How it began
Alpha Limited is a 5 year old company providing IT & ITes enabled services with a top-line of over USD 6Mn based out of India with offices in Sydney, San Francisco & São Paulo. Prequate was brought in to help Alpha manage growth during the period of rapid scaling. Alpha was in a spurt stage with idea of expanding its service visibility overseas. They relied on a set of marketing consultants for their onground presence in the overseas locations.
Getting to work
Alpha started a continuous engagement model that allowed Prequate to develop the management reporting frameworks within the CFO Office offering. Over the course of the next 6 months, Prequate became an integral part of the business with specific charge of the management reporting for Alpha. In the course of such delivery, Prequate Team noticed:
- Huge expenses on commission to Business development teams
- Commission was a standard rate of paid out at a flat rate on sales upon collection
- Established business practice was the logic/rationale behind the % paid and not visited periodically
While BD is critical function, the payment of standard rates that don’t match business interest meant BD meant transactional support and no partnership approach.
The main questions to be addressed behind any variable based payment needed to be addressed. We asked:
- Does it keep the teams motivated?
- Is there continuous incentive for continuous involvement?
- Do incentive payments breed loyalty?
- Do the incentives accrue for greater involvement?
⇒ A new incentive plan was needed.
Detailed contract study: Identify and develop master tracker of all BD agreements, past and present
Understand the rationale: Speak with all key past and present BD professionals on how they viewed the terms
Ask the fundamental questions: Do the terms of the relationship address the long term vision keeping in mind the above fundamental questions?
Create responsibility matrix: Break down the activities and related responsibilities over their critical parts
Develop new scheme: Create a scheme that rewards greater involvement while reducing cash outflow
Buy-ins: Communicate with current providers on new scope and greater opportunity and help visualize lon term win-wins
Activity x Continual Generation Structure (AxCG)
- Win 1 | Net addition of ~5% to net profits over 3 years
- Win 2 | Increased efficiency and long term involvement by the BD team
- Win 3 | Attrition rates lower by 22% over 1 year
- Win 4 | High loyalty for continuing accounts among BD teams
- Win 5 | Proactive account management assistance from BD teams
- Win 6 | Simplified measurement and monitoring of the sales cycle
What happens when Finance goes beyond financial statements
Disclaimer: The nature of professional services is to provide tailored advisory based on the facts and circumstances of the case. Advice is never a one-way-fits-all. You may need to approach your advisor to effectuate a plan that suits your business.
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