Case Studies

CASE 5:  BUSINESS MODELING HELPS SMALL COMPANY TO BETTER UNDERSTAND ITS BUSINESS

Project Background:

PBS’s  client had devoted a significant amount of time expanding their business by both geographical spread and the services it offered, in an attempt to grow its turnover.  In doing so the owner had become concerned about the contribution made by different aspects of the business to the overall company success.  The routine financial reports of the company did not provide the insight the owners wished for and  they were becoming increasingly frustrated that the business was running ever faster just to stand still.

Project Objectives:

PBS was commissioned to complete a review of the business and give the client workable insight to issues such as:

  • Profit margins from the various segments of the business.
  • Pricing of Contracts
  • Cost control methods
  • Sources of potential efficiencies

With diverse service offerings it was important that the business focus on the most profitable areas and so move towards a more efficient and tightly controlled business set up.

Project Approach:

PBS met with a number of key personnel – primarily the MD, Operations, Finance and Departmental Managers.

The information gathered in these meetings concerned:

  • Perception of value proposition and company values
  • Current strategy
  • Revenue Figures
  • Geographic coverage
  • Job sequencing
  • Sales Initiatives
  • Analysis of Computer systems usage
  • Reporting systems
  • Seasonality
  • Issues impacting job performance
  • Future plans
  • Managements concerns and challenges

A review was completed and the information gathered was analysed by PBS and used in the generation of a Business Model.

Business Model:

The key features of the business model were:

  • Establishing cost per hour and revenue per hour to compare different segments of the business (as this was a metric uniquely suited to the service provided)
  • Setting an efficiency factor – contracted hours as a percentage of paid hours as an overall efficiency monitor
  • For each revenue stream developing a simple model to allow people to see contribution to overall business
  • For each revenue stream provide a user friendly model to allow for  evaluating impact of quotes for new business on both that revenue stream and overall business
  • Quantify the contribution of the various costs within the business
  • Allow for ongoing prediction of overall performance of the business
  • Evaluate pricing strategies to optimise gross margin contribution

Project Results:

Utilising the insights gained from the business model the client’s strategy was modified so that the following was achieved:

  • Targeting of new business became more selective and became the central focus of the owner using the insights gained from the model
  • Pricing was adjusted on elements of the business more reflective of their contribution
  • Operations of the business became more focussed on the parameters that added to its profit
  • The management of the business became more focused on current and future performance rather than historical performance