September 6, 2020 at 6:28 pm #113058
Our most recent acquisition was large; it doubled the size of our corporation. This large company was barely profitable, causing us to create a task force to increase the site’s profitability. As we sent our executive staff on-site for a granular analysis of operational processes, we discovered that this entity honored initial customer quotes for billing, regardless of whether the scope of work had changed during testing. As a result, customers learned to “work the system,” asking for initial quotes well below the actual level of work they needed, and changing the scope after their samples arrived in-house. I have not yet integrated this acquired company’s billing process, but have been working with our VP of Sales and Marketing, as well as our Director of Operations and the acquired company’s Site Director to alter the culture at this site. We have had to encourage a paradigm shift in the thought process from “if we alter the customer’s quote, they will leave” to “if the customer asks for a change of scope, we will re-quote for the additional work”.
Has anyone else run into a significant cultural difference in an acquired company’s approach to billing their customers?September 10, 2020 at 9:55 pm #113238
Very interesting Gina, I have not run into this in an integration setting but have seen this in my previous operations role and unfortunately it is a common tactic in sales and pursuits. There are many ways to approach this, one could be how the sales/marketing teams are compensated and whether it is on a volume of sales vs. profitability of project after the job is complete. Another approach I have seen is an education on the impact of these low profitability projects from a compensation standpoint and how it can impact the entire organization negatively when a contract is won by underbidding. Providing training and sales tactics to help the sales and marketing division approach bids differently could also help change the culture.September 18, 2020 at 3:24 am #113399
Pricing strategies are one of the first things we examine to increase the profitability of an acquisition. It is usually a mindset or psychology issue involving the sales and marketing department. Revenue is a vanity matric; gross margin is what matters. You can lose business as a result of implementing a more effective pricing strategy, however still have profit increase and maintain better quality clients.
You must be logged in to reply to this topic.