Managing accelerated growth
How this IT services firm managed their growth and increased their profit 4X year over year.
Rarely does a CEO think growing too quickly is a problem. We don't often have clients asking for help for being good at what they do. But when profitability is considered, a heightened speed of growth can be as problematic as growing too slowly. With rapid growth, a company can get out of sync and an imbalance is created among customers, products/service and the financials. Cracks can appear in quality and gaps start to show up in staff allocation percentages, in the available working capital, and in positive cash flow. The result is that things start to fray at the edges: quality, satisfaction, engagement and profitability suffers.
Hiring staff is the typical default answer to rapid growth. But managing the extra operational overhead can be problematic, and may not have been necessary in the end.
"Some days I just feel like we’re just reacting to things without a sense of control or plan"
- CEO, IT Services Firm
Becoming as disciplined in our operations as we are in our client services
Clients asking for more services was a good problem to have, until it becomes a problem. As reflected in the financials, our client saw slippage in profit and cash-flow even as revenues grew. “What we saw on the surface didn’t make sense, but we could feel the pressures the growth was having on the team and the company as a whole”. The company’s great reputation for quality, responsive service had become a double-edged sword. “We knew we had to take a step back and reassess the what, how and why approach to business.”
RKH Services Employed
RKH helps companies recalibrate their strategies to be more successful. Through AI assisted business situation analysis, RKH quickly analyzes market, company and competitors trends.
Design operations to contribute to operational profit by aligning practices with the corporate strategy at the best quality and cost point.
Creating strategies to eliminate cash flow and liquidity issues that threaten businesses viability.
“RKH's analysis helped us tremendously in identifying what we should focus on to maximize our value”
- CEO, Services Firm
Achieving financial results that match the growth profile
The CEO knew that with growth, they needed to mature their operational processes to keep up with the demand and the pace.
RKH engaged with an operational and functional diagnostic study to determine the best path to improve financial results and operational efficiency. A target was set to return to peak levels of profitability and build up liquidity ratios in-line with industry standards.
A detailed assessment through the RKH transformation process focused on how our client operated and redesigning how it would operate in the future. The result was a clarity on identifying the following:
Who were the most valuable clients to engage with
Which service fee structures to use
How to improve invoice management
How to improve operational procedures
Today, our client’s results are very different. We helped the client define initiatives, provided a business case, and provided a detailed implementation plan to achieve balanced smart growth goals. Over the six-month period we worked with them, we helped them realize:
40% increase in sales
4X increase in profit year over year
positive cash flow
2019 Update – checking-in with the client in year 2, they have again achieved a year-over-year increase in revenue, profit, and cash on hand. Further, they are undertaking a planned refinement of the improvement practices to gain even further efficiencies.