Tag Archives: Service

What’s the Right Model for a Service Company? Four Points

Situation: The President of a professional service company and his team are considering adjustments to their business model. The alternatives under consideration are a client-centered model and a service delivery model. What’s the right model for a service company?

Advice from the CEOs:

  • In the client-centered model, the emphasis is on maintenance of the customer relationship by the responsible manager, with support from the group to optimize service delivery.
    • Consider the service being provided and the client’s expectations. Does the client want to have a principal point of contact – a client manager – to address their needs?
    • This model centers on the key manager creating and maintaining an ongoing relationship with the customer, including rapid response to inquiries from the customer.
  • In the service delivery model, the emphasis is on a developing and maintaining a high standard of service delivery so that multiple individuals can deliver the service rapidly and reliably.
    • As in the client-centered model, consider the service being provided and the client’s expectations. Is the customer’s principle concern functionally rather than personally oriented – for example keeping a system up and running in the fastest time with a manageable expense? In this case, the individual technician is not as important as speed of response and assurance of a quality outcome.
    • The service delivery model centers on standardized and predictable delivery of a defined service, with high responsiveness to the client’s needs. Those who deliver the service are paid variably based on their skills and assigned to deliver service consistent with their abilities. A benefit of this model is that business maintenance is not as dependent on individual service providers as the client-centered model.
  • In choosing between these models, it is important to speak with your clients and to understand their needs and priorities. Is your model a direct business to customer relationship or a business to business relationship? Is your offering perceived by the customer as a service or a product with tangible results? Is your customer more interested in meeting short-term needs or developing a long-term relationship?
  • As an example, is the customer expecting a personal, customized service and desirous of maintaining a long-term relationship? For this, a Nordstrom-like model may make the most sense – a highly personalized level of service where the relationship managers on the sales floor keep detailed records of individual customer’s tastes and past purchases and will even have items pre-selected prior to the customer’s arrival at the store.
    • This model implies that the most important assets to client development and retention will be your account managers. A business development manager may bring in a new client and then hand off that client to “one of my best managers” who will develop the long-term client relationship. The account manager will become the principal point of contact for the client; however, they will bring in other expertise or assistance to handle specific client needs. When a customer calls in, depending on the immediate need, that customer may be triaged directly to their manager or to an individual who could, for example, perform a transaction for them. Responsiveness by the manager within a defined time frame will be an important metric to monitor.

How Do You Fuel Early Stage Growth? Five Suggestions

Situation: An early stage company has assembled an impressive team and has a solid service offering. The immediate challenge is bringing in clients to fuel growth. The team has the capacity but needs some creative ideas on where they should focus their efforts. How do you fuel early stage growth?

Advice from the CEOs:

  • Fully utilize the team’s talents. Team members with established expertise can offer clinics featuring the company’s service offering at local colleges, business organizations and other venues to target audiences. Think about business organizations with members who would benefit from the company’s services. Also reach out to venture capitalists and the entrepreneurial market.
  • Develop a strong value proposition:
    • Go-to Organization
    • Eyeballs on the market
    • Links to highly qualified resources
    • Demonstrated expertise in your space
    • Claims tied to the top priorities of target clients
  • For start-up and entrepreneur client targets:
    • Offer a packaged set of services for a fixed fee. Be open to creative payment options to fit the financial needs of entrepreneurs.
    • Start developing a full suite of services. Start by assessing the need and developing a target list of early clients. VC portfolio companies can be a great target.
  • Build a good web-based communications interface for client use. Think of what is needed to create an attractive menu and let this drive service development.
  • Develop a separate brand for ancillary services that will complement the current offering, but which is outside of the current offering. Look at markets which would benefit from the service, including medical and nursing providers.

How Do You Maintain Your Culture as You Grow? Five Thoughts

Situation: A professional services company wants to grow while maintaining the small company atmosphere that has been the key to its success. There is a limit to how many clients a manager can manage, and with this the reality that if the firm is to grow they will have to bring on more client managers and support personnel. How do you maintain your culture as you grow?

Advice from the CEOs:

  • To maintain your boutique atmosphere, consider hiring to fit your needs rather than to maintain a culture. Use team meetings to direct team members while communicating and instilling the culture that you wish to maintain.
  • Don’t risk diluting the strength of your client relationships. A $250K client who is fully committed to your service may have more demands than a $1M client for whom you only represent 10% of their business.
  • Service companies with the highest profit ratios rotate customer contact among several qualified people. What matters is the level of service provided, not the individual providing the service.
  • Grow by adding locations. Instead of growing vertically in the same office, grow modularly by spawning additional offices.
    • Create an optimally sized model for the level of service that you wish to deliver.
    • Design the organizational structure for this model and identify the order in which slots will be filled as business grows through each office.
    • Develop a service and organizational template with standard operating procedures, metrics, technology, and reporting.
    • Once the model is created, spawn it.
  • Focus your business. Define a niche that you can serve better than your competitors. Focus on this niche and develop a sustainable advantage over your competition.
    • Assure that your service delivery is seamless to the client and make sure that it remains seamless.
    • Offer a menu of service options and price options by the level of service delivered. Some will want to buy a Mercedes, and some will be happy with a reliable lower priced sedan.

How Do You Build in a Declining Market? Five Solutions

Situation: Revenue for a product and craft business has been slipping. At the same time, their competition has been disappearing. It is clear to the CEO that demand is and will continue to be present because of the market that the company serves. The question is how to maintain the profitability to survive long-term. How do you build in a declining market?

Advice from the CEOs:

  • The keys to recovery in a business like this will be in two areas: improving sales and increasing margins.
  • To increase sales the choices are more aggressive marketing and selling to existing customers or creating new markets like previous generations did when they started the business. Consider services that you could bundle with your products to augment the ways that customers use them. It will be the responsibility of your sales and marketing teams to demonstrate these product/service bundles to increase sales both to new and existing customers. This will help to solve the revenue slippage.
  • The other side is ongoing efforts to reduce cost which will, in turn, improve your margins. Costs can be reduced in creative ways that are not obvious. These include improvements in purchasing, reduction of waste, recycling of component materials, and inventory controls. It will be the responsibility of your production, purchasing and inventory management teams to develop these solutions. Assure that these teams are recognized and rewarded for their solutions.
  • Look at the segments of your product offering. Are they declining at the same rate or are there differences? This will help you to focus your efforts, as a company, to grow market share even if the overall market is declining.
  • Other suggestions for increasing sales:
    • Take advantage of the craft trends. Do this with NEW talent – not tired talent.
    • Consider partnerships and collaborations.
    • Set up contests and craft classes.
    • Look at how other industries promote to the craft industry and follow their lead.
    • Consider kitted craft products.

How Do You Plan for Business Expansion? Five Factors

Situation: A company has built a very successful single site business, and wants to expand geographically. They are investigating where it makes sense to duplicate operations in new sites and where it makes sense to consolidate operations. The company’s secret sauce is in their system and procedures. How do you plan for business expansion?

Advice from the CEOs:

  • Look at the shared services piece and the cost/benefit tradeoffs. What services are best centralized, and what are the critical on-site services that you want duplicate in remote sites?
  • Other companies use remote offices for field personnel, but centralize all shared services. Centralized shared services include invoicing and collections, financial reporting, telemarketing, anything dealing with trade names and print or trade-marked collateral, and an array of other services which would be too expensive for individual sites to duplicate, or where leaving things to the individual sites might result in inconsistency of service and erosion of the brand.
  • How do you replicate key talent? Consider whether key talent can be retained in the shared services side of the business, not the cloneable service delivery sites. Typical franchise operations have people who are difficult to replace or replicate so most do not try to include these roles in the service delivery operations.
  • You will need to provide for a sales role in your remote offices as business development will be critical to early success of new sites.
  • In the transition from “successful small” to “successful large” most businesses find that the medium stage is the most difficult. Issues to consider include:
    • Does your direction match your expertise – do you have support of individuals knowledgeable about franchising?
    • What are the margin differentials within the business? Do you want to clone the high or low-margin areas of the business? Develop profitability models for your central and remote sites, and assure that the sites will have sufficient profitability to assure their short-term success. This will make it easier to proliferate the remote sites.

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What is a Fair Revenue Split? Five Pieces of Advice

Situation: A professional services company is constructed as a network of members. The company’s contract specifies that if a member of their network goes to work for a client – even a client that the member brought to them – the client owes the company a fee of 50% of either the member’s salary or the annual consulting revenue paid to the member. This is onerous. What is the best way to respond? What is a fair revenue split?

Advice from the CEOs:

  • This does seem like an onerous provision. It is unclear whether the bite is as fierce as the growl.
  • Consult a lawyer. If you quit the network and go to work for the client, what is the level of risk that the company will successfully sue, and what you can do to mitigate this risk?
  • If the offer from the client is appealing, quit or avoid using this company’s services. Given their cut to your revenue you will see a net gain in your own pay for services rendered.
  • If several members agree that this stipulation is onerous, team up and start your own network with better terms. This can provide you and the others with an annuity revenue stream.
  • Integrity in professional circles is everything. Whatever course you decide on, be up front.

How Do You Manage Residual Commissions? Three Thoughts

Situation: A CEO is renegotiating the company’s agreement with a sales person. The sales person wants a declining residual commission on sales from past customers, regardless of who is servicing the account. A consultant who knows the industry advises the CEO to focus on new sales. What are the implications of each choice? How do you manage residual commissions?

Advice from the CEOs:

  • There are two types of salespeople: Hunters and Farmers.
    • Hunters focus on new business and generally get paid first year, then in later years only on sales that come specifically through their efforts.
    • Farmers focus on ongoing relationships with existing customers and are the service people for those customers. If they are paid commissions, they get paid on the ongoing sales that result directly from their efforts.
  • It is rare to find a salesperson who can manage both of these roles well, so companies often divide responsibilities, and any commissions paid, according to responsibility.
  • Decide what behavior you want from your sales person and pay for this – make the distinction between hunting and farming. Then ask the sales person which they want to be. If they say “both,” challenge this and let them know that they need to make a choice.

How Do You Find Your Sweet Spot? Seven Suggestions

Situation: A company’s sales are bumpy. The CEO thinks that this may be due to a mismatch between products that they offer and their customers’ needs. They currently use online surveys to capture customer needs and input. How do you determine customer needs? How do you find your sweet spot?

Advice from the CEOs:

  • The most important first step for a smaller and growing company is to clearly identify the customer niche that they serve. This must be a niche where the company can out-serve their competition.
  • There are two types of niches to consider:
    • A product/service niche focused on a specific set of products and services – one where you can offer a differential advantage over your competition and become known for this, or
    • A customer niche – a specific set of customers that you dedicate yourself to serve in a way that provides a differential advantage.
  • An example of the product model is an individual who started an e-commerce site for lacrosse equipment – products not commonly stocked in sports stores. They offered a wide range of lacrosse products, built an online community, shared articles, etc. and became THE place for lacrosse players to get their equipment.
  • An example of the customer niche model is to focus on a population and build a concierge or member-only service. The niche here is the buying group. This can be employees of specific companies or government workers as examples. Costco grew using this model.
  • For an early-stage company, survival is about single pointed focus on that niche where you can provide better products/services or better serve your customers than anyone else. As you grow you can diversify based on the reputation and loyalty that you gained early on.
  • Look at competitors – how are they gathering customer preference information?
  • Look at your passion – is it products or people? Choose a niche that fits your passion.

How Do You Optimize Your Business Model? Six Points

Situation:  A company is in the process of shifting their business model to better address customer needs. They have three different models under consideration. Management is split between these models, but must arrive at a consensus. How do you optimize your business model?

Advice from the CEOs:

  • Right now, you are considering three different potential models:
    • Tools – your old model
    • Data – produced by your old model
    • Service – your new model
    • These are different models with different prospects.
  • The money makers in marketing focus on data, not tools. Data is information, and this is what is valuable to clients. If you want to focus on the data component of your offering.
  • Currently, you are scraping data from social media and matching this to your client’s database on a real-time basis. There’s a model and value here because you are enhancing your client’s current database by making it more useful and actionable to them.
  • You have tools to enable and add value to existing client databases by allowing them to better segment their database. Again, there is value here.
  • Your core IP is the ability to correlate diverse data sources. Have you protected this IP? If not, this needs to be a top priority.
  • How much information that you scrape from social media sources can you share without violating privacy? This is something to think about because people are becoming increasingly sensitive about companies collecting their private information.

What are Your Obligations for Use of Data? Five Perspectives

Situation: A company wants to add additional apps to its current service. One possible source is a website that aggregates and publicizes relevant information. The CEO is concerned about whether these data can be used by the company and whether using these data will expose the company to legal action. What are your obligations for use of data?

Advice from the CEOs:

  • Under fair use you can use data processed from other sources and resell this. The key term is “processed.” This means that you must add some of your own value to the data. You cannot just republish data through your site as though you had collected and analyzed it yourself.
  • You cannot copy and repost a copyrighted article. Text is copyrighted, but extracted facts are not. If you want to use text from a copyrighted source, you must get permission from the author or publisher. You can quote a source by providing appropriate references.
  • You can include a link to a relevant site without taking copyrighted information.
  • If the data that you wish to use from another site contains information that includes personally identifiable data – data that would allow a third party to identify personal information about an individual and misuse that personal data to the detriment of the individual – then a distinct set of regulations apply. If you even suspect that this could be the case, seek legal counsel on your obligations.
  • When you are using the Internet, your audience is international. The rules for use of data derived from other sources differ by country or region. Consult your lawyer for general guidelines that will allow you to use data from other sources.