Tapping Your Unseen Business Potential Fall 2009 Meeting October 1, 2009
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Presentation Topics 1.Where Business Potential Hides 2.Quantifying Your Potential 3.“Tapping” That Potential
Employee retention rates are a good indicator of corporate health Where is Your Potential Hiding?
High turnover in sales and marketing indicates a heavy reliance on new customer acquisition or a reactive sales environment High turnover in sales and marketing may mean a heavy reliance on new customer acquisition or a reactive sales environment Where is Your Potential Hiding?
High turnover in operations indicates a too diverse product and service offering portfolio Where is Your Potential Hiding?
Low Turnover in Finance and Administration Indicates A Bloated Infrastructure Where is Your Potential Hiding?
Most contracting firms are only achieving 6% of their revenue potential Startling “Facts”
20% of your customers are responsible for 80% of your revenues Startling “Facts”
Your offerings portfolio ensures that at least 30% of possible customer revenues are left for your competitor Startling “Facts”
Very few contractors are achieving the optimal chargeability rate of 80% Other Places to Investigate
Shared compensation programs may be paying some employees too much. Other Places to Investigate
Most contracting firms are only achieving 6% of their revenue potential The 6% Performance Barrier
Take the largest 2-3 customers and multiply their average revenue by the total number of active customers to calculate Optimal Revenue Potential The 6% Barrier
Compare the actual revenue realized by the potential revenue amount – this represents your upside revenue gap The 6% Barrier
It is possible to double the size of your business in months without adding one new customer! The 6% Barrier
The Revenue Per Customer Metric allows for you to “measure” effective customers – helping you break the 80/20 Rule Customer DNA
Take the total revenue for a stated period of time and divide it by the total number of active customers to calculate your revenue per customer metric Customer DNA
Extract the common characteristics of your “best” customers Customer DNA
Compare this “DNA” Overlay with all active customers Customer DNA
What customers are under-utilized and should aggressively be “marketed”? Customer DNA
The value of the calculation is in the trending of the information – not the snapshot Trends
Revenue per Customer Penetration in Optimal Revenue Potential Scenario #1
Resolution is to increase the number and diversity of offerings available (horizontal acquisition) Scenario #1
If you are in a niche market – this might be impossible to overcome Scenario #1
Revenue per Customer Penetration in Optimal Revenue Potential Scenario #2
This is the “death spiral” scenario – created, in part, by the recession Scenario #2
Only innovation – looking at a new way of doing business will lift you out of this scenario Scenario #2
Revenue per Customer Penetration in Optimal Revenue Potential Scenario #3
Resolution is to “fire all the salespeople” Scenario #3
Conduct an offerings audit to determine relevancy Scenario #3
Penetration in Optimal Revenue Potential Revenue per Customer Scenario #4
This is the best scenario because it fully leverages both customers and offerings – the two “hidden” components of every business Scenario #4
Offerings are sold based on a “reaction” to a customer’s request Portfolio Destinations
The goal is to create an offerings portfolio that focuses on a customer destination Portfolio Destinations
AIM is the foundation for creating a comprehensive offerings portfolio Portfolio Destinations
Assessments are quantitative studies that “show” the monetary value of a current or improved condition (e.g., water conservation audits) Portfolio Destinations
Implementation offerings are your core services and should represent 60% - 70% of total revenue Portfolio Destinations
Maintenance offerings allow you to interact with the customer throughout the entire business cycle Portfolio Destinations
Many contracting firms do not calculate chargeability correctly – leading to high levels of “opportunity” Quick Hits - Chargeability
Excluding the non-chargeable personnel from the calculation can drag down the overall score Quick Hits - Chargeability
Not charging the time of the owner is the same as giving away your most valuable asset Quick Hits - Chargeability
Shared compensation programs are great for rewarding deserving employees Quick Hits – Shared Compensation
For sales people – reward on the deal’s profitability – not, as many owners do, the gross revenue of the deal Quick Hits – Shared Compensation
For operational staff reward chargeable hours and beating fixed price estimates but deduct hours needed for re-work Quick Hits – Shared Compensation
Administrative personnel can take an active role in reducing your G&A expenses – a basis for their shared compensation Quick Hits – Shared Compensation
Reward Reinvest Review The Business Cycle Release Research Portfolio Destinations
Most contracting firms have inherent value that is never realized – much of it being found in customer rosters and offerings portfolios. It is possible to double the size of your firm without adding one new customer – while, at the same time, significantly reducing your cost of sales. The recession has created a “chaotic environment” that is ideal for implementing sweeping business changes. Are you ready to “tap” your unseen business potential? Final Points
Thank You! Contact Information: Brad Dawson LTV Dynamics