Doubling profitability at an Inc. 5000 IT Services firm

The results of KGK’s work with an IT Reseller and Services company generating $45M in revenue per year.

Client Overview

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.

Initial Insights

During a Complimentary 1-Day Assessment, KGK shared observations of where the company may have revenue and profit opportunities:

  • An excessively broad product and service portfolio may be delivering growth without attractive margin contribution
  • Leadership with limited outside management experience / education may be holding back the organization

Engagement Objectives

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: 

  • Reach $5M or 8-12% in net profit, up from their current $1.5M or 3-4% profit.
  • Invest in reoccurring growth that commands a higher valuation at the planned 3-5 year exit horizon.

Engagement Abstract

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.

Insight, Action and Results Delivered

Suboptimal pricing policy

Issue/Opportunity: Suboptimal pricing policy

Proof: Analytics of pricing variances on 2 years sales history + sales interviews

Option(s): Revised pricing policy and system-level controlPotential: $500k net income / year

Accountability: Increased margins without negatively affective volume

Potential: $500k net income / year

Action and Results ->

Action and Results

Decision / Action: 

KGK's Role: 

Client Role: 

Results: 

Back to Insight ->

Insight, Action and Results Delivered

Suboptimal pricing policy

Issue/Opportunity: Suboptimal pricing policy

Proof: Analytics of pricing variances on 2 years sales history + sales interviews

Option(s): Revised pricing policy and system-level controlPotential: $500k net income / year

Accountability: Increased margins without negatively affective volume

Potential: $500k net income / year

Action and Results ->

Action and Results

Decision / Action: 

KGK's Role: 

Client Role: 

Results: 

Back to Insight ->

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