10/08/2021
Overcoming Market Shock creates £30,000 monthly for a £3 million business.
A Calm Business insight enabled my client to overcome market shock created £30,000 per month more profit for a £3 million turnover infrastructure services business.
The former nationalised, government owned business, had just been privatised and now instead of managing budgets and organising logistics between departments, was running as an independent business, as were their customers. Serving a customer they knew well that they had been working successfully with for many years, they now found themselves in a new commercial dynamic – selling, delivering and being paid for services.
Visible problems included:
• Market shock,
• Dramatically reduced bookings, and
• Falling profitability.
Using the principles of Business Calm™, Rex found an insight that the new businesses were looking to save money and were afraid of spending money.
So, working with his client, Rex organised a meeting with the two companies. He set the scene for them, starting from the place that they were used to successfully working together, that the customer wanted our services, and that we wanted to continue to serve them to a high standard.
A warm friendly agreement was reached.
Next month the business delivered close to capacity and made an additional £30,000 profit.
External Changes hit the Business Hard
I’m on a train, hurtling to work. It’s an intercity train moving quickly. The ride is smooth, remarkable for steel on steel, steel wheels running on steel rails at 125 miles an hour. My journey will take 1 ½ hours, with the countryside whizzing by. Sometimes I see canals and rivers, sometimes built-up areas, sometimes I am working.
So, what’s the hurtling about?
The hurtling is in my thinking. I am looking at all the aspects of the business, the people, the equipment, the newly formed company, the services, whilst looking out of the window to enjoy the view. I’m looking to make sense of it all, and it’s jumbled up. Jumbled in my thinking. I have thinking about it all.
I’m working in a business that is being privatised. Formerly a nationally owned business. Now it has been restructured and will shortly be sold. This restructuring means that a large national business is broken up into separate companies that will trade with each other. The separate trading companies are vertically integrated. Each providing a piece of the jigsaw to create the whole picture. The idea behind all this is that in private hands the industry will be more innovative, attract new investment, be more efficient and deliver a better service.
The business that I am helping is both new and old. It is new in that it has just been formed as an independent business, a limited company with a Managing Director and management team and will provide services that it did previously for which it will now charge. It is old in that it has been providing these services for years as a department with budgets in the larger national enterprise, run by a head of department.
The people in the business believe passionately in the service that they provide but the company structure is new to them, and it is not working as they want it to.
Market Shock
I have been brought in to support a part of the new company, which is where the people and specialised equipment used to provide the service is located, serviced, and organised. The logic is simple enough, my client delivers a service, a result, to a customer, repairing or creating new infrastructure. The customer provides the infrastructure to their customers.
For example, think of a road. Businesses and the public use the road, which is paid for either by taxation or directly by a toll. The owner of the roads whether private or government, need the road to be in good repair, renewed where needed and new ones built. They buy in the services needed to build and maintain the roads. My client provides these infrastructure repair, renewal, and maintenance services.
So, what are the visible challenges?
The business is experiencing market shock, the people in the business are in shock. While the work has remained the same, people they have been working with for years are now customers. They need to win orders, deliver a service to an agreed level – time, cost, and quality, and be paid.
Spend Money to Make Money
A moment of Business Calm™ is needed.
What is really going on here? What is the insight that will make the difference, create the breakthrough and the result?
The result the business is looking for is operational and financial performance. Delivering quality services and being paid to make a profit.
It seems it should be straightforward to work with people who you know well, to agree that you will do what you did before, recognise the challenges that existed before, work to resolve those challenges, deliver the service and be paid.
So, what is the issue?
In a moment of Business Calm™, I found an insight.
The newly formed client companies were looking to save money and were afraid of spending money.
The nationalised company previously ran on strictly controlled budgets where the emphasis was on spending exactly the budget in the year, or it would be cut the next year, where the emphasis was on spending as little money as possible on the service, to control costs and deliver within these limited budgets.
This was the deeper shock that the people in the newly formed companies were experiencing. The shock of the new marketplace for their services.
The result was that people who knew how to save money now needed to spend money to create value.
Let me explain.
The charging structure for the services of the company that I was supporting was different at different times and for different services. For example, daytime was cheaper than evening, nights, or weekends.
Looked at on a price basis, it seemed that the best time to use the services was when they were cheapest – during the day.
But the customer was only able to use a limited number of services during the day, because that interfered with daytime operations. Operations which could not be stopped. For example, closing a busy motorway or freeway creates great disruption, both to traffic and the economy.
This meant that the customer wanted to order services when cheapest but couldn’t for operational reasons – they simply couldn’t use the service much when it was cheapest. This was behind the design of the pricing structure.
Clearing up Confusions and Frustrations
Now that the problem was clear, we could work to address it.
Departments that were used to working together to deliver the services were now in a commercial relationship and needed to understand one another in different ways to deliver the service.
Quite simply they weren’t talking to one another about how to solve their problems.
So, we went to meet with the customer.
Before we went, we spent time understanding what our customer needed to achieve to create value in their business. The value that the chain of vertically integrated companies created, where our customer fitted into that value chain, what constraints there were, and how we added value with the service that we delivered.
Back to the road transport example again. What our client needed to deliver was a fully operational road, capable of carrying the designed traffic loads, with minimum interruption to services while the road is being serviced, renewed, or replaced.
We also spent time to understand the importance to our client in this new commercially transactional world of making the wisest investment in terms of time, money, and quality services to create that value – how to get the ‘best bang for their buck’.
When we met with the customer who my client knew well, they all looked at me. The meeting was clearly my idea, my request, they needed me to get the ball rolling, to break the ice.
So, I simply explained the situation that they already knew, that they wanted our services, that we wanted to deliver our services, that this used to work well for both of us, and we wanted to find a way for that to work well again in this new marketplace.
The client expressed their confusions and frustrations. Understandably. Issues included the best way to repair, renew and install new infrastructure, access for us to carry out repairs and renewals, and the pricing structure. We sat in chairs in a circle, there was no table to get in the way. Our customer had organised it that way.
A Warm Friendly Agreement
Together we worked out a way of working together in the new marketplace. We discussed with our client how they could order our services, how we could deliver quality services, how to resolve problems and be paid in this new marketplace. Both customer and service provider reached a new, better understanding about each other – businesses, markets, and services. A warm friendly agreement was reached.
In the next month, my client delivered services close to capacity and made £30,000 more profit than it had the month before.
Market shock overcome.
Business Calm™ achieved.
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Book your free no obligation Business Calm™ Clarity call with Rex at www.businesscalm.co.uk/contact or [email protected]
