Growing Pains: The perils of unplanned expansion – Part 2June 20, 2018
Foodservices DistributionJune 23, 2018
Established in 1995, this firm were technology leaders in their sector, including pioneering Learning Management Systems (LMS) in Australia. Its roots were originally in media technology and video production.
Run by varying combinations of owners since its creation, the current owner had moved from employee, to part owner to full owner in 2013. He took over a business that faced structural challenges in their product life cycle, as well as declining in sales generally.
e-Learning, video production
- Sales declining
- Disruption in the video market, a decline in sales and a steep decline in margin
- Commoditisation and aggregation in the LMS market
- Threatened buy-out by the main vendor of two-thirds of the recurring sales base
- Complex products and customers who frequently don’t understand what they are buying and are therefore difficult to satisfy
- Lost money in the previous financial year
Early work included:
- Negotiation with the problematic vendor and successfully getting them to abandon the push to buy out the customer base
- Choosing the right early product area to focus on and adding an effective part-time sales resource. The area grew from virtually nothing to around 25 per cent of the increased business
- Retaining two significant clients who had indicated they would terminate the partnership by participating directly in negotiations
- As this is a technically complex area of business, requiring the rapid acquisition of sufficient product and sector knowledge to advise and operate effectively was achieved within months.
The Business Success Program provided a firm foundation for analysing the existing business and choosing the right strategies to return the business to a path of profits and growth.
The following areas were chosen as key to the long-term success of the business:
- Focus on one particular sector where we had a genuine competitive advantages for short term growth
- Develop a sales process specifically for the complex three-year buying cycle, taking a Thought Leader position
- Trial another LMS that was more cutting edge
- Develop a basic LMS we owned into a genuine mid-market competitor
- Create a process with collateral for dealing with the difficult to satisfy customers
- Add further sales resources as we hit trigger turnover levels
- Harness and enhance an innately good staff culture to ensure it is one of the foundations of the business as it grows
The strategy of focusing on one sector for short-term growth and adding sales resources and process has proved highly successful. The employee initially hired started their role at two days per week, and is currently employed four days. We are now delivering almost 25 per cent of sales and a higher proportion of gross profit from this sector. It is still early days, and we are on track for substantially higher sales in this area over the next two years.
Finding a quality LMS to resell has proven difficult and we rapidly moved to the strategy above, where we are developing our own mid-market system. This is getting a very promising response, and we are hiring a Business Development Manager who will be tasked with sales for this, as well as custom-built e-Learning courses.
A great deal of time was invested by BSPA and the owner into building positive relationships in key areas. This is now paying off in business development and customer retention.
The owner is very happy with the results:
- Profits have moved from the previous loss, to very strong levels
- The owner has had the confidence to purchase a new CBD office in recent months and is on track to grow the profits significantly over the next two years.
- Cashflow is no longer an issue
- The business now has a competitive quality offer in all key areas, and sales have grown by 50 per cent in the last year.
- There is scope to start developing a cutting-edge e-Learning product that will return the company to its natural position of Product Leadership.