner/partner, The owner should define individual roles based on revenue, not expenses, and tie them to a shareholder agreement. The owner needs to stop avoiding the “fierce conversation” and define normal compensation for each of their roles beyond partnership distribution. This should include brief weekly management meetings.

Define the company culture – the house needs to be in order before realizing sales growth, and time needs to be freed to generate revenue. Establish and communicate expectations, accountability and deadlines for management and personnel. The owner should be the visionary and avoid the day-to-day operations, and outsource both accounting and marketing tasks.

Hire for the administrative role and focus on what they do best. Outsource the other necessary services

Final Results:

The recommendations have been addressed in a 5-7 year plan with a timeline for implementation. Initially clearing his plate to allow for working “on “vs. “in” the company and spending more time on sales. An excellent Operations Manager has been hired who has significantly reduced daily operational activities virtually removing invoicing and marketing tasks from his plate.

They have clarified the growth/revenue goals and a process for achievement, including new services to enhance the current offered services. The additional services have helped the company stand out in a crowded market.

The owner clarified the business partner’s role, with a clear plan to migrate the Controller/CFO functions to outside services. For the remaining employees, he has tied goal achievement directly to salary increases, as well as aligning bonuses and aligned goals with company growth. The company has added a new service line based on the needs of clients.

Lessons Learned:

For any business owner, it’s very difficult to trust while believing one is the best for the job, but this results in getting bogged down in operations while more important tasks such as generating revenue get less attention. A business owner must clearly define roles, establish goals, reward employees for achieving them, and trust his people to believe in the vision.

Issue: Business owner was grappling with the question of whether to expand to include complete phone solutions and services.

Significance:

To the company, it would likely increase monthly recurring revenue (seven existing customers would benefit), and offer the opportunity to market and sell this service separately. A software vendor could drive sales to the company through a protected geography model. Phone services would eliminate some troubling sales agent relationships and increase the ‘stickiness factor’. The hosting, trunking, phone hardware already exist and would be obtainable at low cost, and the company would be ready for the next generation of telco services.

For customers, it would provide a low-cost solution that includes advanced features, such as one-click video and audio conferencing, chat, call center service, reporting, multi-site support, etc. at no additional charge. This would further unify technology management under one entity, and eliminate the need for managing separate phone vendors. Cost savings would include a replacement system for less than typically paid for phone lines. Customers would have no large upfront capital investment, only a monthly recurring fee. The company could suggest implementation of new phone system features.

Background:

Currently, the company offers “Virtual CIO” services to advanced plan customers to help with telco vendor solutions, bill reviews, technical work, etc. and would like to expand capabilities. Customers fall into two categories: those with on-premise systems and those with cloud hosted voice providers. For cloud hosted customers, the company vets providers, analyzes pricing, does a demo, etc. but real issues do not appear until an installation happens. Every cloud install incurs problems.

The company has repeatedly and unsuccessfully tried to align itself with a cloud voice provider that is rock solid as a go-to solution. The opportunity appears to solve all of the headaches with feature rich, solid software.

Actions Taken:

The company has evaluated other vendors, systems and services for ten years. Once this solution was identified, the company implemented a fully configured system and joined their partner program, completing all three levels of certification. The company implemented and tested a second system, developed a relationship with SIP trunking providers to streamline trunking sales, and designed and built cloud and on-premise solutions. Company still focused on “street pricing”.

Ideal Outcome:

To have this become a parallel business, with separate marketing, competing directly with local cloud based providers. To employ this as a lead to other company services. To leverage existing staff for the first 20 installations. To generate ongoing and recurring revenue, including 30% margins with 1 year contracts.

Roadblocks:

The company needs to be sure it makes sense to enter this part of the industry directly; currently the company acts as a sales agent using ‘partners’. Uncertainty includes whether the customer would buy it or still view it as a specialized service, and whether it would cause a company to exchange its phone system for something new.

The company may require additional staff for installs, time is of the essence since launch would delay or distract from current marketing efforts. There is hesitancy to repeat the past with a bad product.

Desired Results:

Improved perspective: Customer sees why it’s worth the trouble and cost to switch out a phone system and see telecom as part of Information Technology. In addition, that the customer sees the value of the additional features, rather than simply thinking “a phone is a phone” and going with traditional providers. Customers see that the venture is viable and a good use of time and resources.

Recommendations:

Form a separate entity, which serves as a lead generator. Keep in mind that customers get upset quickly with phone vendors, and avoid associating transactional business issues with the core business. Most customers shop on price, and an add-on makes the idea hypercompetitive; the business is all about sales, and most will not look for added value.

Think carefully before delving into this market and the potential impact. Try doing a focus group with current customers to determine interest. Have some customers on board before going forward by pre-selling one or two deals. Ask the new software company who is their shining star in sales, and align yourselves with them, especially if their company offers similar services.

This appears to be a revenue opportunity, and you can title it as a business communications tool that integrates with the technology platform.

Outcomes:

Based on the group’s input, the company decided to continue with the telecom solution, but to offer it in a unique way. The company chose to offer the solution in the same manner as IT services – identify the customer’s challenges and present this as a solution. The company can deliver the solution and its components directly while leveraging a third party for connectivity to minimize risk. Speaking with another provider as suggested resulted in a positive outcome to move forward.

The company built the solution and refined it. Initial marketing included the current customer base of which two asked for proposals. The company is pausing to get the two customers on board and work out process bugs and pricing. Company has also simultaneously built a number of telecom based marketing campaigns to be released when the time is right.

Issue: Managing the peaks and troughs in the business.

Significance:

Highs and lows of business have an impact on cash flow, personnel management, and projected growth target(s).

Background:

The company’s primary challenge is to secure predictable sources of growth. Their niche is complex, high-ticket products and services, which are difficult to find and small, requiring a large number of accounts to be self-sustaining.

Accounts are billed by project or hour. Currently no payment on performance

The goal is to bill 2300 hours per week. Currently they are at 50% with a potential revenue drop year over year.

Adding a sales role to an existing executive has increased the pace of closing sales but new leads are not coming fast enough. In the new sales role, the executive closes 50% of the leads that go to proposal. The company sales cycle is three months.

The company passes off four of every five inquiries to lower priced appointment setting firms, because infrastructure is too expensive for low ticket, quick hit programs.

Actions Taken:

The company has multiple sales leads that have gone to proposal but have not yet been closed. Two years of SEO investment is paying off and 50% of proposals come from website leads. Referral partnerships continue to be excellent, and they have benefited from ad agency referrals. The company has two organizations as clients and sold their franchisees through word of mouth.

The company has attended trade shows generating leads but not enough to justify the expense, developed a plan of calling ad agencies, focusing on B2B clients, but cold calling and outsourcing to a sales agency turned out unsuccessful.

The company has built out space for three workstations for lower priced programs, with the goal of keeping operations in-house. They are looking to have conversations about franchises with a former client and considering hiring a “mystery shopper” to walk the floor of trade shows.

Ideal Outcome:

Generate and increase leads, take a financial risk with the right growth investments, including three investment initiatives: expansion for lower-priced campaigns, increase franchising clientele as a vertical, and have a presence in national trade shows.

Roadblocks:

Lofty goals with a reluctance to consider 100% pay for performance. Having grown with conservative cash commitments reluctance to invest beyond their comfort zone. Conservative operational policies inconsistent with their aggressive growth target

Desired Results:

Consideration of the pros and cons for the three investments and ideas for implementation.

Recommendations:

Expansion will offer an opportunity to test a pay for performance model in a familiar industry. Consider booth space at trade shows along with walking the floor with a focus on small businesses. Questions to be addressed – Are the costs the same for each account regardless of size? Are all accounts profitable? Are some accounts a distraction? Based upon response renegotiate referral fees.

Pursue franchisees if they fit the profiles of existing customers, and can form a group of like-minded companies. Establish a client qualification process to bring on additional business in a controlled manner.

Use market data for client-qualitative trends. Sell generic data to others in the industry. Use scrubbed data in marketing efforts.

Base average salaries for new hires to manage the peaks and troughs. Look into the cottage industry – part time home employees are a less expensive resource.

Outcomes:

The company tested adding a program in Philly with a performance-based model, choosing to reduce their on-site resources using technology to take advantage of the recommended home-based cottage industry.

Franchises are happening organically. The company has developed an approach to pricing that works for franchisees and the company.

The company is focused on the Sales function, with a lead generation team that is successful at generating leads (several have converted to sales), hired two junior sales people for lower level sales relieving the senior salesperson enabling her to focus on larger sales.

Having sponsored a conference they have met new referral partners learning about online directories in which they are now listed. These have been terrific sources of leads, as have the new referral partners.

Having closed two recent large contracts, the company’s annualized revenue will meet/exceed their target for the year.

Lessons Learned:

In a business with peaks and troughs that is based on larger clients being profitable, an owner should designate the top sales people to the larger clients accordingly and hire junior level sales associates to handle smaller ones. In addition, when a company is able to see what works and what doesn’t, it’s simply a matter of focusing time and resources on what works.

The Challenge:

• Developing a marketing model to increase revenue.
• Managing the volume of inventory and turnover with products purchased overseas.
• Maintaining the right number of warehouse employees to manage the inflow of orders.
• Determining the cash requirements necessary to pay for foreign and domestic product on time.
• Managing accounts receivable to project sales and incoming order volume.

The Solution:

By analyzing the metrics detailed below, developing the direct mail sales model enabled the company to predict the frequency and better attract additional clients. This led to determining at what point the amount of increased orders would require additional warehouse personnel. The information from accounting enabled the company to manage the cash flow requirements necessary to fuel the production engine.

The Results:

After implementing the changes that came from this analysis, the company grew at a rate of 36% annually, including a one-year high of 135%, while gaining the ability to project inventory requirements, cash flow, and revenues one year in advance. The key was monitoring the frequency and number of mailers sent on a monthly basis.

The Details

Sales/Marketing:

Direct mail served as the company’s primary source of sales. The metrics revealed that mailings produced a 2% return with an average order size of $100. 50% of the clients placing their first order did so again in the second month. 90% of that 50% ordered continuously after month number three.

Operations:

90% of the product was purchased from Asia and had a delivery lead time from order placement of 60 days. The target of 45 days of available inventory had been established, which enabled the company to turn the inventory eight times per year. Warehouse workers were able to pick six orders and pack 14 orders per hour.

Finance/Accounting:

The company’s payment for product was due upon receipt. Accounts receivable averaged 20 days, 85% of which were through credit card payments.