© 2022 KGK & Company. All Rights Reserved.
Over a 15-year period, the company’s two owners grew the business from a small white-label PC builder into a considerable IT enterprise with 3 business units and $45M in annual sales. While revenue growth was consistently impressive, and even recognized on the “Inc. 5000” on several occasions, profitability lagged behind top-line growth.
During a Complimentary 1-Day Assessment, KGK shared observations of where the company may have revenue and profit opportunities:
After continued discussion of the strategic, operational and cultural motivations behind their varied products and services, the owners engaged KGK to conduct an end-to-end business review aimed at pinpointing their opportunities to increase profitability. Their prime objectives:
As an initial engagement, KGK’s end-to-end diagnostic identified over 100 potential revenue and profit leaks to evaluate. Evaluating these theories ultimately resulted our recommending focused action on 5 high-value opportunities (detailed below) and more than 2-dozen general recommendations for management to incorporate during the normal course of business. While some findings confirmed the client’s own suspicions, they agreed that eliminating alternate theories and determining the size of verified opportunities was valuable new information that clarified where to focus their attention.
The client requested KGK engage to assist with solution implementation and six months after project completion, the entire company exhibited greater focus and a profound $2M uptick in net profit run rate. The owners gained confidence they could step back from day-to-day decisions and rely on well-trained managers and KPIs that guide the business. Furthermore, it put the business on track to achieving its objectives of producing $5M in annual EBITDA and gaining the interest of strategic buyers offering higher multiples.
Inconsistent discounting practices was leaving profit on the table
Analytics of pricing variances on 2 years sales history + sales rep / management interviews
Revised discounting policy and system-level controls
Increased margins without negatively affecting volume
Develop a new discounting policy, new commission plan to incentivize adoption, and Netsuite updates to both enforce discount levels and reflect the updated incentives.
Design discounting policy, commission plan, and rollout communications; requirements and testing of Netsuite changes, results monitoring
Change management, results monitoring
7% increase in gross profit, mostly attributed to sales’ ability to price in a more calculated way. A related benefit was that sales found it faster to quote and required to increase their ability to justify pricing.
The company’s value prop lacked claims that reflected understanding of the true needs they served, the competitive landscape, and the company values that compelled interest in doing business with the company.
Review of 1 year’s marketing collateral and the company’s accumulated competitive intel
Competitor and market research; strategic planning to identify a stronger “why” and to focus revenue efforts
Deemed essential; unable to quantify
Salesperson confidence in value prop; leads generated from prospecting efforts
Competitive research on service offering differentiators, claims, mission/vision/values and market focus; define a messaging architecture that more closely aligns with customer needs, company values, overcomes the sameness in competitor messaging, and creates a stronger “why” for buying from them.
Competitive research and value prop design, market selection, change management and advisory
Updated internal and external messaging to drive the desired behavior
Intangible value; greater focus and profound uptick in sales confidence in messaging
A philosophy that “all customers are good customers” led to a situation where 38% of customers totalled less than 1% of revenue.
Analytics on revenue/profit contribution by customer size, sales rep / management interviews, analysis of rep activity history, sales process educational materials, strategic account plans, company strategic plan, sales plan / forecast
Account tiering, sales and service standards by tier, revised account/territory assignments with small customers owned by inside sales, minimum order policy
$3.5-7MM+ in new revenue/year
Increase in sales rep capacity without negatively affecting company reputation amongst small customers
Establish an inside sales role and quote process to enable small customer handoff to less experienced reps. Establish a new customer onboarding process to pre-qualify future Tier 1 and 2 Accounts. Redirect new field sales’ capacity to high-potential accounts.
Inside sales role, customer onboarding and quote process design; Netsuite solution requirements and solution validation; author sales team collaboration practices and guidelines; results monitoring
Netsuite solution implementation and change management
Field reps reported more than 25% of their workload was alleviated for redirection to larger opportunities. The new quote process replaced an error-prone customization process with reference solutions.
As a consequence of “all customers are good customers” and a high volume of small accounts, large accounts or those with large account potential had become unattended.
Analytics on revenue/profit contribution by customer size, sales rep / management interviews, analysis of rep activity history, sales process educational materials, strategic account plans, company strategic plan, sales plan / forecast
Account tiering, differing sales and service standards by tier, revised account/territory assignments, increased adoption of activity tracking
$3-6MM+ new revenue/year
Planned/actual activity by account, pipeline creation by account, revenue
Establish account tier criteria and assign all accounts, define sales activity guidelines by tier, and implement one way to do sales activity tracking.
Account tier and activity guidelines design; advise on account reassignment; identify rep-centered solution options for activity tracking
Account tier assignments, account reassignment to load balance, implementation of voice-to-text activity tracking solution
Sales began using voice-to-text activity tracking to capture activity notes which were logged in Netsuite. Management reported dramatically increased visibility to rep activity and, as a result, more productive account/deal reviews. Best of all, reps were able to focus on cultivating larger opportunities and achieved 30% revenue growth, with commensurate increase in forward looking pipeline.
Fluctuating role definitions and informal performance management practices was leading to conflict, lack of accountability and attrition.
50% of individual contributor roles and 80% of management roles did not have job descriptions or performance reviews, employee survey results, exit interview notes
A RACI matrix to organize roles and responsibilities, job descriptions, and a bonus-linked KPI for HR to enforce the company’s performance review process
Deemed essential; unable to quantify
% job descriptions completed, % of employees with performance reviews complete in last cycle, lower involuntary attrition, employees survey responses reflecting increased harmony, accountability and productivity
Establish a RACI to clarify roles and responsibilities, a Knowledge Matrix for assigning work to the most knowledgeable team member, and a mandate for HR to own job description development and performance review compliance.
Project oversight and management; job description deliverable review; advise on performance evaluation and conflict resolution
Gather internal input to establish baseline job descriptions; communicate and initiate performance review process.
Employees reported a dramatic increase in understanding their roles and responsibilities, performance review compliance reached 100%, and 4 underperformers were placed on a PIP and ultimately exited (a rarity in the organization). Managers also reported the RACI clarified shared responsibilities in a way that eliminated failure points and increased overall productivity.
© 2022 KGK & Company. All Rights Reserved.