ACHIEVING Revenue lift FOR PORTFOLIO COMPANY
In today’s uncertain times, companies need confidence in their revenue projections and certainty that no opportunity for revenue increases remains overlooked.
Market Strategy Group recently put these principles to the test with a leading private equity firm. The firm sought a thorough review a portfolio company’s projected revenue line – and how to improve it. The assignment involved three tasks:
- Vet the company’s current marketing plan and program, and its forecast revenue and marketing costs
- Identify opportunities to increase expected revenue and protect any revenue at risk
- Identify longer-term growth possibilities that should be on the company’s agenda, even though they weren’t part of the near-term operating plan
In order to vet management’s current plan and resulting revenue, MSG first identified the company’s key revenue drivers – media mix, cost per lead, conversion and customer retention. We then analyzed these drivers to determine whether or not management’s forecasts were reasonable and where they were most likely to fail. The impact of each driver is shown in Exhibit 1.
MSG then helped uncover where and why management was under-performing versus the industry. These findings allowed us to identify a number of opportunities for revenue improvement versus the current plan. Increasing customer retention through a few simple steps (already used by others in the industry) proved to be the most effective method of increasing 2009 revenue and profitability (Exhibit 2). Other key opportunities lay in changing the media mix and improving lead conversion.
For execution support, MSG built a detailed monthly spreadsheet model of marketing expenses, activities and expected revenues to help Management track company progress against targets.
Finally, as a byproduct of our revenue modeling and industry analysis, MSG was able to identify and recommend a significant untapped growth opportunity for the portfolio company to consider long-term, focusing on an underpenetrated adjacent market.