Overview of the Situation
A cleaning business based in the North West was fairly successful, however were struggling at implementing correct business processes that would ensure that they were legally secure with client contracts. They had been focused on servicing clients, but had no process to ensure that they were future-proofing themselves, making the correct level of profit or having a pipeline of new customers.
The Problem They Faced
They were a very good cleaning business with significant positive relationships, however their largest client, which was around 55% of their total revenue were engaged in an agreement that was losing the company money. The company needed to raise its prices by around 30% in order to ensure a reasonable level of profit, however with no negotiation skills, and no contract, they were frightened that implementing such an increase would lose them the business. Overall the business owner was working too much “in” his business and not “on” it.
The Causes of the Problem
The focus from the owner was that if he worked hard and had happy customers, the profit would come. He had ideas to build the business, acquire competitors and eventually turn the model into a franchise – even looking to share ownership of the business with his workers.
This approach was very refreshing, however the foundations were not set for success.
The Impact of the Problem
Failing to increase the price for the large client would cause the business to continue to lose money – and a tough decision to cancel the agreement and walk away from the client would have to take place. This would result in the need to lay off staff but allow the business to refocus on those sectors that were more profitable and rebuild with greater stability.
Personally, for the owner, the business wasn’t providing him with an income, and he was struggling to see how he could turn the company around.
The Promise / Plan
Our plan was to:
- Review the current contracts between the client and their suppliers and ensure that they were fit for purpose
- Coach the business owner on how to negotiate with their clients when implementing a 33% price increase
- Evaluate the profitability of each of the services
- Critically assess whether every current client was sustainable and if not, to exit with grace
- Assess the opportunities for the business to grow
- Target 50 prospects per month, gain 20 meetings and sign 6 new clients
After working with GainMore, the business was able to:
- Implement the necessary price increase with the majority of the client base
- Negotiate a sufficient increase with the large client but gain a long-term contract that provided stability and allowed the business to leverage this contract to raise finance to invest
- Understand the true financial position of each of the sectors they worked in
- Assess the central overheads costs and implement a cost cutting strategy to reduce this by 15%
- Introduce accurate job descriptions for the team members and include individual KPIs, focused on business growth and customer satisfaction