CASE STUDY 14/12
Can a Strategic Finance Office add
10% to your bottom-line
by rethinking your business verticals?
The Challenge
The company had 5 lines of business (LoBs) which it had classified as independent functions that only depended on centrally for management time, governance, and support functions. The business & sales teams were separately allotted to each LoB as it required domain expertise to make a sale. The marketing team was a shared function whose time was allocated across all the LoBs based on the revenue generated by each LoB.
Despite achieving over 20% CAGR over the last 5 years, the accrual of cash was reducing. The company continued to maintain profitability above its industry peers and hence were unaware that there could be an issue. During the same 5 year period, the company had also not made any sizable infrastructure spends.
Something was amiss. Enter Prequate.
We were brought on board to recognize opportunities for improving profitability with a perspective of cost optimization and boost the overall reporting frameworks for performance. Within 6 months of working with the business, we realized that while the business continued to grow, the profitability seemed to stay hovering around the same figure, though the time utilization numbers improved. This meant that the problem was less tactical and more strategic.
Knowing the why
The power of looking at a business outside-in is something that businesses tend to forget to do after a period. As the management gets busier in day-to-day operations, they forget to re-evaluate periodically what they are doing right and what they are doing wrong. Further, what worked in the past may not be what is working at this point in time for them. The value of the SFO, which functions as an external problem-solving crack team comes in here.
"
Because something worked well in the past does not mean it will work well today. Every few years, a company needs to look inward at everything they're doing and evaluate 'why'. Here, an external team can be the difference between knowing and actually doing something about it.
"
Pradyumna Nag, Partner
The Engagement
We were brought on board to recognize opportunities for improving profitability with a perspective of cost optimization and boost the overall reporting frameworks for performance.
Within 6 months of working with the business, we realized that while the business continued to grow, the profitability seemed to stay hovering around the same figure, though the time utilization numbers improved.
This meant that the problem was less tactical and more strategic.
The Approach
The first step to solving a problem is understanding how the business was making money mathematically.
Step 1
Introduce a more structured method at capturing costs relating to business operations of each LoB (right from the marketing team to post-sale support) + standardize reporting languages across all the LoBs
Step 2
Execute a detailed LoB study of all the LoBs with an eye for moving from allocations (distributed by share) to the allotment (identified for a specific purpose)
Step 3
Identify under-performing/ unprofitable/ onerous LoBs and deep-dive to understand the reasons for their impact on overall profitability
CASE STUDY 16/10
Business model redesign
can boost your ARR &
make you more investible.
About the client
Auber * Private Limited (Auber) is a was a 4-year-old B2B e-retailer providing tools and implements to small service providers (a $3Bn market) with a team of 10 employees. Auber had been consistently growing and was generating over $100k with less than $1k of marketing spends per annum.
The company had been trying to raise funds, but unable to get investors excited about the opportunity.
Industry: Enterprise SaaS
Location: India
Size: 10+ employees
Disclaimer: Considering the nature of work, client names & organizational specifics have been changed to protect client confidentiality.
Before
Initial operations of the company:
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GM of 14% across all products
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Tech spends of $75k per annum
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Over 40 merchants actively ordering on the platform
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150+ shipments a month
They had begun approaching investors for scaling the reach by adding more service providers across the country investors often compared it to their competition who had failed to break bank.
Enter Prequate.
Prequate was brought in to help Auber remodel their business and make them more attractive for VC investment.
Step 2
Developing a deep understanding
Prequate started off with a deep-dive into the key challenges that these service providers faced, the problems that technology could solve, the core fundamentals of a product, its possible adoption challenges, its stickiness and the type of data it was able to generate when it was deployed over time.
Prequate noticed:
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Product solved only one of the problems that the service providers faced – time to physically buy
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Product installed was essentially a piece of expensive real-estate on their target service providers phone
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Service providers had a tendency of switching to old habits if it yielded no other benefit
The real-estate of the app screen could be used more productively – to digitize the lives of the service provider, increase transparency and retain clients.
"
Because something worked well in the past does not mean it will work well today. Every few years, a company needs to look inward at everything they're doing and evaluate 'why'. Here, an external team can be the difference between knowing and actually doing something about it.
"
Pradyumna Nag, Partner
Step 2
Asking the right questions
Prequate deduced that the product would be quite easily unhinged by its competition which had much better capital firepower. It meant that the business model needed to solve larger problems in a way that answered >
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How integrated is this to all that I do as a service provider? Will I need to build new habits?
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Who gains primarily from using the product – me, my customers, or Auber?
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Will this benefit me in ways more than just efficiency?
Step 3
Getting to brass tacks
Prequate worked with their entire management teams including their customer onboarding team to get a detailed understanding of the challenges that service providers faced day-in & day-out.
▴ Create a well-rounded detailed customer persona
Identify & document clearly the life of the target customer, his daily routine, his concerns & his challenges every day
▴ Problem & solution segregation
Roster the set of problems and segregate them based on those that can be solved with technology and those that can be solved with better operations – ignore the rest
▴ Redesign the revenue model
Challenge the current product roadmap as to whether it solves these challenges. If not, what should be added?
▴ Redesign the business model
Create new business model which involves solving the problems using technology on a sustained basi
The Prequate Difference
Step 4
Getting to brass tacks
Prequate derived a:
▴ a new business model: which involved providing a much needed workflow digitization application, completely built for any smartphone, for service providers – for free. App would integrate into their e-tail to close the loop; and
▴ Re-strategized their product roadmap:
to include one-hand operation, one-touch support, CRM functionalities, e-invoicing, and digital service history and e-payments modules. Clients could use this tool to chat securely.
IMPACT
A business model redesign can boost your ARR & make you more investible.
▴ Raised seed-funding of ▴ $1M in under 90 days
▴ Software ARR growing by ▴ 170% MoM (2,000% Annualized)
▴ GM% increased from 14% to ▴ 26% in 3 months
▴ Product use & adoption increased by ▴ 100% MoM
▴ The solution as a software tool can bring in
incremental revenue at a ▴ 90% GM