Issue
An underperforming, private-equity-backed, industrial cleaning company sought to enhance short-term profitability, evaluate the long-term potential of the business, and build a business plan to capture that potential.
Challenge
Beyond the short-term need for improved profitability to manage cash flow, the client sought to understand the long-term potential of the business. Multiple divisions were vying for capital and management attention, and while each offered promise, they could not all be resourced and grown simultaneously. The client needed to prioritize based on the mix of growing versus established divisions, their respective profit potentials, and their fit with each other. By prioritizing, the client would gain the clarity to classify each division as a target for either exit, preservation, or growth, and then to develop the planning tools appropriate for realizing those targets.
HPA Solution
HighPoint deployed a seven-year McKinsey veteran with 20 years of private equity experience and a wealth of strategy, planning, and financial expertise. After implementing a reduction in force designed to bring personnel in line with demand and to maximize profitability, HPA partnered with company senior management to develop and implement a framework for evaluating both the attractiveness and the fit of each division. Attractiveness was evaluated in terms of growth potential, profitability, capital intensity, competitive intensity, revenue volatility, and revenue predictability. Fit was evaluated in terms of cross-selling opportunity, geographic fit, ability to utilize cross-trained personnel, and contribution to overall cash flow.
Using these criteria, HPA and management identified a portfolio of divisions to preserve and a subset of that portfolio to target for growth. For each target growth division, HPA and management performed a customer segmentation, identified three key growth initiatives, and developed work plans for each initiative. The sales force was redesigned to improve effectiveness and efficiency, and alliances were pursued to accelerate revenue growth. Finally, a monthly dashboard and an annual planning process were designed to facilitate future planning.
Success
Select divisions were exited, others were resourced based upon a maintenance objective, and growth divisions were provided capital and personnel. The approach yielded greater growth potential with reduced revenue volatility and positive cash flow.
