GROWING REVENUE & PROFIT WHILE BEING CUSTOMER OBSESSED
A Story of Success
In any business there are goals to increase revenue, increase profit, move faster, and to work smarter. In a fast growth, start-up organization, this type of behavior can be exemplified at a rate higher than industry standards. It is imperative that data be consistent to the foundation and fuel discussions toward the goal. SSG Consulting secured a large scale / long term project related to revenue and profitability. The revenue goal was to grow as quickly as possible while company gross profit was to be 46% or higher. The firm had to remain customer obsessed when looking at considerations of how to increase revenue and profit.
The analysis showed that the prior year revenue doubled from organic growth while gross profit declined from 45% to 43%. Diving deep into the data and analysis it was evident that growth would continue at a rapid pace due to pipeline and a partnership with a Enterprise Technology Company. However, without making any changes in selling and the price of services gross profit would continue to decline. This was due to having a blended rate for every resource versus an internal rate card for multiple types of roles and resources that projects were being staffed with. At a hourly blended rate the gross profit declined two percent due to needing to hire resources whose salary was higher based on experience.
We proceeded to innovate a solution that would shift the company’s method of pricing, scheduling and delivery of work. This solution would review industry data, clients, and resources to continue the revenue growth and increase the gross profit. This effort had three main categories: obtain industry data regarding regional billing rates (Central region), review salary data compared to title and banding, and initiate a discount process as an option when facing pricing pressure instead of reducing rates. This process would also initiate a culture shift in sales delivery and statement of work creation which would need training and collaboration.
Industry data indicated the market expected to see rate cards and varying rates for different roles. In addition, I discovered that this rate would vary depending where the client was located within the Central region. This data we uncovered supported the foundation of needing to look creatively at pricing and that the client would bear this.
When reviewing salary data, title, and bands of consultants there were three clearly defined groupings with titles and salary bands that could be segregated. From there we reviewed and set utilization targets and billability by role to analyze how more billable roles could absorb the overheard of the less billable ones due to having additional responsibilities like pre-sales, statement of work creation, management roles, and training.
When sales felt pressure regarding pricing from a client we developed a process where the company could offer a discount in return for a case study, a reference or additional future work. Thresholds were put into place for discount approval amounts from director to owner. Each discount needed to be reviewed to ensure that the project was meeting the goals regarding profit. If the project was below an estimated 44% gross profit level, the executive team would need to approve.
We regularly met with executive team with finding and recommendations. When bill rate changes were approved the sales team and solution directors were involved to obtain their opinions and to garner buy in. There was not an immediate acceptance of this change as “business had always been a blended rate”. To manage the change, earn trust and move ahead quickly with the pricing changes two training sessions were held. The training involved sharing examples and detail to gross profit on how this affected the company’s bottom line and the sales commission programs in place. During these training sessions the sales team agreed that this was the best way to move ahead and believed that they could sell this change to existing to clients.
As the business grew and new hires were on-boarded the processes put into place ensured that resourcing / scheduling was done at the appropriate role and bill rate. This ensured the company would maximize gross profit. After implementing these changes in bill rates, revenue grew by 184% and the gross profit for the organization was 45.7% in the following year.