Helping Organizations Grow Profitably

Case Study: Target Acquisition Analysis

Written by Zinal Shah February 5, 2012 —

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In 2009, the subsidiary of a diversified, multi-billion dollar company approached Schweiger & Associates to help develop and execute their future growth strategy. This case study presents the challenges our client faced and the approach we employed.

Challenge

Over the past few years our client had undergone numerous organizational changes that influenced the strategic decisions it made. Its acquisition by a much larger company created overlapping lines of business and a hierarchal organizational structure. At the same time, the majority of our client’s business came from a single office in the Department of Energy (DOE), where they had created a dominant position and won much respect from their peers. As a valuable asset, corporate was satisfied with our client’s position in that office and was hesitant to approve ventures that deviate from it. However, corporate wanted to double the size of the business in 3-5 years. To add to it, the DOE office our client served, faced reduced funding and discouraged dominance by a single company, thereby limiting long-term growth opportunities. As such, our client was faced with the dilemma of searching for new growth opportunities while being mindful of its new parent company’s growth strategies and those of its other divisions, all of which restrained the services that could be offered and the markets served. Critical to our client’s success in implementing any growth initiatives was the buy-in of its own internal leadership team, as well as those of others in the corporate hierarchy.

Scope

Our client was convinced that in order to meet the aggressive growth goals, an acquisition would have to be made. To that end, Schweiger & Associates was trusted with:

  1. Identifying and validating attractive adjacent markets which our client could successfully serve but had little or no presence.
  2. Identifying and assessing viable acquisition candidates that would enable our client to successfully enter and compete within validated markets.

Approach

To complete the scope of work outlined, we employed our Strategy Development and Execution Process (illustrated below) in 3 stages:

(S&A uses this process as a guide and adjusts the order in which steps are performed or conducted depending on the needs of and challenges facing our clients. As with all our processes, executives and managers participate regularly providing critical input and feedback, creating a partnership that fosters long-term commitment to strategic decisions.)

Stage # 1: Identify Adjacent Markets

Prior to identifying adjacent markets, it was critical for the S&A team to have an understanding of our client’s goals and competitive advantage, and to reach consensus on the capabilities and services that could be extended to new markets. This preliminary internal capability analysis allowed us to short-list nine local and international adjacent markets. To help prioritize the nine prospective markets, the S&A team analyzed:

  • Overall trends shaping the energy landscape by reviewing several market reports, news reports, and expert opinions.
  • The level of presence that our client had in these markets by analyzing past projects and by connecting with key individuals within the company.
  • Overall market potential and growth rates.

Our research and findings were presented to internal decision makers during an S&A facilitated brain-storming session. S&A believes that involving key individuals at the onset of the project is an essential first-step to securing the buy-in for any growth initiatives. This session resulted in:

  • A final short-list of the five most attractive markets which needed deeper analysis. These included other offices within the DOE where some work was won but significant penetration had not occurred and an international market that was recently entered but organic growth was ineffective.
  • A preliminary list of acquisition criteria such as capabilities/ services offered, customers served, size of the organization, revenues, market position, brand reputation, ownership of proprietary products / processes, and company culture, among others.
  • Identifying internal sponsors for each market, who provided critical feedback at regular intervals and who also had joint ownership in the validation process.

During this session, the S&A team also observed and assessed our client’s organizational culture which guided our research of companies.

Stage # 2: Conduct Market Attractiveness Analysis and Competitor Analysis

As the next stage in our solution offering, we worked in partnership with the internal sponsors to validate the short-listed markets by understanding:

  • Public office mandate, structure, operating model and geographical scope.
  • Near-term and long-term strategic plans.
  • Major sources of constant funding for the next 5/10/15 years including any exceptions such as funds appropriated through the American Recovery and Reinvestment Act.
  • Market drivers, growth trends and key success factors.
  • Future opportunities and planned projects that could be of interest for the next 5 to 10 years.
  • Supply chain and contracting process.

S&A employed a holistic approach to thoroughly understand each element listed above by conducting secondary research and when necessary connecting with subject matter experts. For example:

  • We interviewed subject matter experts in a number of new technologies that were likely to shape the future of some prospective markets, and we also drew from the knowledge that our client’s corporate members had gathered by visiting industry conferences.
  • We interviewed officers from various international public offices to understand the fundamental differences in the shortlisted international market.
  • Also, we created an extensive database of projects awarded since 1995 and planned projects till 2015 to get an accurate understanding of the overall opportunity and growth trends in the specific international market.

Next, by working in partnership with our sponsors and studying previous contracts we developed a comprehensive list of key players within each market that provided services in line with our client’s goals. These companies were classified as competitors or targets based on their fit with preliminary acquisition criteria.  To get a further understanding of the Key Success Factors and competitive intensity within each market, the S&A team conducted an in-depth competitor analysis by drawing on annual reports, news reports, and in some cases connecting with individuals knowledgeable about the companies.

We presented our findings to the leadership team, and through a facilitated debate and discussion, the team shortlisted two markets to pursue.

Stage 3: Choose Viable Acquisition Candidates

In this stage, S&A conducted a comprehensive study of potential targets in the short-listed markets. Acquisition criteria that were preliminarily agreed upon at the onset of the project were revisited and more specific attributes for strategic, financial and organizational criteria were discussed, finalized and weighted. Some criteria were go/ no-go while others were assigned specific metrics as cut-off points and weighted composite scores were calculated.

Other than performing detailed company analysis, we also did the below:

  • Performed financial analysis to ensure the companies were not in distress.
  • Reviewed contracts to see if the companies had existing contracts in short-listed markets.
  • Assessed the caliber of personnel within the organization and the overall reputation of the company.

Finally, through a facilitated session, the leadership team assigned subjective values for each acquisition criterion for the potential targets. The leadership team along with S&A reached consensus on 2-3 companies per market that was presented to the division CEO with whom one market and acquisition target was finalized.

Results

At the end of the project, our client was several steps closer to achieving its growth goals. S&A had equipped them with detailed, fact-based and thorough research and analysis to make informed decisions.  More importantly S&A played a vital role in securing the buy-in of the entire leadership team, which significantly improved our client’s chances of success at division and corporate levels. Even after project deliverables were met, while our client performed initial negotiations with the chosen target, S&A continued to assist by developing preliminary integration plans that reinforced our client’s commitment to the acquisition at the corporate level.

Case Study: Company Turnaround

Written by Vishal Khushalani February 1, 2012 —

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The Client’s Challenge

A $100+ million division of a large multi-billion dollar industrial company lost 25% of its revenue between 2005 and 2010 while their EBIT declined by 91% during the same period dropping to 0.9% of their 2010 sales revenue. In 2011, Schweiger & Associates (S&A) was hired by the company to help restore its revenues and achieve at least 10% EBIT by the end of 2012.

Customer’s Business Status by the End of 2011

With support from S&A, our client’s 2011 revenue increased by 20.20% over that in 2010 and its 2011 EBIT was 5.5% of their 2011 revenue, an increase of 470% over that of 2010. S&A continues to work closely with the client to increase their EBIT to 10% of their sales revenues by end of 2012.

How Schweiger & Associates Helped

We will present some of the key issues that were identified throughout the company during the course of the turnaround and the solutions we provided that yielded a sizeable increase in revenues and EBIT in less than one year.

Strategic Alignment

S&A provided market insights, growth rates and trends to help our client focus on customers that were in high growth markets and regions in the US. Additionally, the S&A team conducted a detailed analysis of four years of historical data (2007-2010) to understand the following aspects of the business.

  • Top customers – revenue, contribution margin, product portfolio, purchasing by manufacturing location.
  • Top products – revenue, contribution margin, key customers, shipment by manufacturing location.
  • Manufacturing locations – revenue, cost components, contribution margin, top customers and products.

Key issues that surfaced from the analysis were brainstormed with our client’s management team to develop an executable action plan. All of the key improvement areas mentioned below were executed simultaneously as they were highly inter-related.

Sales & Marketing Execution Support

Product Pricing

This was one major issue our client faced that needed immediate correction. Through several years of matching competitive bids, their current product pricing varied significantly for the same product across customers and regional markets. To add to the problem, it was difficult to get the true market price since our client owned 70% of the market share.

S&A reviewed the pricing for each of the 1400+ products and helped our client:

  • Create product groups that had similar cost structure based on their technical specifications
  • Establish min, max, average, and median sales prices for each product group
  • Highlight products that were currently sold at below average product group prices
  • Highlight strategic and non-strategic customers that were draining the bottom line

The following action plan was implemented to improve the contribution margin.

  • Pricing for non-strategic customers was immediately increased. This resulted in a loss of a few profit-draining customers which was the first step to improving our client’s bottom line.
  • Several meetings were held with strategic customers explaining the rationale for fair price increases that helped our client to at least cover their costs.
  • Mutually agreeable future price increases were discussed and planned with several strategic customers.

Product Costing

A second major issue for our client was their product costing mechanism. The costing tool they employed was designed 25 years ago based on time studies that were conducted in 1980s. Another issue highlighted was that costs such as warehouse costs, freight costs, and assembly costs, among others were based on variable percentages that were not in line with current real costs.

S&A conducted several time studies across different manufacturing locations for various product lines. The time studies helped revise labor costs for each product. Knowing the current material usage for each SKU and by calculating all related costs (freight, assembly, storage), the true costs were determined for each product. Our client’s costing system was thus updated with the latest time studies and with all related current costs for each of their products. Using the current sales price and costs, the current contribution margin was calculated for each product.

To assist our client further, the S&A team created a P&L simulation sheet based on revised product costs and pricing. This simulation sheet proved to be critical in customer negotiations since it helped our client simulate the contribution margin based on varying degrees of price increases.

Product Standardization

Over a 25-year period, customization requests by customers resulted in 1400+ SKUs within seven product groups. When the economy was booming and pricing was not under pressure, product customization was considered to be a competitive advantage for our client and hence they absorbed all costs to keep their customers happy. When margin pressure increased, this competitive advantage drained our client’s profitability as they failed to charge their customers for customized products and services.

By conducting a week-by-week ordering analysis, the S&A team highlighted about 400 SKUs that met the minimum order quantity (MOQ) set by the operations team. Over 70% of the products ordered by customers did not meet the MOQs resulting in higher setup costs and frequent changeovers reducing the overall efficiency of the plant.

The following action plan was implemented to standardize products across product groups.

  • Through a series of discussions with our client team, about 200 products were identified as standardized offerings across the company’s various product categories.
  • All other 1200+ products were considered to be non-standard, for which the customers had to pay a reasonable premium and also pay a “Setup Fee” if the order was less than MOQ.

Although several strategic and high-volume customers did not welcome product rationalization initially, they eventually appreciated the standardization effort since it helped them streamline their supply chain across the product lines.

Operations Improvement Insights & Implementation

Process Improvements

S&A Operations Experts visited each of the client’s manufacturing facilities and provided several process improvement insights. The following are some of the key action areas that resulted in significant plant-level productivity improvements.

  • The process flow, batch times, and throughputs of each manufacturing line were analyzed and a detail plan was presented to eliminate the bottlenecks and improve the productivity of the lines.
  • Policy changes were implemented to freeze the master production schedule at least one week in advance, to avoid any disruptions in the production schedule. Also, strict adherence to established MOQs was implemented by charging setup fees to customers for orders less than MOQ.
  • Setup staff (a critical resource) was optimized effectively by staggering breaks and by cross-training existing personnel.
  • Preventive maintenance programs were implemented to avoid future production downtimes.
  • Paperwork analysis resulted in reduction of 50% of paperwork.
  • Scrap analysis reduced scrap by 60% resulting in reduced material loss and increased productivity.

Most of the “low hanging fruits” were fixed in 2011 that resulted in higher contribution margin at the plant level. In 2012, as we complete the network constraint analysis, eliminate more bottlenecks, implement a superior production scheduling system, and realize the true benefit of standardization, our client’s profitability is bound to increase significantly.

Conclusions

In addition to the technical aspects presented above, it was the organizational execution that made this turnaround successful.

  • Working as one single team with one single goal – to increase profitability.
  • Clearly communicating the strategic direction across the company.
  • Involving all inter-related parties/functions before making any major decisions.
  • Taking prompt decisions and moving quickly on action plans.
  • Consistently focusing on the overall strategy and the vision, throughout the turnaround.

With that we’ll conclude this case study with the famous lines of Robert Frost (1923), “The woods are lovely, dark and deep. But I have promises to keep, And miles to go before I sleep, And miles to go before I sleep.”

Case Study: Driving Profitable Growth

Written by Dr. David Schweiger December 22, 2010 —


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Case Study – Driving Profitable Growth

The Client’s Challenge

In early 2004, the CEO of a Fortune 1000 industrial and consumer manufacturing company approached us with an interesting challenge. While he continued to meet analysts’ earnings per share (EPS) estimates, his share price was languishing – even as the overall stock market was somewhat bullish. While the company had done a great job at increasing earnings through productivity improvements and cost cutting, the message from the analysts was quite clear, “more top line growth. “ To that end, the CEO committed to the analysts that he would profitably grow revenue by one third over the next 5 years.

The CEO approached us shortly thereafter and asked if we would work with him, his division presidents, and numerous business unit managers within each division to achieve the promised growth. This would require the company to both look at adjacent growth markets and to explore markets that were potentially outside their traditional sweet spots. In both cases it would require breaking some paradigms and traditions. It would also require taking a hard look at the company’s internal capabilities. Growth would not come easily or quickly. It would require focus, commitment, and persistence, tempered with patience. After discussion with the CEO, it was apparent that there were three important deliverables that needed to be realized if the company were to actually achieve the promised growth.

1. A feasible set of new market opportunities with clear analyses of the nature and magnitude of the opportunities, strategies for capitalizing on them and the resources needed to take advantage of them (i.e., sound business cases) needed to be identified.

2. Executives and managers would have to understand and buy into the need to enter these markets, commit to implementing the changes needed to do so, and subsequently execute them.

3. Executives and managers would need to develop the individual and organizational capabilities to continue this process well into the future after we departed.

How We Approached the Challenge

Based on the three deliverables, it was clear that we would have to co-design with our client both the “technical” approach for evaluating and deciding upon opportunities and a “social” process for properly engaging key executives and managers in getting and implementing the “right” answers. Without the latter, the results would likely be a series of thoughtful presentations that would wind up on a shelf.

Over the period of several years we worked with both the consumer and industrial divisions and numerous business units within them to identify and assess growth opportunities. In every case, core teams were created with key company managers and with Schweiger & Associates (S&A) staff. The former brought with them knowledge of their businesses and markets, whereas the latter brought a systematic process, frameworks and tools for analyzing opportunities; team facilitation and coaching; independent research capabilities; experience with numerous other companies and markets; expertise in developing and presenting work products; and a dispassionate objective eye.  Since this effort was a knowledge-driven activity, additional people from within the company and outside industry/market experts were brought into the teams on an ad hoc basis as needed.

At the outset of the project several key issues were addressed to ensure that each team’s efforts were focused and productive. Specifically:

1. What was the scope of the project? What was within scope? What was outside scope?

2. What were the deliverables from the projects? Challenge session meetings (critical reviews at various stages); Presentations; Reports

3. What were the completion timeframes and milestones that needed to be achieved?

4. Who at the highest executive level would champion the project?

5. What key executives and managers needed to be part of the team; Those with key knowledge; Opinion/change leaders who would help drive the execution of the project results; Those who were action oriented and would help drive the project

6. What roles would each member of the team play?

7. How would we ensure that the CEO and other key executives and stakeholders were committed to the outcomes?

Once the teams were established we worked through a three-stage process as illustrated and described below. It is important to note that in some cases the divisions and businesses were very clear on which market(s) they wanted to investigate, whereas in others needed were more open to exploration. In the former case we focused on stages 2 and 3, whereas in the latter, we included stage 1.

In Stage 1 we focused on the ideation or idea generation process to generate a sufficiently broad list of potential markets to explore. This was done through a brainstorming process that leveraged executive and manager’s experience, knowledge and insights with our research capabilities, tools, and facilitation. During this stage executives and managers were first encouraged to articulate those markets that they believed were worth looking into. To ensure that we had a sufficiently broad pool of potential markets, we explored:

1. Market value chains to determine whether there are growth opportunities for either forward or backward integration.

2. New business models that may supplant the existing model and lead to significant market share gains.

3. Opportunities for horizontal integration.

4. How the company might leverage its customer base and offer new products and/or services.

5. How the company might leverage its capabilities/products/services into new customer markets

6. New markets that were beyond both the company’s existing customers and capabilities/products/services.

We encouraged open mindedness and creativity. While we knew that some ideas might seem off-based at first, we believed that it was important to initially break some strongly held paradigms before arriving at a final set of markets. In a number of cases, the S&A research staff did some preliminary research to better understand markets that were unfamiliar, poorly understood, or not considered by client members of the team.

Once the initial list of markets were identified, a first cut analysis of each market was conducted. We developed preliminary standardized (e.g., market size, growth and profitability, ease and cost of entry and barriers to entry, commoditized or differentiated products/services) and customized (i.e., tailored to the company’s strategic and financial orientation) “go no-go and weighted criteria to develop a rank-ordered set of markets that warranted a “deeper dive” and further validation. It is important to note, that constructive debate among team members was encouraged and was critical in deciding which markets to further investigate. This was especially important, as the research needed for a deeper dive would require significant time and resources.

In Stage 2 we focused on the validation of those markets that survived stage 1. The objective here was to rigorously analyze each market to determine:

1. Whether the market was worth entering.

2. What it would take to effectively compete.

3. What were the most effective strategies for entry (e.g., organic, merger or acquisition, joint venture).

4. What types of profits and return on investment could be expected.

Using a fact-driven protocol developed by S&A we systematically examined an array of elements including:

1. Market structures, value chains (supply through distribution) and business models

2. Drivers of growth and profitability

3. Drivers of industry changes and disruptive transformations (e.g., technology, demographics, social, legislative and regulatory)

4. Customer key success factors, competitors, winning value propositions, and bases of competitive advantage

5. Market entry strategies and investments

6. Financial impact analysis

To analyze all of these elements for each market, both primary and secondary research needed to be conducted. (Please see an overview of S&A’s market research capabilities). Before we began, we examined all research that had been previously purchased or conducted by our client. There was no need to reinvent the wheel! We found, as is the case with many of our clients, that there were many studies floating around. Once that step was completed, we defined what new research needed to be completed and worked with our client to determine what they were capable of doing and what the S&A staff needed to do. Essentially, we worked as a tight-knit team to do whatever it took to get the job done.

After pouring over the analyses, conducting many facilitated debates and discussions within the team and with senior executives, decisions were made as to which markets to go after. Often, the research yielded one or two markets worth pursuing. Once those decisions were made, we developed an execution strategy.

In Stage 3 we focused on developing an execution plan to translate the opportunity into a reality. This included a plan on how we would enter the market with detailed initiatives for getting the job done. For example, in the case of an acquisition strategy, we identified specific acquisition targets, many of whom were identified as potential competitors in stage 2. We thoroughly analyzed each target, identified whom to contact at the target, conducted a preliminary valuation of the target and even set up meetings between the target and our client’s senior management. Throughout the acquisition process, we worked with our client as needed to complete the acquisition, right through to developing and executing an integration strategy. In the case of an organic entry strategy, we developed complete plans for securing and deploying the necessary resources (e.g., people, assets, systems, processes, organization structure) to successfully enter and compete. All execution plans included key initiatives and activities, due dates, milestones and reviews, responsibilities, contingencies, stakeholder analyses, and financial and people resources needed to complete the plan.

Although many of the entry strategies have been implemented and the teams disbanded, S&A continues to assist our client as needed in helping ensure that the execution continues to go well and new opportunities are considered. However, our client is successfully performing many of these activities on its own.

The Results

Overall, the process we employed achieved what it set out to do. Within less than 5 years, the company had achieved its revenue and earnings per share growth goals. More importantly, it achieved more than 50% growth in its stock price within 3 years and 40% growth within 5 years (taking into account the great recession). Further, the company is well positioned within growth markets.

There are a number of managers who participated on the teams that have been promoted to key positions within the company. The company readily acknowledges that the process not only helped develop these individuals’ capabilities, but it gave them exposure with the senior executive team that enabled them to demonstrate these capabilities. Moreover, the company is better able today to drive growth alone than before it began working with us. However, S&A remains a trusted partner with the company and continues to provide support when needed in identifying, validating and supporting the execution of the company’s growth strategies.

Case Study – Making an Investor Business Plan

Written by Vishal Khushalani December 21, 2010 —

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Case Study – Making an Investor Business Plan

Challenges facing the client

Our client, an entrepreneur and venture capitalist, was passionate about a new business concept, had done some secondary research and had prepared a draft business plan. He envisioned that China and US could largely benefit from his business service and hence several investors will back it up once they are presented with a solid business plan. He believed that his research was thorough and that he needed a professional company to translate his thoughts, ideas, and research into an executable business plan that could be presented to investors for funding. Thus, he was referred to the Schweiger & Associates (S&A) team to help him overcome his challenge.

Our Initial Assessment

In a situation like this where entrepreneurs are involved, it is important for the Schweiger & Associates (S&A) team to understand the vision and passion of the entrepreneur on venturing into this business. Other than having a good business idea, it is important that the entrepreneur believes in his own idea and is committed to it. Also, it was important for the S&A team to be convinced about the concept to write a convincing plan for investors.

We brainstormed with the entrepreneur and his team to answer some basic business related questions. Some of them are mentioned below.

  • What is the most compelling value proposition of this business concept?
  • What value (tangible and intangible) will this service bring to customers and promoters alike?
  • What are the sources of his research and how current is the information?
  • Why target China first? Why not any other country?
  • Have they discussed with any prospective customer if they would be interested in this service and how much will they be willing to pay for it?
  • What are some of the personal and professional reasons that the entrepreneur is passionate about the business?
  • What in his opinion should be the market entry strategy and why?
  • Are there any investors that he has in mind that he wants to approach first and why?

After spending several hours together over two sessions, the client and the S&A team concluded that:

  • The business concept was innovative enough that it’s worth everybody’s time to pursue this further. It was important for the S&A team to believe in the business concept to deliver a good quality product. Our intent was not to just make a business plan; we wanted to make this business happen!
  • The existing research material was dated. We needed to get current information. Hence, it was important to conduct secondary and primary research and get direct customer feedback. There is nothing more convincing than the customer saying that they would like to have this service and that they will pay for it.
  • It was required to research on investment firms that will be interested in supporting a business venture like this one and get their relevant contacts.

Deliverables Finalized

One of our key tasks at Schweiger & Associates is to help businesses understand what they need to make their business grow profitably. What are the kinds of information, tools, and processes that they need to be armed with to succeed? Finalizing the deliverables is the most critical aspect of any project so that the expectations between each team are set appropriately to ensure complete satisfaction of our customer.

Project Scope:

  • Validate draft business plan through secondary and primary research
  • Prepare a concise and actionable business plan and 5 year financial plan
  • Advise on appropriate market entry strategies
  • Present a financial package proposal for investors
  • Research and profile key investment firms to target

Market Validation

Since the S&A team believed in the viability of the business concept, we dived into understanding the market further to validate the below information:

  • Market size, revenue, profitability, key players, growth drivers, key success factors, and more
  • Market pain areas and challenges that could justify the need for this business service
  • Estimate the tangible and intangible benefits that the value chain will gain by the business service

Since the initial target market was China, there were several challenges that we had to overcome.

  • Information about the current dynamics of the Chinese market was not openly written about or readily available. Also, a lot of information was in Chinese which made the task even more difficult.
  • Being a new concept, there was no market precedent of anybody trying this concept and hence there were “technically” no competitors. We had to think and brainstorm about who could become a potential competitor once the business concept was proven and was viable.
  • Since the business concept was a more efficient way of achieving the same result, the challenge that we had to answer was will the people in China change their way of working to be more efficient or there were any specific reasons why they would want to stick to their old processes.

With so many issues at hand, the best way to answer the above questions was to conduct primary research into the Chinese market and get the answers ourselves.

  • We researched on obtaining contact information of prospective interviewees who could possibly answer our questions and help us understand the market better. Interviewees included industry participants, authors of related books and articles, and people at industry forums.
  • We hired a bi-lingual resource that could translate our questionnaire into Chinese and also conduct interviews in Chinese where people where not comfortable to talk in English.
  • We tried to connect with relevant people in the US who had connections in China. “Guanxi”, which means “connections” or “relationships”, is very important in China and it helped us open a lot of doors.

Even though the interview process increased our estimated timeline for this project, the client understood the rationale for our actions and realized the efforts that were being made to do a thorough job. It is always better to do the job right first time around instead of doing patch work later!

The primary research helped the business plan drastically since it specifically addressed the areas that were most critical to the success of this business concept:

  • 64% of the respondents confirmed that they face the same issues which we had pre-empted.
  • 56% of the respondents were open to try the new business service.
  • Respondents further confirmed the existing business model and a few of them even proposed a new business model that could be more efficient for the industry.

With a solid backing of secondary and primary researched information we were able to write a solid business plan for our client. A typical format of our business plan is highlighted in our blog “Writing a Solid Business Plan”.

The Financial Plan

One of the biggest challenges with this business plan was that there was no precedence of a similar business or concept in any industry. Everything had to be estimated and rationalized to make this business successful.

Some of the areas that we worked on extensively included:

Business Model: Given the business concept, we created the business model that would be most efficient for the customer and the business. It is important to understand how and when the cash will flow through the business and who will be the stakeholders at each stage.

Sales Methodology: This is an important piece of any business. Especially in a service-oriented business, the sales price is not so easy to determine as it is for a product-based business. Additionally, if the service is openly priced, it is easy for any customer to understand the cost structure and then bargain on the price paid. Service-oriented businesses need to be compensated based on the value gained by the customer and it should not be based on the traditional model of cost plus profit. Value-based model is also difficult to comprehend and hence it gives businesses a solid competitive advantage. Along with the entrepreneur, the S&A team innovated a pricing mechanism which was simple enough to justify the value to the customer and at the same time it was difficult enough for competition to duplicate our business model anytime soon.

Expenses: This was an interesting piece of the financial plan. We formed a panel of industry experts and brainstormed with them on all possible expenses that one would need to make to run the business cost-effectively. Every expense was estimated that the business would make in the near term and long term and still make a justified profit, if it grew as planned.

The financial plan was completed with short-term and long-term cash flows, P&L statements, Balance sheets, customer ROIs, and Investor ROIs up to the satisfaction of industry experts and the entrepreneur’s team.

Investor Research

Based on the probability of success we focused our research on identifying investors from three groups of firms – private/public companies that could benefit the most from the business service, venture capitalist and banks that fund new businesses in that industry. Other than identifying the right set of investors, we also ensured that our client understood their deal process and history and the key players within each firm. For each prospective investor, our team provided insights on the approach and strategy specific to each investor.

Final Results

Our client, an entrepreneur and a venture capitalist was happy to receive a comprehensive and professional set of documents that included a thorough and actionable business plan, financial plan, and other relevant presentation materials for prospective investors. We continue to advice and guide our client as they actively seek funding. The aim of the Schweiger and Associates team is to always ensure that our clients succeed in achieving their goals which gives us the most satisfaction than anything else.

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